Cash-strapped councils are turning to private enterprise to plug their funding gaps – with mixed success

An artist's impression of the i360, from before its completion. Image: Marks Barfield.

The i-360 is a 162m-tall observation tower on Brighton’s seafront. It offers a fine view of the channel, the nearby Regency rooftops and, if you look hard enough, rough sleepers sheltering along the promenade.

The tourist attraction was funded by a £36m loan from the council, which it, in turn, borrowed from the government. The idea is that the tower will earn money from tourists which the authority can spend on cleaning the shop window of the city by the sea, freeing up council revenues for other projects.

In 2016-17, the council’s i-360 reserve contributed £840,000 to the upkeep of the seafront – namely, the landscaping works either side of the i-360 itself.

Meanwhile, the council’s plan to open an assessment centre for vulnerable homeless people has been shelved because none of the potential providers could do it with the funding the council offered: £280,000 per annum.

Andy Winter, chief executive of the Brighton Housing Trust, says: “It is a scandal that in one of the richest cities in one of the richest countries in the world we have almost 150 people sleeping on our streets.  The assessment centre is an important part of ensuring that everything is in place to help achieve that ambition. 

“But the council is trying to juggle its finances and commitment with both hands tied behind its back.  Adequate funding for the assessment centre is just not there at present which is one reason why Brighton Housing Trust did not bid for this contract.”

For its part, the council insists:  “We recently conducted a procurement exercise to secure a provider to deliver this new service. The bid we received met our financial requirements, but did not meet our quality requirements. We were therefore unable to award the contract.”

In plain English, the project has fallen into the funding gap: there isn’t enough money to do what it’s supposed to.

Brighton is a city that is a proud of its eccentric way of doing things. Elsewhere, councils have looked to more traditional methods of making money in the private sector.

Mole Valley District Council in Surrey, for example, has snapped up the building that houses a branch of supermarket Asda in Wales for more than £11m. Councillors say the deal for the supermarket in Ystalyfera will generate around £600,000 per year until the tenancy runs out in 20 years’ time. The authority expects to earn approximately £12m in total – a profit of around £500,000.

But the approach is fraught with risk. Surrey Choices is an arms length trading company set up by Surrey County Council to deliver social care services. An audit by Grant Thornton for the period ended 31 March 2016 found the company had made a loss of £4,152,821.

Hazel Watson, leader of the Liberal Democrats on Surrey County Council, says: “Using trading companies is not necessarily the answer to a council's financial difficulties. It is still possible to lose money and not to obtain value for money services for residents. Councils have to remember that public money is involved and that it has to be protected.


“Surrey County Council has spent millions of pounds using a wholly owned property company to purchase commercial properties around the UK. I believe that this is putting millions of public money at risk.”

There is a reason many councils are getting into these risky new ventures. Earlier this year the leader of Newcastle City Council, Nick Forbes, explained the sinister sounding ‘jaws of doom’ scenario for the benefit of Radio 4 listeners.

“If you imagine a graph with two lines on the graph,” he said, “One is plotting resources over time over time – and that is going  down. But the other line is the pressures on local governments and that is going up. Those lines are getting further and further apart. And it is that gap, what is local government terms we call the ‘jaws of doom’, that is filling local authority leaders with dread.”

But councillor Veronica Dunn, Newcastle’s cabinet member for resources, is less apocalyptic. “In these challenging times, the city council is keen to explore other avenues of investment and generating income,” she says. “We are currently reviewing our joint ventures, arms-length vehicles, governance, and our future direction of travel is being particularly reviewed.”

She added that the council is clear about its priorities. “Anything we do to commercially improve our position is done taking those priorities into account... Being entrepreneurial also means identifying the size of the risk and knowing what you should not get involved in or exposed to.”

So what steps are Newcastle councillors taking to mitigate that risk? The press office sent me a statement: “The review is a rolling programme of work, involving a number of people, and will take some time to conclude. Unfortunately we can’t provide specific details at this stage while the review is ongoing.”

Your guess is as good as mine.

Back in Brighton, Andy Winter is clear where the buck stops.

 “The responsibility rests with government which has to make the necessary funds available,” he says. “At the drop of a hat it was able to find £1bn for the DUP to prop up its precarious hold on power.  Can you imagine what difference even half that amount would make in tackling rough sleeping?

“That would provide a legacy that Theresa May could be proud of,” he goes on. “But I guess she has other priorities which history will not judge favourably.”

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A growing number of voters will never own their own home. Why is the government ignoring them?

A lettings agent window. Image: Getty.

The dream of a property-owning democracy continues to define British housing policy. From Right-to-Buy to Help-to-Buy, policies are framed around the model of the ‘first-time buyer’ and her quest for property acquisition. The goal of Philip Hammond’s upcoming budget – hailed as a major “intervention” in the “broken” housing market – is to ensure that “the next generation will have the same opportunities as their parents to own a home.”

These policies are designed for an alternative reality. Over the last two decades, the dream of the property-owning democracy has come completely undone. While government schemes used to churn out more home owners, today it moves in reverse.

Generation Rent’s new report, “Life in the Rental Sector”, suggests that more Britons are living longer in the private rental sector. We predict the number of ‘silver renters’ – pensioners in the private rental sector – will rise to one million by 2035, a three-fold increase from today.

These renters have drifted way beyond the dream of home ownership: only 11 per cent of renters over 65 expect to own a home. Our survey results show that these renters are twice as likely than renters in their 20s to prefer affordable rental tenure over homeownership.

Lowering stamp duty or providing mortgage relief completely miss the point. These are renters – life-long renters – and they want rental relief: guaranteed tenancies, protection from eviction, rent inflation regulation.

The assumption of a British ‘obsession’ with homeownership – which has informed so much housing policy over the years – stands on flimsy ground. Most of the time, it is based on a single survey question: Would you like to rent a home or own a home? It’s a preposterous question, of course, because, well, who wouldn’t like to own a home at a time when the chief economist of the Bank of England has made the case for homes as a ‘better bet’ for retirement than pensions?


Here we arrive at the real toxicity of the property-owning dream. It promotes a vicious cycle: support for first-time buyers increases demand for home ownership, fresh demand raises house prices, house price inflation turns housing into a profitable investment, and investment incentives stoke preferences for home ownership all over again.

The cycle is now, finally, breaking. Not without pain, Britons are waking up to the madness of a housing policy organised around home ownership. And they are demanding reforms that respect renting as a life-time tenure.

At the 1946 Conservative Party conference, Anthony Eden extolled the virtues of a property-owning democracy as a defence against socialist appeal. “The ownership of property is not a crime or a sin,” he said, “but a reward, a right and responsibility that must be shared as equitable as possible among all our citizens.”

The Tories are now sleeping in the bed they have made. Left out to dry, renters are beginning to turn against the Conservative vision. The election numbers tell the story of this left-ward drift of the rental sector: 29 per cent of private renters voted Labour in 2010, 39 in 2015, and 54 in June.

Philip Hammond’s budget – which, despite its radicalism, continues to ignore the welfare of this rental population – is unlikely to reverse this trend. Generation Rent is no longer simply a class in itself — it is becoming a class for itself, as well.

We appear, then, on the verge of a paradigm shift in housing policy. As the demographics of the housing market change, so must its politics. Wednesday’s budget signals that even the Conservatives – the “party of homeownership” – recognise the need for change. But it only goes halfway.

The gains for any political party willing to truly seize the day – to ditch the property-owning dream once and for all, to champion a property-renting one instead – are there for the taking. 

David Adler is a research association at the campaign group Generation Rent.

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