• Home
  • About
  • Subscribe
  • LATIF
  • Conferences
  • Dashboard
  • Edit My Profile
  • Log In
  • Logout
  • Register
  • Edit this post

Room 151

  • 151 BRIEF

    What's New?

  • London CIV appoints Dean Bowden as CEO

    August 18, 2022

  • Coventry secures over £115m of funding to decarbonise transport system

    August 18, 2022

  • Bexley Pension Fund appoints responsible investment consultant

    August 17, 2022

  • Leeds’ £120m levelling up bids offers ‘transformational change’

    August 16, 2022

  • Social care workforce crisis ‘requires government intervention’

    August 15, 2022

  • Consultation opens on future of IFRS 9 statutory override

    August 12, 2022

  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews
  • Briefs

Talking Point: Economic regeneration and council risk

0
  • by Guest
  • in Interviews · Recent Posts
  • — 5 Dec, 2013

How can councils create economic regeneration without taking on too much risk?
With local authorities moving away from a traditional grant funding model towards greater self-sufficiency, we asked four S151s how they view the risk/reward trade off when investing public money in their local communities.

Chris Buss, Director of finance & deputy chief executive for the London Borough of Wandsworth
“Do you feel lucky, punk?” That great misquote from Dirty Harry may seem a long way removed from the work of a local authority. When I first started in local government in the 1970s, the borough I was working in had a whole department dedicated – it seemed – to rebuilding the borough with the provision of new housing and other social, welfare and community buildings plus employment workspace. The idea of this being a risky business sounded absurd as, at the end of the day, it was all covered by public money either as government subsidy or the ratepayer footing the bill. Since then attitudes have changed, with development risk and also reward largely transferring to the market. But in these austere times is there now the opportunity for councils to gain by taking some of the risk in exchange for the reward? At present, in Wandsworth, we are consulting on options for two major estate regeneration schemes that may involve substantial investment both in public and private facilities. The sums involved are in the hundreds of millions of pounds. If the risk is transferred wholly to the market, our reward is limited to the physical improvements to the area and the extra additional income in local taxation. If, though, we work on some elements including estate refurbishment and new-build social housing using lower cost borrowing or balances, more of the reward comes back to the council. However in recent times it is central government that has changed the risk profile of projects at a stroke of a pen by changing the rules: the rent formula and convergence data on HRA rents and 35% top slice on New Homes Bonus are just two examples. It is almost perverse that the markets are less risky than government. It really is a case of: “Do you feel lucky? – Yes, but only if the government doesn’t change the rules.”

Matt Bowmer, Director of finance for LGSS and S151 for Northamptonshire County Council
In the face of continued austerity, there is an acceptance in Northamptonshire County Council that our appetite for risk has to change. This hasn’t been an overnight moment of enlightenment but a gradual process over recent years. Accepting greater risk means greater management and understanding of risks and ensuring that appropriate arrangements are well embedded in the organisation. There has been a positive change in mindset with the focus now on a ‘can do’ approach. This has been demonstrated through the support that the council has given the prosperity agenda which is at the heart of our core priorities. One of the most prominent examples of this approach locally is the support provided to Silverstone Holdings through a radical change in direction in our Treasury Management Strategy. In October 2010, the council provided a loan of £10m to Silverstone Holdings to develop the circuit and ensure that the British F1 Grand Prix remained in Northamptonshire. It also ensured the continued success and growth of the world-leading High Performance Technology sector which had built up around Silverstone and the wider Motorsport Valley. Within the county there are more than 1000 high performance technology  companies, employing more than 20,000 people with an annual turnover of £1bn. The council also supported the implementation of the Masterplan through a further £1.5m joint venture, invested over five years. This was enabled in part by use of new wellbeing powers at the time. The loans had gross profit triggers to give stability and the headline loan was repayable in full by December 2014. The plan was that by this time, the work undertaken, including planning permission for significant redevelopment of the site, would have attracted external investment to complete the project. The development of the circuit has not been without its fraught moments with cash flow being very tight as the initial development works were completed. In September 2013, however, a major property investor/developer stepped in, buying up the Estates part of the business ensuring the long term investment and at the same time enabling the return of the council’s investment. The investment by property developer MEPC in Silverstone Park will unlock the delivery of more than 2,500 new jobs.

Margaret Lee, Executive director of corporate services for Essex County Council
I’m not sure what ‘too much risk’ means – it is for each council to work that out for itself, depending on its finances, the specific project, partners involvement, and local economic environment. However, it is clear that things can’t be done without risk, and central government has been clear that it expects us to take risks, be entrepreneurial, but balance the risk with the need to ensure we can still provide the essential public services our most vulnerable people rely on. Regeneration is not a short term project to be delivered within the space of a one year capital programme. If it was, it would have been done before. So the role we play in the success or otherwise of a regeneration project is about providing local plans, democratic leadership and vision, and co-ordination. It’s also about providing some finance – we need to recognise that the cost of our capital is less than the private sector and we can generally accept a lower rate of return and over a longer period. Central government has recognised this to a degree – the establishment of Enterprise Zones, LEPs and City Deals all point to an understanding of the role of local government in healthy communities, but I would like to see more. As a DoF of a shire county, I believe that the ‘asks’ given to cities in particular can apply to wide areas – our City Limits document sets this out clearly. Key for all of us is that the projects we facilitate are sustainable over the longer term. So what constitutes success? The basic ingredients must be there – involvement of the local community and businesses and partners, capital investment and a clear idea of what will sustain the developed area going forward. And the means to support that sustainability which will generally include local access to good education facilities. Local government has a clear role to play – and finance professionals must do their part to facilitate this.

Vic Allison, Deputy managing director and S151 officer for Wychavon District Council
At Wychavon, we like investing in property. Not only does this often provide a better financial return for the taxpayers, it often provides a community benefit too. And where that community benefit is a boost to the economy, then that’s a real win-win. The council enabled the development of a superstore in Droitwich Spa about 10 years ago. It assembled the land, most of which it already owned, and then the retailer built the store on the council’s land. Once it was up, the council bought the building from the retailer for a pre-agreed price and entered into a long-term lease with the retailer. The lease represented a better return for the council than it was able to achieve from its surplus capital cash on the money markets. The store is a huge success, bringing additional footfall to Droitwich Spa. While the economy is very different in 2013, there are still opportunities such as this for councils to invest. We have recently lent money to local companies where banks were more reluctant so that they could invest in property. In one case, this was to help to refurbish and re-open an old cinema, and in another it was to turn a former leisure centre into a training academy. Our economic development team is very excited about both projects. We are about to invest in another town centre superstore which will bring massive economic benefits to Evesham. Investing in property is more risky than investing in the Bank of England. But the returns are so much higher. And the risks can be reduced by doing the normal due diligence such as picking the right partners and taking the right level of security.

This article was first published in Room151 Quarterly magazine. Didn’t receive a copy? Local authority heads of finance, resources, procurement and chief execs can email subscriptions@room151.co.uk for a complimentary subscription.

Share

You may also like...

  • Finding private sector solutions to the housing crisis 16th Mar, 2022
  • Jackie Weaver calls for more ‘hyper-localism’ to revitalise local government 9th Feb, 2022
  • ‘Funding cuts have changed the scale, shape and scope of local government’ 31st Jan, 2022
  • Pension power: beyond net zero 4th Feb, 2022

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • 151 BRIEFS – WHAT’s NEW?

    • London CIV appoints Dean Bowden as CEO
    • Coventry secures over £115m of funding to decarbonise transport system
    • Bexley Pension Fund appoints responsible investment consultant
    • Leeds’ £120m levelling up bids offers ‘transformational change’
    • Social care workforce crisis ‘requires government intervention’
  • Room151’s LGPS Roundtables

    Biodiversity
    Valuations & Risk
    LGPS Women

  • Room151’s LGPS Roundtables

    Biodiversity
    LGPS Women
    Valuations & Risk
  • Latest tweets

    Room151 10 hours ago

    Liverpool faces further government intervention as commissioners find ‘whole-council failure’: The levelling up secretary has announced that he is “minded to” expand intervention at Liverpool City Council by transferring the authority’s financial… dlvr.it/SWvgGc pic.twitter.com/cB7YeHZ9lE

    Room151 1 day ago

    Recovery position: withholding tax and the LGPS: Partner Content: Paul Sprenger from WTax talks to Room151 about how Local Government Pension Scheme funds could be missing out on millions of pounds of withholding tax recovery opportunities.… dlvr.it/SWsTfQ pic.twitter.com/z6aVMcaqHe

    Room151 2 days ago

    Treasurer societies favour permanent extension to IFRS 9 statutory override: Two treasurer society presidents have indicated their preference for the current five-year IFRS 9 statutory override to be made permanent following the government’s latest… dlvr.it/SWr3G4 pic.twitter.com/MGf9M5zC8Q

    Room151 3 days ago

    Luton Borough Council faces ‘grave’ £10m overspend: Luton Borough Council faces a £10m overspend in its 2022/23 budget which poses a “serious risk” to the authority’s financial sustainability. A report by Dev Gopal, director of finance, revenues[...] dlvr.it/SWmynD pic.twitter.com/ETDd7sQA48

    Room151 3 days ago

    Luton Borough Council faces ‘grave’ £10m overspend: Luton Borough Council faces a £10m overspend in its 2022/23 budget which poses a “serious risk” to the authority’s financial sustainability. room151.co.uk/funding/luton-… pic.twitter.com/XvyTZckW6m

    Room151 1 week ago

    LATIF/FDs’ Summit ‘on course to be biggest yet’: Room151’s flagship event – the Local Authority Treasurers Investment Forum (LATIF) and FDs’ Summit – is on course to be the biggest yet, with more than 200 delegates expected. Combining[...] dlvr.it/SWSDrL pic.twitter.com/f8FXzcAdWB

    Room151 1 week ago

    ‘Local government treated worse than any other part of public sector’: Clive Betts, chair of the Levelling Up, Housing and Communities Committee, talks to Mike Thatcher about lack of progress on levelling up, pork-barrel politics and why local government… dlvr.it/SWRk1L pic.twitter.com/Jpw0BsOsy3

    Room151 1 week ago

    Which LGPS pools and funds are attending the LGPS Investment Forum on Nov 2 & the LGPS Private Markets Forum on Nov 1st? Answer here: lnkd.in/eDHU8tuy pic.twitter.com/D3gd63Rh7F

    Room151 1 week ago

    LGPS and levelling up: nothing to fear but fear itself: There have been a number of objections to government plans for LGPS funds to invest 5% of their assets in local projects. But George Graham says these objections can be[...] dlvr.it/SWL7vt pic.twitter.com/ebwBEkZTy4

  • Register to become a Room151 user

  • Previous story Working with our hands tied
  • Next story NAO questions regional growth accountability

© Copyright 2022 Room 151. Typegrid Theme by WPBandit.

0 shares