I have followed and written about the East Hampshire District Council property portfolio scheme for some years now, and I know from reader feedback that my earlier letters have been appreciated.
Indeed, in May this year while ‘telling’ during the recent local elections, one voter and his wife came up to me and said how much they liked my letters. This is an issue that worries quite a lot of people living in the district.
It does not, however, seem to worry the current leader of EHDC, one of the early supporters of the scheme.
He is on record in this paper (August 11, 2021) saying how proud he is of the EHDC decision he supported, to borrow funds from the national government Public Works Loans Board (PWLB) to invest.
To be fair, he probably said this partly out of loyalty to the-then leader of the council, who resigned in a bit of a huff in 2020. But that is a whole other story.
For those unfamiliar with the portfolio story, let me provide some background. Councils in England can access funds from the PWLB. The money borrowed is ostensibly to construct essential infrastructure (roads, schools, etc) needed to support new housing development.
However, there is little – if any – scrutiny of how the funds are used, and some authorities, such as EHDC, have used funds to speculate as property developers.
The idea was sold to the people of East Hampshire in 2017 as a way of replacing council tax with rental income. It was a crazy idea at the time, and history has more than confirmed this, as it has been a financial disaster.
To some considerable extent this is because EHDC had no property expertise in-house when the scheme began. It was therefore at the mercy of the ‘goodwill’ of estate agents.
Properties purchased include a grocery store used by Tesco, somewhere in Gloucestershire, an office block once used by Rolls-Royce in Derby, some houses in Chichester, and most recently Rams Walk shopping arcade in Petersfield.
It also included the hotel known as Liphook Services on the A3. This was bought in 2014 and resold in 2020 incurring total losses of £328,500. It also includes the currently empty property in Rams Walk and the unused old Barclays bank building in The Square.
In 2021 the council announced they were not buying any additional properties using the balance of the £200 million borrowed from the PWLB.
In an article in this paper (February 3, 2021) Cllr Louisson confirmed this decision but provided no explanation.
Sharp-eyed readers might see a link between the decision and the fall in value of the portfolio in recent years.
The portfolio was valued at £141 million in March 2019 and £130.5 million a year later – the last time a valuation was published. It has fallen even more since then. According to Cllr Costigan in a recent letter to the paper (June 1, 2023) the current valuation is put at £115 million.
Cllr Costigan claims that despite the falls in valuation the scheme should still be seen as a success as it generates a gross income of some £8.5 million a year, of which a net £3 million provides “for vital frontline services”. He does not say what these are or whether this figure incorporates recent increases in the interest due on the PWLB funds, or the letting costs associated with renting out the properties.
Whatever the actual details, a net income of £3million is a very, very long way from the promises made by the originators of the scheme.
The point is we, the taxpayers, are in the dark about the real costs and benefits of the scheme. If Mr Millard, the current leader of EHDC, and his Conservative colleagues want to restore our confidence in their ability to use our money wisely, they should do three things, and do them quickly.
In the first place we must be provided with an up-to-date valuation of the portfolio.
When the scheme was started, EHDC promised an annual valuation as part of the property strategy.
Secondly, we should be given a full report, ideally audited, of the annual costs and benefits of servicing the PWLB funds.
Finally, we must be given a projected assessment of the likely effect of any capital repayments.
The first of these, some £25million, falls due in 2028, and will make for considerable financial difficulties for EHDC unless sensible action, perhaps by selling off some property, is taken quite soon.
The Square, Petersfield