Forest of Dean quits £50m retail deal
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Plans by a Gloucestershire council to invest £50m in a retail development have been abandoned due to the rise in government lending rates.
Forest of Dean District Council had been exploring the option of investing in the Cathedral Square development in Worcester to generate revenue that could plug a £1.2m shortfall caused by government funding cuts.
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March 25th, 2020, Manchester
Council treasury investment & borrowing
The plan to invest in the retail development, outside of the council’s boundaries, had been initially signed off at a meeting – closed to the public – in September.
The deal was to have been funded by borrowing from the Public Works Loans Board which raised its interest rates last month.
It is understood by www.Room151.co.uk that the plan was dropped at another meeting held behind closed doors due to the hike on PWLB interest rates.
Concern over the proposed deal had been heightened among councillors after details of investment were leaked twice to the local media.
Officers have been left looking for alternative ways to help fill a £1.2m hole in its finances.
The council’s budget had allocated £350,000 in its accounts for interest and investment income which along with money from reserves would balance the books.
In February’s budget discussions, councillors were told: “Part of our drive towards financial sustainability includes identifying new opportunities to generate income and investment in projects which provide good financial returns.”
The council’s financial position has already generated a fierce row between councillors over borrowing plans – including for borrowing plans to be debated by all members.
Opposition councillor Harry Ives challenged Tim Gwilliam, leader of Forest of Dean, at a full council meeting last month: “This council has been debt free for more than a decade.
“The council’s treasury management strategy currently authorises borrowing of up to £83m. Can I ask the leader to confirm his plans for borrowing against this limit.”
Cllr Gwilliam responded: “As you will be aware the council has faced and continues to face unprecedented cuts from government in the amount of funding it receives, resulting in a £1.2m deficit over the period of the medium term financial plan approved in February. This position has been facing this council since 2013.”
He added: “I can confirm therefore that my plans are: to continue to listen to our financial advisors and the advice of officers, to listen to suggestions of investments based on return put forward by the cross party asset management group.”
The Treasury – and Ministry for Housing, Communities and Local Government – had expressed concern before the PWLB decision – about the borrowing decisions by councils for retail developments at a time when the High Street is under pressure.
In his last appearance before MPs ahead of the general election, communities secretary Robert Jenrick said: “There has been some abuse of the Public Works Loan Board by a minority of local authorities who have become highly indebted, as a result of boring very cheaply, and – perhaps even more concerningly – a small number of local authorities who have used it to purchase what I think are quite risky assets outside of their local authority boundaries.
“Purchasing shopping centres and, and so on, may well not turn out to be good investments at all.”
A Forest of Dean district council spokesman said the discussions and decisions had been restricted and that it would not be commenting.
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