Eastleigh Borough Council’s net debt is set to reach £519,706,000 next year and beyond that in future years. Eastleigh is one of several councils borrowing heavily to gamble on the property market in the hope of big returns to balance the books. The Lib Dems running the Council have nearly as much debt by comparison to their assets as the infamous bank Northern Rock did just before it crashed, unlike Conservative-run Winchester City Council.
Former Lib Dem peer, Lord Oakeshott (an investment manager) said in The Guardian (26th Jan 2019), “It’s a hell of a gamble that these councils are taking and not what councils should be doing”. The Chartered Institute for Public Finance & Accountancy has warned councils not to expose public funds to unnecessary risk when borrowing to invest in commercial property. The government has published new guidance to councils requiring more transparency to this surge in councils’ activity in the property market. Eastleigh BC is still investing in retail:
The former Budgens site, Hedge End – bought for £3M from a company who’d paid just £1.385M for it 18 months earlier. And, £12.8M for Chestnut Avenue Retail Park to owners who’d paid only £6.34M for it two years earlier – all borrowed money. Is this good value?
The forecast financing costs of Eastleigh’s debt are £5,852,000 next year, rising to £9,022,000 in 2021/22. To put this in perspective, the income from your Council Tax next year will be £5,939,150.