The controlling group at Spelthorne Borough Council- that has undertaken a huge investment programme in recent years- has launched an internal investigation related to the treatment of the chair of the council’s overview and scrutiny committee.
The investigation within the Conservative group of councillors was launched following a complaint brought by the chair of the overview and scrutiny committee Councillor Sinead Mooney.
The investigation came a few weeks after the Surrey council’s £285m acquisition of three buildings, including the Charter Building in Uxbridge, last Summer- a process in which Cllr Mooney was required to make a judgement on whether the purchase represented good value.
The internal investigation is understood to have been terminated without reaching a conclusion.
Cllr Ian Harvey, leader of Spelthorne Borough Council, confirmed the investigation had taken place, but declined to give more details.
He told Financial Director he denied any suggestions that pressure had been brought on Cllr Mooney in her role as chair of the overview and scrutiny committee. Asked if he denied the existence of the investigation he said: “No I don’t deny that.”
A spokeswoman for Spelthorne Borough Council said: “I can confirm that no official complaint has been made to the Council in relation to these allegations. We would also like to make clear that the Council has followed proper constitutional processes for all of its investments.”
She said: “The Council understands the importance of making sound and transparent decisions and has high standards of governance and risk management processes that stand up to scrutiny. There have been absolutely no procedures that have been constitutionally bypassed.”
The council spokeswoman said that any suggestions the previous chairman of the overview and scrutiny committee Cllr Colin Davis had come under pressure during asset purchases including the 2016 acquisition of oil giant BP’s office park at Sunbury-on-Thames for a total borrowing of £377.5 million, “are malicious and unfounded claims, which are wholly refuted.”
Spelthorne Borough Council became the poster-child of local authority property investors following a purchase of assets in recent years.
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Last Summer the council, which currently has debt of £1bn compared to a net annual budget of £22m, gained a mandate to increase its debt capacity to £1.5bn.
The increase in debt capacity was expected to be in readiness for more imminent acquisitions. Properties cited as being possible targets included two London sites, 100 Cheapside for £140m and a £160m development in Nine Elms, Battersea. These plans are understood to have now been shelved.
After Spelthorne Borough Council’s 2016 purchase of oil giant BP’s office park, some commentators dubbed the authority “a property company with a side line in providing local government services.”
Spelthorne Borough Council has previously told Financial Director that although it regularly cites a 4-5% gross return on its £1bn property portfolio, the actual net return is closer to 1%, or £10m from the £1bn of investments.
A council spokeswoman said earlier this year: “A gross yield of 4-5% is entirely consistent with high quality commercial investments in the market. We do achieve this rate of return on our investments.
“Acting as a prudent investor we set aside interest, capital repayments, management costs and substantial sinking funds for future unforeseen events. The Council typically budgets on a net yield of 1%. This accounts for the difference,” she said.
Making big investments in shopping centres, ferries and car showrooms may not seem the most appropriate way for local authorities to be spending their budgets. But many councils are taking large positions in commercial projects to improve their financial position, in a bid to address the challenge of less funds from government.
Baroness Wheatcroft, a member of the economic affairs committee of the House of Lords, referenced Portsmouth City Council’s asset purchases, when she said: “I am prepared to believe that local authorities know a lot about social housing, but I am not convinced of their knowledge about Mercedes showrooms or ferry terminals.”
Since the 18th Century local authorities have accessed capital from the Public Works Loan Board to fund projects, a source of funding that has been available at exceptionally low rates of interest since the financial crisis of 2007-08.