Newcastle City Council is sitting on one of the ten most profitable local authority portfolios of investment properties in England at the same time as residents face further cuts to services of £67.4mn over the next three years.
Statistics published by the Department for Levelling Up, Housing and Communities (DLUHC) this week here show that the council’s income from its investment properties, including its share of the Eldon Square shopping centre, in 2021-22, the latest available, was £6.976mn. The council has had a share in Eldon Square since it was developed the 1970s.
This is by far the largest figure for the North East, followed by County Durham with £2.535mn and Middlesbrough with £1.248m. No other council in the region had income from property investments over £250,000 and four – Darlington, North Tyneside, Stockton and Sunderland – had nothing at all.
Newcastle’s was the tenth largest investment property holding of any council, by income, in England in 2021-22. The 415 (out of 426) English local authorities, combined authorities, police and crime commissioners, fire authorities and national park authorities which completed returns to the DLUHC received total property investment income of £339.511mn – an average of £818,099.
The authority with the largest income from property investment was the City of London with £38.353mn. Others with incomes larger than Newcastle’s were Manchester (£20.620mn), Buckinghamshire (£19.691mn), Croydon (£10.228mn), Bracknell Forest (£9.061mn), East Hampshire (£8.566mn), Trafford (£8.264mn), Surrey (£7.261mn) and Redbridge (£7.190mn).
Many authorities throughout England have no investment properties, though according to Newcastle City Council those that do and have declared returns of more than £1mn include many much smaller than Newcastle.
Newcastle also benefited from income of £3.875mn from interest on capital loans in 2021-2022 and £102,000 interest on revenue loans.
The city council spent £444.921mn on services such as education and social care in 2021-22, and its income from property assets and loans helped it keep its council tax requirement down to £119.911mn, though government grants and business rates made much bigger contributions.
But property holdings are no guarantee that a council will stay out of financial trouble and can also lead to criticism. Croydon bought a retail park, the Colonnades, for £53mn in 2018 and had property returns of over £10mn in 2021-22, as we have seen. But in November 2022 it declared bankruptcy for a third time. On that occasion the cabinet member for finance, Councillor Jason Cummings, told the BBC:
“It is not the sort of thing we should be buying or investing in, it is part of this legacy of trying to make money on the property market. The council borrowed money for the Colonnades and we still have that debt. This particular one has pretty much broken even, but in our current position we can’t sit on an asset of that value which isn’t providing any service and it presents a risk for us.”
Property investment can also leave a council open to criticism. Elliott Keck, investigations campaign manager for the Taxpayers’ Alliance, writing on the ConservativeHome website this week, said:
“Much has been made about the role property investments have played in some of the more spectacular bankruptcies by local authorities in recent years. Whether it’s the £41m splashed out by Slough on their new headquarters or Croydon’s multi-million gamble on shopping centres and hotels, local politicians have been happy to buy. What might be needed now is more of an inclination to sell, because councils are sitting on prime real estate which is sitting empty.”
A Newcastle City Council spokesperson said:
“The [Newcastle] figures include a return from our part-ownership of Eldon Square shopping centre. This puts us in a strong position compared to other local authorities with a significant stake in a key asset in the heart of our vibrant city centre which is accessed by thousands of people every single day.
“It is one of the cornerstones of the local retail economy, and we remain committed to working with operators to ensure the very best offer for residents, the employees it provides a living for, and the many visitors who come to shop in Newcastle.
“We have a mixed-use commercial property portfolio that includes retail, offices, industrial, historic and leisure buildings among others. The income we receive contributes to our annual budgets. Selling these stakes may provide short-term financial boosts; however, this would be in the form of capital receipts which we would not be permitted to use to fund council services. A healthy property portfolio ensures we have long-term sources of income which help to manage the council’s budget and costs.”
CLICK HERE TO SUPPORT THE BYLINES NETWORK CROWDFUNDER!