Local Government: Investment

(asked on 12th November 2020) - View Source

Question to the Department for Levelling Up, Housing & Communities:

To ask the Secretary of State for Housing, Communities and Local Government, what plans he has for Government oversight of local authority business investment companies.


Answered by
Luke Hall Portrait
Luke Hall
Minister of State (Education)
This question was answered on 20th November 2020

Local authorities borrow and invest under the Prudential Framework which is designed to ensure that their capital plans are affordable, prudent and sustainable, while giving councils the freedom to set their own capital strategies. Government is responsible for ensuring the Framework remains effective in driving sound decision making, and collects appropriate data to monitor trends and identify risks. Local authorities remain accountable to their electorate for managing their own investment strategies and meeting their Best Value duty. They must comply with the Framework’s statutory guidance, including the requirement to report performance against a set of metrics designed to demonstrate the objectives of the Framework are being met, and must publish an investment strategy.

Government is aware of recent trends where some local authorities are taking on high levels of debt to invest for commercial income, and takes the view that a minority of councils are exposing taxpayers to undue financial risk. Government is also aware of the financial risks that can arise from councils' investments in companies. We have already strengthened our investment guidance to support better consideration of risks in decision making, and are now considering carefully what further interventions are needed, taking into account the recommendations of the Public Accounts Committee in their report of 13 July 2020. We already have underway a review to improve our available data and ensure we fully understand sector borrowing and investment activity, including current and emerging risks. We continue to actively monitor capital trends in the sector, as part of our normal processes, and we are collecting data from authorities to understand the impact of the current crisis on commercial income.

Reticulating Splines