Agenda item

To seek the approval of the draft Commercial Investment Strategy and the associated delegations and constitutional amendments necessary to bring this into effect.

Members considered the Commercial and Investment Strategy report presented by Councillor Boden.

Councillor Boden advised members that on Page 281, appendix B of the report there is a diagram which contains a couple of anomalies with regard to the inter relationship between various bodies involved in the proposal. He also advised members that the Chairman of the Overview and Scrutiny will be attending the Investment Board meetings as an observer and the overview of the officers on the LATCo board will be given to an elected member, rather than a non-executive member and will be in an observation capacity only.

Proposed by Councillor Boden, seconded by Councillor Hay, Councillor Mrs Mayor opened the item for discussion.

Members asked questions, made comments and received responses as follows:

·         Councillor Hay stated that she welcomes the proposal. She added that she has a query contained within appendix 1, with regard to the core principles of the assets, where it states ’to minimise management and risk, preference is for single occupancy investments’. She stated that in her opinion, it could increase the risk. She added that if a property has multiple tenants and one ceases their tenancy, there will still be an income generated, however if a sole tenant ceases their tenancy then all revenue is lost. She asked whether consideration has been given to this. Councillor Boden confirmed that full thought had been given to the balance of the core principles.

·         Councillor Yeulett stated that in principle he is in favour of the strategy, although he has concerns. He added that at Overview and Scrutiny Committee, questions were raised concerning risk, investment, expertise and accountability. Councillor Yeulett provided 2 examples of councils who have encountered issues in financial and property investments, where they have been unable to redeem finances. Councillor Yeulett stressed the importance of being able to access funds without any delay. Councillor Yeulett made reference to a Sunday Telegraph newspaper article from December 2019, which states that the Bank of England and Financial Conduct Authority are reviewing whether redemption terms should be changed, due to concerns that local authorities are exposed to large losses following investments in commercial property. Councillor Yeulett added that he would ask for a cautious approach when considering any proposed investments and stated that he has concerns with regard to the proposed structure and stated that he would like to see a wider member involvement with the process. Councillor Boden provided assurances that this Council will change its attitude and management to risk going forward ensuring a sensible assessment before decisions are made.

·         Councillor Boden stated that the Council is looking at investments in property and not investments in equities, which provides a greater reassurance and stability. He added that the property funds that the Council will be investing in will only be institutional investments and not retail opportunities. He stated that the understanding and nature and format of the underlying assets which the council decides to invest in, will form a major aspect of the councils appraisal of the process of investment. Councillor Boden assured members that there will be active monitoring of the councils portfolio by officers along with the support of the councils treasury management advisors.

·         Councillor Yeulett asked for confirmation as to whether the necessary skills are held within the council to deal with the proposed strategy. Councillor Boden confirmed that the Section 151 Officer will be prudent and oversee all aspects of the work in a thorough manner. He added that with regard to investments, the authority already uses external consultants to provide us with advice and guidance and we are currently taking advice from the advisors with regard to property investments.

·         Councillor Patrick addressed Councillor Boden with regard to the Nene Waterfront Development and stated that although he is very supportive of the regeneration, he questioned whether consultants will be instructed to assist with the project at a highly inflated cost. Councillor Boden gave assurance to Councillor Patrick that this will not be the case.

·         Councillor Booth stated that he has concerns with regard to the demographic deficit when the Investment Board is set up and added that it will only have three Council members on the Board with the Chairman of Overview and Scrutiny attending in an observation capacity. He added that having three members on the Board assisting with major decision making responsibilities is too restrictive. He stated that with regard to the strategy and direction, he has concerns that there is no clear definition within the report with regard to what the Councils objectives are from setting up a Local Authority Trading Company (LATCo).Councillor Booth expressed the view that the Governance and scrutiny needs to be in place at the start of the project and then appropriate level of scrutiny going forward.

·         Councillor Boden thanked for Councillor Booth for his concerns and gave strong assurances that there will be a high level of scrutiny. He stated that the LATCo will be scrutinised by the Investment Board, there will be reports to Cabinet and Council and also further scrutiny from Corporate Governance and Overview and Scrutiny Committees. Councillor Boden confirmed that internal auditors will be involved with the Investment Board and will require details from LATCo. It is expected that LATCo will only be dealing with straightforward investment opportunities and there are no plans to deal with complicated leases or joint ventures. He stated that with regard to the Investment Board, they will have the support of the Chief Executive, Monitoring Officer and the Section 151 Officer, who will ensure that the necessary expertise is in place before any decisions are made. Councillor Boden stated that with regard to strategy and direction, there have been no specific targets set as of yet, partly because it would be unrealistic to do so. Councillor Boden expressed the view that having too much member involvement at the start of the project is not a good idea.

·         Councillor Sutton stated that he will not be supporting this strategy. He expressed the opinion that he supports the idea, but has concerns surrounding the delivery and management of the project.

·         Councillor Booth asked for clarity as to when was it decided that the Investment Board would be able to utilise and borrow sums up to a maximum of £25 million. Councillor Boden stated that the figure of £25 million is a figure to propose to Council as a limit for total investments, with the expectation that the limit will not be reached for a long period of time.

·         Councillor Sutton requested a recorded vote.

In favour of the proposal: Councillor Boden, Councillor Benney, Councillor Bristow, Councillor S Clark, Councillor Connor, Councillor Mrs Davis Councillor Mrs French, Councillor Miss French,  Councillor Hay, Councillor Humphrey, Councillor Miss Hoy, Councillor Mrs Laws, Councillor Lynn, Councillor Mason, Councillor Murphy,  Councillor Purser, Councillor Rackley, Councillor Seaton, Councillor Skoulding, Councillor Tierney, Councillor Topgood, Councillor Wallwork

Against the proposal: Councillor Booth, Councillor Cornwell, Councillor Divine, Councillor Patrick, Councillor Sutton, Councillor Yeulett, Councillor Wicks, Councillor Wilkes

Abstentions: Councillor John Clark, Councillor Meekins, Councillor Maul, Councillor Tanfield

Council AGREED to adopt the recommendations within the report of the Commercial Investment Strategy.