Jenrick offers support for councils exposed to property losses

Communities secretary Robert Jenrick has promised to work with local authorities exposed to commercial real estate losses, but warned riskier investments would receive less support. Speaking to MPs at a housing, communities and local government select committee, Jenrick invited councils to work with the department and said it was considering a request to allow councils flexibility in short-term borrowing. However, he said the government would not step in to support interest or loan repayments to the Public Works Loan Board, adding that “speculative property portfolios” were unwise “for precisely the reasons we’re now discovering”. Jenrick said: “It’s up to councils to make sound financial decisions. Those councils that have chosen to take out loans from the PWLB will need to carry the cost of those. Obviously we will consider the sustainability of councils, both individually and collectively in the weeks and months ahead.” He added: “If there are councils that, for exceptional reasons, are in particular financial distress, I think the first port of call would be to speak with my officials or come to me directly at the department. “But I do think it is important to differentiate between those councils that have done what governments have actually asked them to do over the years, which is to diversify and garner income, and the small minority of councils that have chosen to get income through much riskier assets.” He said some strategic investments, such as airports, had made councils especially vulnerable and noted that the department was already helping Luton Council. “My officers are in regular contact with them and we’ll have to work with them in the weeks and months ahead to see how we can navigate our way through what is undoubtedly a difficult situation.” But Jenrick highlighted that the asset portfolios of a very small number of local councils may “prove problematic as a result of whatever may happen in terms of economic disruption”. In these cases, Jenrick said the government would have to “think carefully” about a response that “doesn’t create a moral hazard and would prove unfair to those councils which have managed their finances responsibly”. Local authority property investment topped £7.5bn in the past six years, with a large chunk of spend facilitated by cheaper loans from the PWLB. According to EG analysis, the most active investors since 2013 have been Spelthorne Council with £947m, Warrington Borough Councils at £472m and Surrey County Council at £373m. To send feedback, e-mail emma.rosser@egi.co.uk or tweet @EmmaARosser or @estatesgazette