Somerset Council has been “encouraged” by the government to sell a £220m commercial portfolio to fund essential services, despite it being expected to make a loss on the assets.
In response to the authority’s £100m funding gap for 2024/25, the government granted Somerset £76.9m to help balance its budget in February.
Alongside this, Liz Leyshon, deputy leader of Somerset Council, revealed that the government also “encouraged” the authority to sell its commercial properties and use the receipts to fund essential services, such as adults and children’s social care.
Acting on this recommendation, Somerset has agreed to dispose of an “inherited” commercial investment portfolio, which was purchased by the unitary’s former district councils for £289m. However, as of 31 March the portfolio was only valued at £220m.
Assets in this portfolio include the Steelite International building in Stoke-on-Trent, which was purchased for £21m by former Somerset West and Taunton Council in 2021 but is being sold for £14m, the council confirmed.
“Although we will seek to secure the best value for taxpayers, we can only sell property in line with current market values,” Leyshon explained.
Following government guidance
However, in response to criticism about the revenue loss, Leyshon pointed out that at the time Somerset’s four district councils followed “government encouragement to operate commercially as a measure to counter funding pressures in the long term”.
In 2010, former communities and local government secretary Eric Pickles started the commercialism agenda in local government, by encouraging councils to invest to fund services. In doing so, authorities would become financially independent.
However, the government has recently been pushing back on this agenda, as can be seen through tighter minimum revenue provision requirements.
According to Somerset Council, its investment in the Steelite International building generated £1.3m annually from rent. Other assets in this portfolio include North Shields Retail Park, which was purchased for £11.96m in 2021 and an office building in Bristol, which was bought for £9.6m in 2020.
Leyshon added that since the purchase of these assets, “the situation has now changed and we continue to call on the government to take urgent action to fix the system of funding local government which is fundamentally broken”.
—————
FREE bi-weekly newsletters
Subscribe to Room151 Newsletters
Follow us on LinkedIn
Follow us here
Monthly Online Treasury Briefing
Sign up here with a .gov.uk email address
Room151 Webinars
Visit the Room151 channel
