BASILDON Council is investing millions into commercial assets, despite finance experts warning that it puts public money at risk.
The council has used £30million to invest in commercial properties in the past six months in an effort to gain long term returns.
Labour councillor Jack Ferguson, a member of the Corporate Resources Committee said it is a risk that needs to be taken due to “savage” Government cuts to local government funding.
He asid: “Nobody has gotten into local government to buy real estate. But what we do accept is the reality that £16million has been lost due to savage cuts from the Conservative central Government since 2010, which forces us into this position as a result.
“We have to look for alternative measures to provide frontline services and if we don’t, bin collections get cut, housing services get cut and we are not able to provide other vital services.”
Last month the Chartered Institute of Public Finance and Accountancy warned that local authorities across the country are putting public funds at “unnecessary or unquantified risk” when borrowing to invest in commercial property.
Shortly after the warning, Essex County Council announced “the risk profile has changed” and they would no longer be pursuing further investments.
But Basildon say they will continue.
Conservative Councillor Stuart Sullivan, chairman of the Corporate Resources Committee, said: “The council works closely with an investment advisor to ensure it is fully informed and receptive to the property market, which allows us to mitigate risk and fully diversify our asset portfolio.
“The council had a total of £80million to invest in commercial assets and we will continue to prudently invest in the commercial property market in line with our strategy approved by council.
“We are committed to protecting frontline services for our residents and commercial asset investment is just one of the ways we seek to generate income whilst balancing the risk by spreading our investments across sectors and locations.”
Details of the council’s commercial investments are outlined in a treasury report published on Thursday. It states that the council purchased its first commercial property, Roaring Meg South Retail Park in Stevenage, in May for £17.8million.