Portsmouth council boss defends buying £138m office block - but rows back support for future big purchases
A COUNCIL boss has rowed back support for future plans to splash out millions on commercial properties months after his authority shelled out £138m to buy a business park.
Cautious Councillor Gerald Vernon-Jackson, leader of Portsmouth City Council, admitted he was ‘uncertain’ about gambling huge sums of cash to buy up shops and offices.
His slip in support comes just six months after the council bought the city’s largest office complex, Lakeside North Harbour, using a 35-year loan.
The Lib Dem chief insisted the move to buy the site was the ‘right’ one but said: ‘I’m not sure about the future. Even though we have the assets to pay back the money we have borrowed we need to be careful not to push the council into too much debt.
‘I am uncertain whether we will buy more commercial properties and borrow in this way any more. We need to remain cautious because when you don’t that’s when mistakes are made.’
The city leader’s comments came as a government spending watchdog raised the alarm on how much council’s were forking out buying shops and offices.
Findings by the National Audit Office revealed local authorities had spent £6.6bn between 2017 and 2019, a 14-fold increase compared with the previous three years.
Councils have argued the investment is a way for them to make money and prop up their budgets, which have been brutalised by government cutbacks.
Meg Hillier, chairman of the public accounts committee, said it was understandable that councils were carrying out ‘risky investments’ to get more money in.
‘However, a fourteen-fold increase in spend on commercial property raises serious alarm bells,’ she said. ‘The [communities] department needs to take stock and ensure that there is protection for local taxpayers from local authorities acting as investment bankers.’
Portsmouth’s commercial property portfolio currently stands at £172m.
The council’s finance director, Chris Ward, said the purchase of properties had been financed by borrowing and generated an annual income of £6.5m.
He added: ‘At the last valuation, the value of the Portfolio was greater than the amount of borrowing undertaken to finance those purchases with a resulting gain of £7.3m. Should the council sell the entire portfolio, it would be able to more than pay off the outstanding debt.’
Cllr Vernon-Jackson said council’s had been struggling to make ends meet.
He added: ‘Councils have to do some entrepreneurial things because there isn’t enough money in the system to pay social services without it.
‘The government has cut funding for things so much yet councils still have to do everything we used to do.
‘Now councils have to look at ways of trying to make money to balance the books otherwise we will have big, big cuts.’