To receive questions in accordance with the provisions of Council Procedure Rules 12.2 and 12.4 which require a Member to give at least 3 working days’ notice, in writing, of the question to the Chief Executive.
Minutes:
The Covid-19 pandemic has dramatically changed the work of Lancaster City Council as it has responded to the crisis in supporting its residents with food parcels, information and the coordination of volunteer efforts. The cost of this support together with the suspension of parking charges, the closure of leisure services and the foregoing of substantial amounts of rent and rate income mean that the budget agreed in February is going to need substantial revision. The impact of the lockdown on the economy of the UK as a whole will have a significant and lasting effect on business and commerce and there is every likelihood that the world economy will enter a recession.
Nonetheless, to my surprise, some aspects of the Council’s work have continued regardless of these changed circumstances. Under the Chief Executive’s ‘urgent business’ powers, a decision was taken on the 17th March to purchase commercial property in Morecambe as part of the Property Investment Strategy and the Capital Finance Strategy Group have since pursued investment in other commercial property.
On 30th January 2019, Full Council approved a Property Investment Strategy to buy land with sitting commercial tenants whose rent would provide an income to the Council to help meet its funding gap. On the 18th December 2019 Full Council approved a major uplift in the amount the Council can borrow (the total figure was not specified in the minutes) in order to purchase a series of commercial properties identified by the Capital Strategy Group. To date the investment strategy has been focussed solely on purchasing property currently occupied by commercial businesses paying rent.
In the light of the substantial impact of the Covid-19 crisis on the Council’s budget and the likely effect on the UK economy including local commercial businesses, will the Portfolio Holder for Finance suspend the Investment Property Strategy agreed by Full Council on the 30th January 2019 and seek a review of that strategy to be undertaken by the Budget and Performance Panel?
Councillor Whitehead responded:
First of all, I should like to thank Council Officers for their quick and decisive action and tremendous efforts during the Covid-19 pandemic to support vulnerable people and businesses in our district, whilst maintaining vital frontline services as much as possible.
This pandemic will inevitably have a financial impact on residents, businesses, public sector organisations, charities, and the community and voluntary sectors. As a Council, we will incur costs related to the pandemic as well as losses due to reduced income from council tax, business rates and fees and charges. Today, Central Government have offered the Council approximately £1.4 million towards our costs.
Over the last few years, the value of all usable reserves increased significantly, and we are more financially resilient than some other Councils. That is why we were able to allocate £2million of reserves to help mitigate the impact of the COVID-19 emergency to residents and businesses in the District. Our approved budget for 2020/21 included the use of reservesto help us to achieve progress in our priority areas and to lead to increased income to support our priority areas. Now, in these unprecedented times, Cabinet and Officers are working on ways to move forward on financial decision making. Whilst there are so many uncertainties, a flexible plan based on a set of principles is required. Where possible we want to achieve progress in our priority areas, while ensuring that the Council remains financially viable. To that end, we need to progress our ‘funding the future strategy’: that is implementing a zero-based budgeting approach, looking to make efficiency savings, implementing a commercial strategy and investing for a return or to reduce costs.
It is planned for financial monitoring to be undertaken on a monthly basis. The Financial Resilience Group will meet monthly from the beginning of May and will review the Council’s ongoing financial position, the statutory and non-statutory spending, and consider zero-based budgeting. Cabinet will be reviewing the position on a regular basis. The Budget and Performance Panel may also wish to consider their involvement.
The Capital Strategy Group includes the Chairs of Overview and Scrutiny and Budget and Performance, senior officers across a wide range of relevant expertise and an outside consultant. Recommendations on property investment proposals are made with a view to providing long term investment in accordance with the Council’s corporate and financial objectives, whilst assessing and managing all risks and undertaking effective due diligence. Proposals are thoroughly reviewed prior to any recommendation to Cabinet. The Group has a duty to take appropriate decisions in the light of the pandemic.
Cllr Dant states “Under the Chief Executive’s ‘urgent business’ powers, a decision was taken on the 17th March to purchase commercial property in Morecambe as part of the Property Investment Strategy” The decision was actually taken by the Leader using her executive powers on 19 March, not by the Chief Executive. The Leader made the decision after consultation with the cabinet, as the decision had initially been intended to be made by cabinet on 17th March, but at that time we were not able to hold a formal cabinet meeting. The details and procedures followed are provided in ‘The agenda for Individual Cabinet Member and Officer Delegated Decisions, Tuesday, 21st April 2020.’ The Council has had a long-term interest in this property for both its investment and strategic development potential and to enable resolution of the legal restrictions on adjoining land in council ownership. Its acquisition was recommended due to the increased importance to the critical path of the emerging Morecambe Future High Streets Fund (FHSF) implementation strategy, and the potential of Eden North.
So far, the Council has acquired two properties since the implementation of the Property Investment Strategy. The investment strategy is not focussed solely on purchasing property currently occupied by commercial businesses paying rent. The Capital Strategy Group is currently reviewing the Property Investment Strategy, to make clearer the distinction between purely commercial investment and investments which provide some social value, such as economic regeneration, environmental and housing projects. The updated version will come to Council. I welcome any comments that Councillors may have.
The two purchases were made earlier in 2020. The Council has not untaken any borrowing to make these purchases. The Capital Strategy Group has a remit to monitor performance of individual acquisitions as well as in total. It is too early to undertake a meaningful review.
I hope that you can see that the Capital Strategy Group will be acting to take appropriate action in the light of the pandemic, and that suspending the Property Investment Strategy would be restricting the Council from taking opportunities when they arise. The advice from officers remains that this strategy is an important part of securing our financial future. Not only could judicious acquisitions help build financial resilience they may also contribute to improving local economic sustainability.
I do not support suspending the Property Investment Strategy. Also, I am not allowed personally to suspend the Investment Property Strategy. Suspending a Strategy agreed by Council would have to be a Council decision.
I am also not allowed to instruct the Budget and Performance Panel. The Budget and Performance Panel is free to set its own work program.
Councillor Dant thanked Councillor Whitehead for her full and comprehensive response to his question. He joined with her in congratulating all the officers of the council and, indeed, Cabinet in the way it had responded to the COVID crisis, which he had found really impressive.
As his supplementary question, Councillor Dant asked:
What progress has been made in property investments that would directly benefit Lancaster residents such as renewable energies or housing projects?
Councillor Whitehead replied:
We are looking at renewable energy projects. I don’t want to go into the details at this moment in time, but that is the case. And we are thinking about looking into housing projects in the future.
Councillor Dant thanked Councillor Whitehead for her response. The Democratic Services Manager agreed to circulate the questions and answers to all Councillors following the meeting.