By committing to multi-million pound borrowing to fund buying commercial properties, the council risks mortgaging the futures of young people in the borough, an opposition councillor has warned.

Epsom and Ewell Borough Council approved an increase of up to £60 million of its commercial property acquisition fund at a full council meeting this week.

From yesterday: Epsom and Ewell Borough Council commits to multi-million pound borrowing, and increasing tax and charges in annual budget to offset Conservative austerity

The council will seek to borrow the sum through prudential borrowing – the system by which local authorities can borrow money – and use the fund to buy properties it can then lease out to tenants.

Under current rules, there is no upper limit to how much debt or liabilities a local authority can incur from loans taken out in this way, and the board which provides the loans is to be replaced, but interest rates remain fixed for 50 years.

Borrowing rates being fixed at two per cent by the government’s Public Works Loan Board – which is to be scrapped and replaced by the Treasury – and the council only investing in properties already leased out by long-term, solvent tenants, make it a sound strategy the chairman of the council’s Strategy and Resources Board argued.

Your Local Guardian:

Councillor Eber Kington (pictured above) added that it was necessary to find new ways of making money after the council missed out on a new homes bonus (NHB) of £700,000 for not fulfilling government housing requirements drafted in December, and after the government withdrew £417,000 of core funding for this financial year.

From December: Tory cuts to Epsom and Ewell 'unfair' and 'disproportionate', borough councillor claims

But Labour Councillor Vince Romagnuolo of Court ward fears economic and market instability might make commercial investment a risky strategy.

Your Local Guardian:

“This is for a council which has a budget of 10 per cent of that (£80 million),” Cllr Romagnuolo (pictured above) said.

“This council will be borrowing £80m on the financial markets, being at the whim of currency flows, speculators and market traders.

“These are the same people that crashed the economy in 2007 – the same people who we will now be asking the residents of Epsom and Ewell to put their trust in and mortgage our children and grandchildren’s futures.”

Councillor Kington responded: “I think it’s highly unlikely that the government would stop offering this deal to local authorities, because it’s one of the few things that the council can do to get money without going directly to the government.

“The criteria (for what we buy) is very tough, so we have a very safe policy in what we are looking for in terms of buildings to buy.”

From November: Epsom and Ewell Borough Council to invest up to £20m in property in face of government cuts

The council set up the fund in November 2016, with an initial £20 million investment, and purchased a £5.7 million property in East Street, Epsom, which it is leasing out to Epsom and St Helier University Hospitals NHS Trust.

Rent from the property is forecast to make the council a net income of £130,000-a-year, council officers believe. 

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