Council Tax increase and £25m loan for CIFCO commercial property enterprise approved by Babergh District Council
Plans to increase Council Tax by £5 from April and a fresh loan of £25 million to pump into commercial and retail property has been approved.
Babergh District Council approved the 2019/20 budget on Tuesday night, where the proposals were tabled.
The district council’s element of the Council Tax will rise by £5 a year – around 10p extra per week – for a Band D property, the government benchmark.
It follows a 12.7 per cent increase already approved for the police precept and four per cent increase at county council levels.
Elsewhere, controversial plans to borrow an additional £25 million from the Public Works Loan Board were also given the green light, which will effectively double the council’s investment in retail and commercial properties through its joint-owned company CIFCO Capital Ltd.
The firm has come under fire for borrowing large sums of money but investing it largely out of county.
There were also question marks over the retail market following high-profile national stories of firms such as Marks and Spencer, House of Fraser and HMV struggling.
A stress test to assess potential risks has been undertaken, with council chiefs confident they have mitigated the risks as much as possible.
John Ward, Conservative council leader, said: “The numbers produce a compelling case for Council Tax increases each year. We will continue to do this at the maximum level required without a referendum.”
Concerns were raised by independent councillor Clive Arthey that nationwide changes to council investments which meant there were soaring numbers of local authorities investing in business property using Public Works Loan Board cash at preferential interest rates had 'skewed' the market, presenting a risk to the council’s portfolio if the bottom fell out of the market.
Cllr Nick Ridley, member of the board at CIFCO and cabinet member for planning, said: “Whatever we invest in there is a risk.
“But over the last 30-40 years property has proven remarkably resilient.
“You won’t see many portfolios that have failed – only those that were speculative.
“We are not there to blow council money we are there to support it.
“If we don’t get the income from there, it’s hard to see where we get it.
“If we don’t want to take advantage of this particular type of investment we may have to cut back.”
More by this authorJason Noble, Local Democracy Reporter