Residents will want some reassurances over investment strategy
How does the old saying go? You have to speculate to accumulate.
Well that’s certainly what Portsmouth City Council leader Donna Jones believes.
It’s why she is pursuing a strategy of borrowing money to invest in buying assets around the country that will provide what she expects to be a good return.
A bullish Cllr Jones says the council is expected to make £3m a year from these investments.
Rents coming in will cover borrowing costs and make a profit that can be used to pay for ‘statutory and non-statutory council services’.
This income generation means that at a time when cash-strapped councils, forced by the government to keep trimming budgets, are closing libraries and museums and stopping weekly bin collections, Portsmouth has not gone down that route – yet.
But it all comes at a price and that is the amount of debt that the city has now racked up.
We reveal today how the council borrowed £30m the day after the EU referendum to expand its growing property empire.
Ms Jones got the loan as soon as the nation voted in favour of Brexit because she says she wanted to take advantage of low interest rates triggered by the referendum result.
Now the council’s investment fund has grown to £112m of borrowed money used to buy varying assets.
These include a Mercedes-Benz showroom down the M27 in Eastleigh for £8.75m.
It all sounds great, but Ms Jones’ political opponent Cllr Gerald Vernon-Jackson, Portsmouth Lib Dem leader and a former council leader, is right to sound a note of caution about this new penchant for property speculation.
Yes, borrowing when interest rates are low and then investing that money makes sense.
But what happens if interest rates rise and the city is suddenly left with a massive bill that it cannot pay back?
Council tax payers will want to know that they will not be required to make the sums add up if that were to ever happen.