St Helens Council to create £10m reserve for acquisitions

On Wednesday, the Labour cabinet agreed to adopt its new investment land and property acquisition strategy, which will help establish a framework to secure long-term and sustainable income streams for the council.

A report on the plans says adopting such a strategy will allow the council to “exploit commercial acquisition opportunities” to support council services in the future and support economic growth in the borough.

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The Labour cabinet also agreed to create a £10 million reserve to be funded via capital receipts, which is money from sold assets, such as land or buildings.

“The pot of £10 million is funded through capital receipts,” said St Helens Borough Council leader David Baines.

“It’s money that cannot be used for services.

“What we can do if we invest responsibly and successfully with it, is generate income that can be used to fund services.”

Cllr Baines said in the past, the council has been “risk averse”, but said it “can and should being doing more to strike the right balance”.

“We’ll always be responsible with public money, but we need to be more ambitious and creative,” the Labour council leader said.

Cllr Baines said the council has not actively pursued the acquisition of properties or land purely for investment return purposes.

Those it has pursued, he said, have generally been for operational or regeneration reasons, such as the purchase of Church Square shopping centre in 2017 for £26.6 million.

Cllr Baines said that acquisition remains “crucial” to unlocking the regeneration in St Helens town centre.

But he said the new strategy and future approach is something “fundamentally more profound” than what the council has done previously.

Cllr Baines said: “This is a formal approach to strategic acquisitions for commercial investment purposes.

“And we need to take this approach to generate income in new ways that don’t hit residents and business in the pocket.

“And this strategy and governance arrangements will ensure decisions are made in a clear and appropriate manner.”

To facilitate future acquisitions, the local authority will create an investment property acquisition group, which will be chaired by the leader of the council.

Once an acquisition is approved by the group, which will also feature a number of senior officers, the appointed advisers will act as the council’s agents in respect to the bidding process, negotiations and final purchase.

St Helens Council bought Church Square Shopping Centre in 2017 for £26.6 million.

Cllr Richard McCauley, cabinet member for regeneration and planning, said: “The purpose of adopting this strategy is to establish a strategic framework to secure long-term, sustainable income streams for the council, thereby increasing our financial resilience over time.

“This is not about taking financial risks in areas unfamiliar to the council, but is instead about investing in the borough to support our economic prosperity and corporate objectives.

“The council is facing unprecedented financial challenges.

“However, the borough’s development potential provides the opportunity to play a greater role in the future growth, whilst generating financial returns to support the delivery of vital services.”

Local authorities have increasingly invested in the property market in recent years as they try to offset brutal funding cuts from central government.

It has not always gone to plan however, and has seen numerous local authorities rack up huge debts.

Just this week, the Labour-run Croydon Council issued a Section 114 notice – meaning it is essential bankrupt – and is only the second authority in two decades after Northamptonshire County Council to take such action.

Croydon Council’s leader said the Covid-19 pandemic and austerity have had a major impact on the council’s finances.

But opposition councillors accused the authority of making “dodgy property deals”, buying hotels and shopping centres in the hope they would see returns.

Croydon Town Hall (image courtesy of Mtiedemann)

Despite the risks, Cllr Seve Gomez-Aspron, deputy leader of St Helens Borough Council, said the authority should be doing more commercial activity.

Cllr Gomez-Aspron, cabinet member for reset and recovery, said: “It’s something that we’ve never really done, but always needed to do.

“And it’s another thing that other authorities around us are trailblazing on, so we always get compared to authorities that are doing this type of stuff locally.

“And now we can say we’re actually going to compete in that arena, which is fantastic.”

Cllr Gomez-Aspron said it is important the public understand where the £10 million is coming from, and understand the difference between revenue and capital funding.

“Through good financial management the council has got a capital reserve which we can use for this type of stuff,” he said.

“Now that’s one-off lump sums that can be used to generate an income then.

“That isn’t the same as the revenue that the government have chopped over the last 10 years to the tune of nearly £100 million a year.

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“So there’s a distinct difference.

“And I always compare it to, capital is like your life savings, revenue is like your salary. If you start using your savings to cover your salary and give up your job, you’ll eventually run out of money, so it’s not sustainable.

“But what you can do is invest those savings to bring in a return that then means you can spend it living the way that you want to live, which is exactly what we need to do.”