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Councils plan response to Covid-19 with key decisions

Council finances and the future of communties will come under the spotlight later this month with councillors set to make two key decisions.

On July 21, Babergh District Council will discuss the performance of CIFCO, its commercial property arm, followed by discussions on how plans for housing and employment should develop through its Local Plan.

Mid Suffolk District Council, with which it works jointly, will then follow suit on the same two topics on July 23 - both in light of the coronavirus crisis.

Mid Suffolk District Council, Endeavour House (38517514)
Mid Suffolk District Council, Endeavour House (38517514)

CIFCO Capital Ltd, which is wholly owned by Babergh and Mid Suffolk District Councils, is due to present its third annual business plan to councillors at the meetings, outlining plans for the next 12 months.

It was established jointly by the two councils in 2017 to generate income through property investment, which is then ploughed back into council services within the districts to offset reductions in funding from central government.

The company has met its payments to the councils in full this quarter, despite the ongoing Covid-19 crisis.

But accounts for the year ending March 31, 2020, show a paper loss of £3.5 million, due to acquisitions of two new assets, as well as a re-adjustment on the value of the portfolio as a whole. According to the company the loss would only be realised if the assets were sold in the current market.

Last year, the councils approved CIFCO funding be increased from £50m to £100 million with £60 million invested to date. The timescale within which to invest the remaining £40 million has been extended from April 2021 to October 2021 due to the Covid-19 market impact.

Both councils will also consider motions, from Green Party councillors in Mid Suffolk and Green and Labour party councillors in Babergh, calling for a cautious halt to further CIFCO investment.

A joint statement from both parties, said: "Council and residents of Mid Suffolk are now exposed to great risk for very limited returns. The future will bring even greater uncertainty as retail and office property is vacated across the country.

"Unpaid rents mean local taxpayers are supporting struggling businesses in Milton Keynes, Epsom, Norwich and other towns although local people have made clear they are not happy with the basic proposition of remote property investment.

"Most of the CIFCO losses are due to the fall in value of property rather than acquisition costs. These losses are now undermining the council's own balance sheet. Property rents are clearly going to be under great pressure as companies try to cut cost to allow themselves to recover in our stressed economy

"Government has made it clear that they want local councils to stop all risky investments in property, not merely those funded from the Public Works Loan Board. The Green and Liberal Democrat group wish to see local housing built using the available borrowing capacity of the council. Similarly local regeneration cannot be funded from CIFCO income, and is dependent on borrowing.

In total, the two councils received £1.633 million of net income after costs in 2019/20, the equivalent of 10 per cent of the councils staff costs or a 13.5 per cent increase in council tax.

“Despite Covid-19, our investment strategy has resulted in better than industry average rent collection at the current time,” said CIFCO chairman, Sir Christopher Haworth.

The timetable for the Joint Local Plan will also be considered at the meetings with a view to a revised plan being published this autumn.

The Local Plan will lay out how the two councils will work with their communities to deliver housing and employment between now and 2037.

Following public consultation last year, the councils are drafting the next version, also taking in to account the potential impact of Covid-19 on social, environmental and economic factors.

If agreed, this will then be formally adopted by the councils following examination by the national planning inspector.

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