Fighting the local authority funding gap
As local authorities try to balance their books, they face dilemmas on cost savings and income generation.
In July 2018, the Local Government Association launched a campaign for increased investment in local services. Local authority leaders warned Whitehall that the 2019 Spending Review will ‘make or break’ frontline services, with a funding gap of £8bn by 2025.
From an asset perspective, property portfolios play an important role in enabling authorities to provide cost-effective services, ideally at a convenient location, in a fit-for-purpose building. Faithful+Gould’s team is therefore experiencing increased uptake of our portfolio review service, which helps authorities balance quality and affordability.
Aims are three-fold: to save on costs, maximise the estate’s potential and utilisation, and generate ongoing or single-instance revenue. Scrutiny of the property portfolio should address both investment and income, and our team has been exploring the following routes with our clients.
Rationalisation and re-organisation are the watchwords. One Public Estate is a great initiative, combining service and sector offerings into hubs which free up buildings and land for redevelopment. Authorities can also sell unused property, or vacate certain properties and sell the land.
The creation of investment portfolios for income purposes is growing in popularity. Some authorities have purchased significant property holdings, whilst other have invested in hotels, gyms, retail and commercial office space. This strategy could be affected by increased central government scrutiny. The CIPFA Prudential Code for Capital Finance, updated in 2017, mandates that an authority’s capital strategy, and its associated risks, should be formally reported.
Development companies and other vehicles can potentially do more than generate revenue. The opportunity for housing development is increasingly attractive, given the country-wide demand. Development companies can also generate inward investment opportunities for commercial, retail or industrial developments, providing jobs as well as income. The set-up process brings political, financial and managerial issues, but these can be overcome, with rewarding results.
Public Private Partnerships (PPP)
PPP provides funding solutions, delivery mechanisms and service provisions, and has been utilised to good effect on projects where placemaking is key. Private sector input is important to placemaking, but today’s emphasis is on the development’s added value and community benefits. Collaboration is needed, between the private and public sectors, their partners and advocates, with encouragement for local communities to become active stakeholders in the project. However, authorities need to create a receptive environment for investment, for maximum social and economic value.
Given the housing shortage and subsequent infrastructure demands, there is room for innovation and further options No one size fits all—authorities must adapt to the environment and think long term, not just to the next election cycle, but to five, ten or even fifteen years ahead. We work with public sector clients, providing Clerk of Works, employer’s agent, cost management, project management and design services on a variety of development schemes. We harness our financial, legal and property knowledge to produce much-needed savings and ongoing revenue for local authorities.
For further information please contact our consultancy services framework manager, Krish Raichura
Darren BakerRegional Director, Faithful + Gould
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