ASSET MANAGEMENT

Selling the family silver is a mistake

The Government is Incentivising councils to sell off publicly-owned assets, 'but these flexibilities should not become business as usual and they are not a sufficient substitute for a reform of our broken funding system', warns Rob Whiteman.

Grounded in a reluctance to provide direct funding, the Government is incentivising councils to dispose of publicly-owned buildings and assets.

But selling the family silver to fund ongoing revenue costs is a terrible way to fix financial distress.

While we welcome greater flexibility handed to councils, the directive to break the rules of accounting convention marks an appalling shift from stable funding.

At best, disposing of assets to fund revenue shortfalls defers the impact of cost pressures on the general fund. In some cases these flexibilities risk exacerbating costs regardless.

This is unsustainable because it generates one-off cash injections that come with the burden of liability and borrowing costs, not to mention the loss of a potentially productive asset for the local authority.

In this way, there is a risk local authorities are drawn into fire sales in efforts to plug budget shortfalls. This could drive poor value for money for communities.

The Chartered Institute of Public Finance and Accountancy (CIPFA) recommends flexibilities are limited to invest-to-save and uptake closely monitored. Independent reviews handled by a stakeholder panel including CIPFA and the Local Government Association could be an option.

Raising money in this way does not address longer-term pressures on finances and fails to target the underlying issue of how services are funded. The funding gap of £4bn, estimated over the next two years, can hardly be topped up by flexibilities on capital funding alone.

These flexibilities should not become business as usual and they are not a sufficient substitute for a reform of our broken funding system. The Government must set out what longer-term support will be provided. Only through such strategic and lasting measures can we safeguard the stability of our local government financing.

Rob Whiteman CBE is chief executive of CIPFA

X – @RobWhiteman

ASSET MANAGEMENT

Worry less about black swans, focus on grey rhinos

By Barry Quirk CBE | 19 July 2024

The studied critique of the Covid-19 Inquiry should encourage policymakers to pay more attention to other known but poorly managed risks, says Barry Quirk

ASSET MANAGEMENT

Squaring the circle

By Seb Lowe | 18 July 2024

Joe Montgomery and Seb Lowe review the King’s Speech, and they conclude the sector is well placed to help the Starmer government find solutions to several co...

ASSET MANAGEMENT

Intervention shift signalled with plans to boost watchdog

By By Heather Jameson | 18 July 2024

The new Government is to change its tone on local government intervention – with a possible push towards more oversight in a beefed up watchdog.

ASSET MANAGEMENT

Celebrating excellence in local government

By Dawar Hashmi | 17 July 2024

Penna’s Dawar Hashmi reflects back on The MJ Achievement Awards earlier this year, and reminds us of the importance of recognising outstanding leadership.

Popular articles by Rob Whiteman CBE