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.”

Want more of this stuff? Follow CityMetric on Twitter or Facebook.

 
 
 
 

CityMetric is now City Monitor! Come see us at our new home

City Monitor is now live in beta at citymonitor.ai.

CityMetric is now City Monitor, a name that reflects both a ramping up of our ambitions as well as our membership in a network of like-minded publications from New Statesman Media Group. Our new site is now live in beta, so please visit us there going forward. Here’s what CityMetric readers should know about this exciting transition.  

Regular CityMetric readers may have already noticed a few changes around here since the spring. CityMetric’s beloved founding editor, Jonn Elledge, has moved on to some new adventures, and a new team has formed to take the site into the future. It’s led by yours truly – I’m Sommer Mathis, the editor-in-chief of City Monitor. Hello!

My background includes having served as the founding editor of CityLab, editor-in-chief of Atlas Obscura, and editor-in-chief of DCist, a local news publication in the District of Columbia. I’ve been reporting on and writing about cities in one way or another for the past 15 years. To me, there is no more important story in the world right now than how cities are changing and adapting to an increasingly challenging global landscape. The majority of the world’s population lives in cities, and if we’re ever going to be able to tackle the most pressing issues currently facing our planet – the climate emergency, rising inequality, the Covid-19 pandemic ­­­– cities are going to have to lead the way.

That’s why City Monitor is now a global publication dedicated to the future of cities everywhere – not just in the UK (nor for that matter just in the US, where I live). Our mission is to help our readers, many of whom are in leadership positions around the globe, navigate how cities are changing and discover what’s next in the world of urban policy. We’ll do that through original reporting, expert opinion and most crucially, a data-driven approach that emphasises evidence and rigorous analysis. We want to arm local decision-makers and those they work in concert with – whether that’s elected officials, bureaucratic leaders, policy advocates, neighbourhood activists, academics and researchers, entrepreneurs, or plain-old engaged citizens – with real insights and potential answers to tough problems. Subjects we cover include transportation, infrastructure, housing, urban design, public safety, the environment, the economy, and much more.

The City Monitor team is made up of some of the most experienced urban policy journalists in the world. Our managing editor is Adam Sneed, also a CityLab alum where he served as a senior associate editor. Before that he was a technology reporter at Politico. Allison Arieff is City Monitor’s senior editor. She was previously editorial director of the urban planning and policy think tank SPUR, as well as a contributing columnist for The New York Times. Staff writer Jake Blumgart most recently covered development, housing and politics for WHYY, the local public radio station in Philadelphia. And our data reporter is Alexandra Kanik, whose previous roles include data reporting for Louisville Public Media in Kentucky and PublicSource in Pittsburgh, Pennsylvania.

Our team will continue to grow in the coming weeks, and we’ll also be collaborating closely with our editorial colleagues across New Statesman Media Group. In fact, we’re launching a whole network of new publications, covering topics such as the clean energy transition, foreign direct investment, technology, banks and more. Many of these sectors will frequently overlap with our cities coverage, and a key part of our plan is make the most of the expertise that all of these newsrooms combined will bring to bear on our journalism.

Please visit citymonitor.ai going forward, where you can also sign up for our free email newsletter.


As for CityMetric, some of its archives have already been moved over to the new website, and the rest will follow not long after. If you’re looking for a favourite piece from CityMetric’s past, for a time you’ll still be able to find it here, but before long the whole archive will move over to City Monitor.

On behalf of the City Monitor team, I’m thrilled to invite you to come along for the ride at our new digs. You can follow City Monitor on LinkedIn and on Twitter. If you’re interested in learning more about the potential for a commercial partnership with City Monitor, please get in touch with our director of partnerships, Joe Maughan.

I want to thank and congratulate Jonn Elledge on a brilliant run. Everything we do from here on out will be building on the legacy of his work, and the community that he built here at CityMetric. Cheers, Jonn!

To our readers, on behalf of the City Monitor team, thank you from all of us for being such loyal CityMetric fans. We couldn’t have done any of this without you.

Sommer Mathis is editor-in-chief of City Monitor.