Capital idea: Putting asset sales into a local context
0A recent report shone a light on the use of capital receipts by a small number of councils to fund redundancies. Rob Whiteman says that the issue is more complicated than headlines might suggest.
Recently a national investigation by the Bureau of Investigative Journalism highlighted the selling off of ‘libraries, parks and community centres’, and how proceeds from these sales were being used to ‘fund job cuts’ by councils.
Such a loss of public space will always generate a certain amount of heated debate.
The article did a good job of showing that serious trade-offs have to be made by local authorities who are engaging in more diverse financial strategies, including increasingly risky commercial investment, shrinking services and staff numbers, and in some cases as this investigation has showed, selling off assets.
In other ways it simplified the issues at hand – particularly when it comes to asset management.
There is a lot of good work being done right now to manage assets by councils, but taking these decisions out of a local context, though it can potentially bring light to national trends, can also lead to a loss of perspective.
Buying and selling unused or underutilised assets is within the normal scope of good public financial management, particularly where they are able to be transformed for the benefit of the community.
And with many services now being delivered more effectively and efficiently online, we should expect a shift away from the traditional brick and mortar façade of local government.
This is not to say all asset sales are a good thing, local authorities are having to make tough choices and compromises around what assets they hold onto, just as they do with services.
The effects of austerity and a decline in funding will influence the decision making of local authorities when it comes to asset management, as they must do more with less, options may be more limited.
It is important that we do not view all assets sales negatively or, tangentially, that cutting staff numbers is a wrong decision.
When we bring these choices into a local context they will often show better reasoning than what is revealed in a headline.
Decisions on how to support local communities and on how funding is allocated, are usually best made on a local level, and we remain steadfast that part of the solution to the funding issues being faced in local government is providing greater power for local authorities to make these decisions.
This includes the move to give greater control over assets by the chancellor in terms of the best use of any sales, and whether they go towards improving services, purchasing other properties, or indeed transforming back office functions.
It is councils who are best able to understand the needs of their area, constituents, and organisation, and ultimately, it is they who will be held accountable in the democratic process.
However, with more power comes more responsibility.
All commercial activity must be coupled with both strong governance and transparency – asset management is no different.
There are several areas where improvements could be made.
Good governance is a pillar for ensuring financial resilience and sustainable service delivery within local government, and is essential for ensuring that big decisions around assets are well managed.
Transparency and accountability remain a central tenet of good public financial management.
Councils must have a demonstrable strategy and vision to justify their decision to dispose of assets, and must be able to show how this fits in with their long term view.
They must also be able to demonstrate this to the public.
The recent introduction of a requirement in the Prudential Code for every local authority to produce a capital strategy which binds together a council’s capital programme, investment strategy, borrowing strategy, and from a best practice perspective, strategic asset management policy, is a positive step in this direction.
We are looking forward to working with local authorities to tackle these challenges, and shape the future of our towns, cities, rural communities and coastal centres.
Rob Whiteman is chief executive of the Chartered Institute of Public Finance and Accountancy
