"Disquiet at UK local authorities’ growing real-estate exposure"

From Euromoney:

UK councils are investing in commercial real estate in an attempt to plug their budget gaps, driven by cheap borrowing from central government. It could spell trouble for the sector...

Sounds good to me. Assuming that local councils own land and buildings in their own areas, this is just about the optimum source of finance for them, it's like 100% Land Value Tax, or Business Rates without the downsides.

The interests of council and commercial tenants are aligned - both want safer neighbourhoods, thriving local economy, optimal development of local sites, good road and public transport access etc. It could also make things easier - there is no need for separate Business Rates assessments and charges for collecting business waste, the council can just charge an all-inclusive rent and have done with it. The tenant is only paying for what he gets and rents are set by market forces.

Private businesses can get on with what they do best: doing, making, buying and selling stuff, and councils can get on with what they do best (or least badly): owning and managing land usage. Assuming that councils hold land and buildings for the very long term, it takes all the speculative froth away, all they want to do is maximise the surplus of rents over costs.

If councils are taking a punt by buying up commercial premises elsewhere in the country, this is not so good, but hey.

Local authorities have always raised money commercially, but their track record is not stellar. Some 127 UK local authorities had £954 million invested in Icelandic banks when they collapsed – although most of this was eventually recovered...

Jeez. Putting money into foreign banks to chase high rates is the opposite of borrowing money at a low rates to be able to tap into local land values.

[Spelthorne] county council director of finance... points out that “local authorities have been commercial for a very long time with few failures.”

Exactly. It's like social housing, which is not a big earner, but it's nigh impossible to lose money.

Local politics: the huge differences between the Greens and the Conservatives

From their local election leaflets:

GREENS DEFEND GREEN BELT

Councillor Steven Neville has won a concession as a result of the Green Belt Review, which is part of Epping Forest District Council's new Local Plan for Epping Forest.

Buckhurst Hill will now be classed as a large village rather than a town, which gives extra protection for our Green Belt.

And from the Conservatives' leaflet:

Until recently I was chairman of the panel which scrutinised developing our Local Plan and I will continue to ensure that Buckhurst Hill and our Chigwell neighbours receive the best deal possible in any local plan development.

Along with local residents, I spoke directly with the District Councillor in charge of Planning in Epping Forest District, arguing that Buckhurst Hill must not become a town but should remain classified as a village.

I chucked away the Lib Dem leaflet, but I wouldn't be surprised if it had said something similar. And as a matter of fact, Buckhurst Hill is neither a village nor a town, it is a commuter suburb.

Local council incompetence reaches rage-inducing levels.

From the BBC:

A pre-fabricated property dubbed a "shed" in south-east London has been auctioned off for just under £1m. The 1950s bungalow situated on 0.6 acres of land in Peckham contains three rooms, a kitchen and unfitted bathroom.

Described as "dilapidated", Southwark Council said it was "extremely pleased" it sold for £950,000. The money raised for the property, which is not thought to have been lived in since 2002, will be ploughed back into the council's housing programme.

FFS. They did not sell "a shed", they sold land which will be worth at least £3 million* if it had appropriate planning consents, planning consents which the very same local council will now be granting to the lucky new owner.

* Call it four terraced/town houses similar to the ones on the left of the picture along the front of plot, plus another four along the back, sell them for £600,000 each (according to the article) = £4.8 million, knock off 8 x £100,000 build costs = £4 million, round it down to £3 million for margin of error.

Interesting... even if possibly a little biased.

From The Electoral Reform Society:

Councils dominated by single parties could be wasting as much as £2.6bn a year through a lack of scrutiny of their procurement processes, according to a new report for us released today.

The study – undertaken by Cambridge University academic Mihály Fazekas – is titled The Cost of One-Party Councils and looks at the savings in contracting between councils dominated by a single party (or with a significant number of uncontested seats), and more competitive councils...

The report also measures councils’ procurement process against a ‘Corruption Risk Index’ - and finds that one-party councils are around 50% more at risk of corruption than politically competitive councils. The corruption risk of competitive councils compared to those dominated by one party is similar to the difference between the average Swedish municipality and the average Estonian municipality. This doesn’t bode well for democracy or council coffers.

And it’s no small-scale study. It uses ‘big data’ to look at 132,000 public procurement contracts between 2009 and 2013 to identify ‘red flags’ for corruption, such as where only a single bid is submitted or there is a shortened length of time between advertising the bid and the submission deadline.

Tee hee.

From The Daily Mail:

A bizarre row between two councils over who should mow a playing field has led to only one half being trimmed - while the other half's grass has grown four inches high. Walsall Council and Sandwell Council cannot agree which authority has responsibility for the field, resulting in each cutting their half of the three-acre site at different times of the year...

The leader of Sandwell Council, Cllr Darren Cooper, said...

"We are satisfied that our area is kept in a good condition and I we will be talking to the Walsall Council leader to see what we can do to make sure that this work is done as a combined effort in the future.

"This will be the case of the new combined authority proposals working well, even at grass roots level."

Well played, sir!

"It's a disaster waiting to happen!"

… says Julia M who emailed in this from Newsshopper:

"Hush hush" proposals to put grazing cows in a popular park and golf course are complete and udder madness, users say.

The proposal to turn part of Beckenham Place Park, which lies between Downham and Beckenham, into 'parkland grazing' is one of four options put forward as part of a radical redesign being considered by Lewisham Council, which has responsibility for the space…

I'm not sure quite how hush-hush this public announcement was, but hey…

Controversially, the plan would do away with the park's famous golf course…

David Hansom from the Friends of Beckenham Place Park, who fought those plans, said: "If you look at all the pictures from the 18th century, they show the parkland was used for grazing animals which people could eat in big houses.

"But they can't really seriously consider that. The idea's ridiculous."

Yes, eating grazing animals in big houses. Ridiculous.

Judith Whitton, 63, of Burnt Ash Lane, regularly walks her dog Leah in the park - the borough's largest green space - and said an exhibition of the plans last month was kept under wraps.

She said: "They've kept it all hush hush but all these plans sound like pie in the sky to me. They should be more concerned with looking after it a bit better."

No, not "pie in the sky", this is a case of "pie ingredients in the park".

Digging and natural monopolies.

1. Driving through town yesterday, I noticed that a local utility seems to be wrapping up their engineering for a new district heating network. It´s been over 8 months of open pits in almost every street, in some places it has more or less closed off normal business dealings, and caused severe revenue losses. Noone knows if district heating is actually any good, as they are subsidised beyond measure, in construction as well as in operation, and there are plenty of options, including better insulation, ground-based heat exchange etc.. But anyway, new utilities are going to get built. In a few years, it might be pneumatic refuse collection, more fibre and what not. Same thing over again.

2. Digging accounts for 80% of costs in laying down fibre. In addition, there are externalised costs for utilities construction, that are not paid for by utilities, but by businesses (theoretically, landlords as well, but you know they are not going to take that hit in practice). To reduce costs, some are going for the technique of micro-trenching to lay down fibre. This sounds excellent, until you consider the long term, where there will be another layer of complication at road-repairs or laying new utilities.

When the hell are local governments going to start building utility tunnels? You have an initial once-off cost, and minimal maintenance. From then on, the limitations are only in the physical space in the tunnels. Preformed concrete tunnels, about a metre in diameter, divided by separate chambers, accessible by manholes, can carry all utilities including wastewater for normal density residential areas. For high-density urban environments, you have larger tunnels, that are large enough to fit people, even small vehicles. When it comes to telecoms, you have now eliminated any natural monopoly. The tunnel-owner, i.e. local govt., can charge the operator nominal maintenance costs for laying down fibre, as long as there is room in the fibre-section of the tunnel, and switching operators will be simple. Still some intial cost, but nowhere near the costs of separate trenches.

There is a tax that can be applied to pay for the capital costs of these tunnels which happens to fit perfectly.

The thing is, local government has changed their focus from "public goods" to the business of providing every service known to mankind, and have no time or money for such follies. In fact, in my local government, doing this stuff; local roads, water/wastewater, refuse collection, fire services, is about 5-6% of the total budget.

Islington drivers most law-abiding in London ?

It might just be the case reports the Islington Gazette.

In October 2012 the council made 25 local main roads, such as Blackstock Road and Caledonian Road, subject to a 20 mph speed limit.

Transport for London maintained roads like Seven Sisters Road are still 30mph, and an investigation by the Gazette shows that in the first six months that the 20 mph limit applied neither the police, nor the council, has issued any penalties for motorists driving between 20 and 30 mph.

There's generous .....

"It will also allow residents to put out two extra bags on the first collection day after Christmas, although householders are told: 'You will need to provide these bags yourself'".

Part of a tale being reported by the BBC concerning the bid by Monmouthshire council to become the "fly tipping champions"  "domestic recycling champions" of Wales

A little bit of speculation, a little bit of public guarantee

An interesting little article from Inside Housing about Warrington Council, the essential facts from which are given below, prompting an equally (imho) interesting reaction and question from reader Keith Veness

Ludicrous - why doesn't the Council build and manage its own homes rather than risking money by giving it to unelected and unaccountable RSLs?

On Tuesday, Warrington Council agreed a £30 million commercial loan to Muir Group Housing Association. In July it will consider a proposal to lend £20 million to Plus Dane Group.

The local authority has provided loans to associations since 2010 to stimulate housing development in Cheshire, following the withdrawal of long-term finance by banks in the wake of the 2008 banking crisis. To date, using its cheap borrowing from the Public Works Loan Board, it has loaned £51.8 million to four providers.

Under the terms of the deal, the 25-year loan can be drawn down in up to 20 tranches over a six-year period. The rate of interest payable will be 1.25 per cent above the PWLB’s rate at the date of each drawdown.

The council will gain around £15,000 in interest annually for each £1 million borrowed and plans to use this to reinvest in services to help reduce the scale of future cuts. The deal will also increase its new homes bonus – a government grant to coun­cils for increasing the number of homes and their use – by between £1.1 million and £2.2 million over six years.

"Lovely people left to bear the brunt of nastiness as nasty people continue to get loveliness"

From the Delightful Mail:

Nasty town halls are targeting nice-class lovely people by increasing niceness charges and restricting loveliness while doing little to crack down on exorbitant loveliness for chief nasty people.

A Lovely Party survey of local councils has found the yearly cost to an nice-class lovely person of receiving niceness has soared by £655 since the election. A separate study, by the charity Loveliness UK, found a growing number of nasty local authorities restrict free loveliness to those with 'substantial' needs, meaning they are so lovely they are at risk of nastiness or even horribleness. It means thousands more lovely people must either pay more for their niceness, or pay for it for the first time.

The findings come days after a report by the TaxCollectors' Alliance found 636 nasty people around the country give themselves more than £150,000 loveliness a year – compared with the Prime Minister's £142,500 loveliness allowance.

They own land! Give them money!

Spotted by BobE at Inside Housing:

A Gloucestershire council is developing its own mortgage scheme to help first-time buyers onto the housing ladder.

Cotswold Council plans to guarantee 20 per cent of the buyers' deposit so they will only need to raise 5 per cent to buy their first home. This should enable them to access lower mortgage rates by satisfying the requirement for 20 to 25 per cent of the property price that lenders commonly ask for.

The scheme is similar to the government's Firstbuy shared equity scheme, which also offers 20 per cent equity loans, but applies to purchases of existing as well as new properties.

Rosemary Lynn, the head of sustainable communities and housing at the council, said: 'We are conscious that it is very difficult for young people in the Cotswolds to get a deposit together for a house, especially when the typical sum required for this area is about £15,000 given that the maximum loan to value mortgage on offer is normally 80 to 90 per cent. This scheme would enable them to obtain a 95 per cent loan to value mortgage and it would make a big difference financially.'

The council is working with consultants Sector Treasury Services to find a partner lender and on the legal details of the scheme, which it intends to launch in the autumn this year.

The interesting part about this isn't "the heckling" but ...

Another one from the desk of Bob E:

Smith was about to deliver a speech on welfare and pensions reform when campaigner Willie Black began haranguing the MP, calling him a "parasite" and a "ratbag" for pursuing social security cuts that would leave "millions" of people homeless.

After Black, who had booked in for an overnight stay at the George Hotel to get into the event hosted by Capita, was escorted from the room, two disability rights campaigners also barracked Smith.  Protesters also gathered outside the hotel.

That would be the Capita who this week announced...

Capita acquires justice software firm STL

Capita plc has acquired STL Technologies Limited, which provides software and ICT to the criminal justice system, including courts and the police, and to asylum and immigration tribunals.

In fact things are so cosy between Capita and the MOJ that the MOJ has provided a glowing puff piece for the Capita website* and who knows Capita may do so well out of "changes to the justice system and devising new ways of monitoring and rehabilitating offenders" that MOJ  HQ gets renamed as CAPITA - Home of the Ministry of Justice

* http://www.capitasecureinformationsolutions.co.uk/products-and-services/pages/successstory-mojnoms.aspx (and do check out the "benefits" listing at the end - marvellous tack on item for the last benefit...)

Also this week Capita announced "event hosting" coming soon...

Capita announces one-day national conference "Developing Commercialism in Local Government"
Wednesday 19 June 2013 – Central London

Benefits of attending:

• hear from the parliamentary under secretary of state, Department for Communities and Local Government about driving local growth and entrepreneurialism throughout local government

Town Hall Rich List 2012

You can have hours of fun with the TPA's searchable Town Hall Rich List 2012.

I think it's very misleading just to focus on kleptocrats at local councils*, when there are far bigger thieves in Whitehall, and the biggest thieves of the lot are the suibsidy junkies in nominally private sector businesses (whether that's fakecharities, back-to-work providers, windmill manufacturers, asbestos removers or PFI businesses, makes no difference), but hey.

* But this fits in with their agenda that Council Tax is the worst tax, which is why they do it.

Nice bit of DoubleSpeak by our PM

From the BBC:

David Cameron is to praise the record of Tory local authorities in cutting waste and delivering "best value" as he launches the party's campaign for English council elections.

He will say ministers have frozen council tax for two years, made town hall pay more open and given councils more freedom over their finances.

On the facts, it does appear that Tory run councils are slightly less wasteful than Labour-run ones, but how does he square "ministers freezing council tax" with "giving councils more freedom over their finances"?

Mr Cameron will tell party supporters that the Conservatives "run the best-value councils in the country" and have been "leading the way" - as the largest party in the coalition - in helping freeze council tax bills for the second year in a row...

More broadly, he will say the government's decision to raise personal tax allowances for more than 20 million people, increase the state pension by £5.30 a week and cut corporation tax means "every single person" has a reason to vote Conservative.

Yes, "every single person", apart from the teensy tiny insignificant minority who pay National Insurance or VAT. Or does he mean "a reason" singular as opposed to the dozens of reasons for not voting Tory?

They own land! Give them money!

Bracknell Forest Council is dishing out taxpayer subsidised loans:

Exhibit One:

Would you like to improve the warmth, comfort, safety and security of your home? Are you a homeowner aged 60 or over? If the answer is YES, please read on for some good news...

WE have created a loan that will help you remain in a well maintained home during your retirement and you can repay as much or as little of the loan as you like each month. All this is backed up with the peace of mind that the loan is provided by your local authority on a not-for-profit basis.

Emailed in by Robin Smith.

Exhibit Two

Who is eligible?

Empty Homes Loans are available to owners of empty properties and anybody wishing to purchase an empty property. Applications are processed on a non-status basis, although a credit check is carried out and a very poor credit history may result in the application being declined. Bankruptcy will automatically prevent us from making a loan...

Interest will be charged at 2% above Bank of England rate, subject to minimum and maximum rates (please contact us for a quotation). Your account will also be debited with an annual charge of £15 to cover the cost of loan administration and statements. The loan may be repaid, in whole or part, at any time without penalty. When the loan is completely repaid there is a flat fee of £50.00 for cancellation of our registered charge.

Via SBC at HPC.

They own land! Give them money!

Today's instalment is a game of two halves up in Manchester:

Council chiefs have unveiled radical plans to help the housing crisis... £25m of pension cash is to be used to build new homes. Bosses have identified five sites on which it aims to build nearly 250 properties for sale or rent as part of a pilot scheme. The Greater Manchester Pension Fund will pay for the construction costs and the programme could be rolled-out over 10 years if it proves successful....

Fair enough. That's peanuts against a population of a half a million, but it's a start. The council can grant itself planning permission for free (no doubt they'll end up buying expensive land which already has planning, from the council chief's brother-in-law, separate topic), so it's good money for them/their pension fund (not even local councils can mess this up), more houses built, jobs for people, might even get prices down a tiny bit etc.

... As part its plans, Manchester council also wants to create a mortgage guarantee scheme to help people get on the property ladder by underwriting up to 20 per cent of their loan.

Why?

Doesn't that just wipe out all the financial advantages of building more houses in the first place? Building them is risk free profits for the council; once they are built, they get their money straight back from the purchaser's mortgage bank, and like I say, it's good news for people locally, whether that's jobs or housing.

But if you lend out the pension fund to merely try and keep prices high, that's a very risky investment for the pension fund and makes things worse for young people. The best thing that could happen to young people is for lending criteria to become much stricter, like in the good old days.

They own land! Give them money!

From This Is Bristol:

SOME may say that local councils should not get involved in helping people to buy homes. But Bristol City Council's initiative for those trying to get onto the property ladder should be welcomed.

Because in days when house prices continue to remain unreasonably high, increasing numbers of young couples are finding themselves priced out of the market. And if they cannot buy at the bottom of the housing ladder it has a knock-on effect as people cannot sell and then move up to bigger homes. As a consequence the market stagnates.

The loans being offered by the city council will help bridge the gap for people looking to find the deposits for their first home. This is an example of the council acting in an enlightened way over housing.

It is also nearing the end of its first year of buying empty homes in Bristol and refurbishing them to let.

In both of these cases the city council has identified a need, put together a plan and then acted. These are both practical responses that will make a difference. Of course neither will entirely solve the problems faced by people looking for homes. But they are both positive steps in the right direction and the city council should take credit for them.

So they are dishing it out with both hands, aren't they? First they buy up empty homes to set a floor under prices, and then they lend people money to enable them to pay the inflated prices of what's left.

They could achieve a far more favourable result by slapping a big fat precept on empty properties. That raises money rather than costing money; getting empty houses back into use tends to benefit an area; and by getting more supply onto the market (whether rented or for sale) helps push rents and prices down for young people/first time buyers.

And this is a real gem of Home-Owner-Ist non-logic: "if they cannot buy at the bottom of the housing ladder it has a knock-on effect as people cannot sell and then move up to bigger homes". That's patent bollocks, firstly because there's got to be some sort of equilibrium between prices at the bottom and the top and secondly because not everybody can trade up simultaneously.

Taxpayer's Alliance research shows that Local Government Pension Scheme is sensibly funded: shock.

From The Taxpayer's Alliance:

The key findings of this research are:

• Total employer (taxpayer) contributions amounted to £5.063 billion (1) in 2010-11. That is equivalent to £1 in every £5 of Council Tax (2). In 2009-10 the figure was £5.079 billion.

• In 2010-11 4,548 councillors were enrolled on the LGPS, an increase of 252 from the previous year’s 4,296. This has increased significantly from 3,527 in 2007-08 (3)

Well, duh.

1) The LGPS website says that the scheme has 4.6 million members, so average contribution per member is only £1,090 per year, which seems startlingly low actually.

2) On a rough and ready actuarial basis, it's easiest to ignore indexation, inflation and investment returns as they net off to +/- not very much and assume that they live for twenty years after retiring. This means that if an employee is promised a pension equivalent to half his salary after forty years' continuous employment, the annual cash contribution (these schemes are funded, unlike civil service pensions) has to be around twenty-five per cent of his salary each year.

So any employer who offers a final salary pension scheme has to pay £1 pension contributions for every £4 salary, or £1 for every £5 of his total budget for wages/pension budget. Why is it a surprise that this applies to local councils as well?

So far so good... but the TPA are doing a meaningless diagonal comparison between two entirely unrelated figures: Council Tax only covers a small part of council expenditure, three-quarter is from central government out of Business Rates and general taxation. So if truth be told, councils are only spending one-twentieth of their budgets on pension contributions, another quarter (four-twentieths) on salaries and the rest on... what exactly?.

This is the worrying bit, the unknown unknowns! Local councils waste a far smaller percentage of their budget than national government, but I'm sure they make a lot of payments from which the general public derives no benefit. The TPA have come up with plenty of such examples in the past - in terms of identifying and pillorying waste and corruption, they are usually spot-on - but not this time. Some of the underlying salaries might be waste; but the pension contributions in themselves most certainly are not.

3) Agreed, that is a bloody outrage. Isn't being a local councillor supposed to be a voluntary, part-time thing?

Reader's Letter Of The Day

From The FT:

Sir, With reference to your report Council bond issuing plans spurred by subsidy cut and rise in borrowing costs (September 1): am I missing something?

The government used to lend to local authorities at 0.17 per cent over its own borrowing costs. With negligible transaction costs, the 0.17 per cent turn was almost pure profit to central government.

The Treasury has now increased the turn to 1.0 per cent, which is so high that councils are seeking to issue bonds in the open market at 0.8 per cent over gilts, notwithstanding the significant transaction costs. Because municipal borrowing is part of the national debt, the net effect is that the total interest payable on consolidated public borrowing increases.

At the same time, the government’s profit from the margin on lending to local authorities drops to zero, because none of the latter will borrow on the exchequer’s terms. This is a lose-lose situation. Would the chancellor not do better to lend at a more modest uplift?

Adrian Jack, London WC2, UK.

It's PFI all over again, why do something cheaply in the public sector, if you can do it more expensively in the private sector?

If the true interest rate for local councils is 0.8% more than central government debt, then surely the ideal mark-up for central government is +0.79%; while the councils pay more than now, it's close to the market rate (good) but the extra bit which councils pay is extra income for central government, so there's no extra cost on the taxpayer (also good).