During the last two Parliaments I pressed the Treasury to make it more difficult for Councils to borrow large sums of money. As so often it took time to persuade Ministers and their department that waste was afoot and spending was too lax. I watched as various Councils went on a buying spree for commercial property, and renewable energy projects.
Prior to 2020 some Councils were buying up shops as they thought with rents exceeding the low interest rate charged on government loans they could gain more income to spend. They did not realise the private sector and the property agents were thrilled to sell out to them as many in the private market thought shops overvalued and thought rents would fall as online shopping reduced shop turnover. Covid lockdowns came along and accelerated that trend leading to large capital losses on the shops Councils had bought. Rents fell. When interest rates rose the disaster was complete with heavy losses.
Nottingham invested in its own energy company. It ran up large losses and put itself into Section 114 bankruptcy. Woking made too many bad property investments whilst Thurrock came a cropper with buying solar farms. They too went into Section 114. Birmingham underpaid its female staff and faced large back pay whilst also losing on its investments which took it to Section 114.
The government has undertaken a round of expensive bail outs. Birmingham was granted £1255 m, Woking £331 m, Bradford £220 m and Southampton £122 m with others getting multiple millions. Far from Councils being starved of money some have lobbied for huge sums to dig them out of financial difficulty or bankruptcy of their own making.
Taxpayers do not want Councillors and their officers playing at being investors in real estate and energy only to lose them a fortune. A well run Council keeps Council tax down and concentrates on providing good service in core areas. Too many bad Councils grandstand, over reach, add services they should stay out of and land up in a financial mess. Too many want to wreck our roads at great cost and dabble in business in ways that prove costly.