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Budget Opinion: We Should Not Be Gambling With Public Money

Representatives from all four political parties at Guildford Borough Council (GBC) were invited to give their opinion on the council’s budget, approved last Tuesday (February 7, 2018). Here is a view from the local Guildford Greenbelt Group…

Cllr Susan Parker

By Susan Parker

I am very uncomfortable with the new strategic budgetary direction that the council is taking and I expressed this concern including at the full council meeting.

The government has said that councils should avoid undue risk when investing public money but ignoring this central direction, Guildford is to consider investing £81 million in student housing.

There is considerable public disquiet as to why we are subsidising the university on this matter.  It may indeed be desirable to have more student housing on campus – personally, I think it is – but it doesn’t necessarily follow that GBC should be providing the funds.

Our budget also shows future “strategic property acquisitions” of more than £34 million. What are these?  These are huge amounts in the context of our budget.

We are in a time of unprecedented flux in terms of the global and national economic climate. This is not a good time to gamble.

The rationale is now the grant income from central government has been withdrawn, we need other, long-term sources of income. However, I’m not sure that this is being properly considered: it is just being forced through.

Should we seek to finance future cash flows for the council from an income stream from property – or is this a high-risk strategy that might lead to us risking loss of public money? Is there a risk of loss of capital?

I’m not qualified to answer this question, but with all due respect to the officers and other members of the council, I’m not sure that they have this expertise either.

Some of this is being invested in physical infrastructure. This may be supported by the local community, even if they don’t support the consequential housing development.  But in any case, it can’t be justified as income-generating.

But this is not even money we hold.  We are borrowing much of the money we are choosing to invest. Let’s stagger this – not do too much at once.

Local councils do not have huge expertise in property investment – it’s not our business.  Retail, in particular, is threatened in the current economic climate.

There is too little debate about projects that invest public money. Too often these are decided behind closed doors, or by the Executive, without reference to other parts of the council. Investment of substantial sums of public money should be agreed after consultation with the public.

A separate but major concern is that we are investing in other local authorities – approximately 34% of our investments.  This is effectively concentrating risk.

As a local authority, we are exposed to certain risks.  Other local authorities may be exposed to risks that are similar. If a downturn occurs it may affect our investments as well as other activities. Is this sensible? It’s effectively circular investment.

I don’t think we should bet on speculative future investments.  It is not prudent, in a time of volatility, austerity and high risk, to borrow extensively in order to gain uncertain future rewards.  We were not elected to gamble with public money.

See also: Concerns Expressed Over Student Accommodation Loan As GBC Agrees Budget, Budget Reactions – Opposition Leader Criticises Government for Preventing the Building of More Council Homes and  Budget Opinion: We Need To Think About Future Council Finances

Tomorrow the view from the the Lib Dems. Cllr Michael Illman (Con, Shalford), lead member for finance, did not respond to the invitation to contribute a piece.

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