Bankruptcy risk as ‘desperate’ councils play the property market

This very interesting article points to the darker side of the risks run by “entrepreneurial” councils. It tells us:

Desperate councils risk being plunged into an Icelandic-style financial crisis after investing £1.5bn in the commercial property market, according to Sir Vince Cable, former business secretary.

Heavy cuts in central government funding have left the authorities having to consider increasingly exotic solutions to ease their financial constraints.

Between 2010 and 2015, there was a 37% cut in real terms in central government funding to local authorities. One option – popular in the last couple of years – has been to borrow from the Treasury-run Public Works Loan Board (PWLB) at very low rates of interest and then use the money to invest in commercial property ventures that offer returns of as much as 8%.

But there are fears that the strategy is creating a bubble that could bankrupt some local authorities.