Local authorities are subject to financial pressures from reductions in government funding and increased demand for services. One way that local authorities are responding is by making commercial investments to provide income (sometimes alongside other objectives). While local authorities have a long history of owning commercial assets, the last three years have seen a step-change in the scale of this activity, alongside increases in borrowing.
The Ministry for Housing, Communities and Local Government (the Department) is responsible for maintaining the overall accountability system for local government, including the framework within which authorities make decisions about borrowing and investment. In response to recent concerns the Department and the Chartered Institute of Public Finance and Accountancy have made changes to the statutory codes and guidance dealing with borrowing and investment.
The study will examine how the Department is exercising its responsibilities as the steward of local authority borrowing and investment. In support of this, the study will review evidence about recent activity across the sector. The study will focus on commercial investments made to secure revenue income rather than the use of commercial principles in delivering services directly.