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Treasury proposals to limit property investments by local authorities could impact Babergh District Council-owned firm Cifco

Proposals aimed at limiting the practice of local authorities buying up commercial property could impact a property investment firm owned by two Suffolk councils.

The Treasury has launched a consultation, running until July, on planned changes to the Public Works Loan Board, which many councils have used to secure loans to purchase properties for rental income to supplement their budget.

Babergh District Council is among the authorities to have employed this investment strategy, having spent millions of pounds on properties through Cifco Capital Ltd, the company it jointly owns with Mid Suffolk District Council.

Babergh District Council is based at Endeavour House (31895786)
Babergh District Council is based at Endeavour House (31895786)

But a spokesman for the Treasury indicated they want the practice to end, in light of the anticipated downturn in the real estate sector due to the coronavirus crisis.

“Our starting point is that local authorities should invest public money in regeneration, housing and delivering services, not in speculative commercial investments which can put local and national taxpayers at risk,” he said.

In response, Emily Atack, Cifco managing director, said: “Cifco made a total net return to our councils of £1.634 million for 2019/20, up from £1.4 million last year.

“That’s a significant income for our councils that we have been able to invest in our services and communities without having to rely on council tax or other funding.

“With each of our investments, we have taken professional advice and undertaken a full scrutiny test to mitigate our risks, and ensure our portfolio is balanced.

“It’s thanks to this approach that Cifco can weather the current storm of Covid-19 and we are confident the portfolio will continue to deliver important income for the councils.

“We are keen to make our case in our response to the consultation, challenging some of the Government’s assumptions and championing financially prudent councils which can demonstrate they have applied the correct governance and diligence in their approach to commercial property investment.”

But Robert Lindsay, leader of the Babergh Green Party group, argued the council should not be taking on the risk of investing in commercial property outside of the district, and should instead use the money to invest in local housing.

“We badly need to change the strategy of Cifco,” said Cllr Lindsay.

“Cifco revenues are predicted to fall dramatically this year as tenants either defer rent or don’t pay. There is a risk they could fall below the amount we pay in interest on the loans Babergh took to do the deal.”

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