Islington Labour – the shopkeeper’s friend?

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Sometimes I wish the journalists who work for the Islington Tribune actually engaged critical faculties before publishing a story. This week, they have effectively republished a Labour press release calling for the District Auditor to look into the Lib Dem run council’s sale of 220 properties, mostly shops, which is being hotly contested. Many of the existing tenants are up in arms because, as the piece says, “Shopkeepers fear the new owners will charge huge rents, forcing the closure of businesses built up from scratch over many years.”

Labour’s allegations warrant some scrutiny. They are claiming that the real problem is that the council is selling the ‘family silver on the cheap’, and that the valuation they have based their plans on doesn’t accurately reflect what they could get over the next 20 years from the property if the council kept it. They claim the council could make more money by borrowing off the value of the property.

I will happily claim ignorance – I have no idea whether they are right here or not. The District Auditor certainly should pay close attention, as it should whenever any council proposes selling off part of its portfolio. But let’s be clear what Labour are, and are not, saying here. They aren’t questioning the principle that the council must get the best value out of its portfolio and that best value means, brutally, the biggest bang for the taxpayer’s buck. Many of the shopkeepers involved in this dispute have argued that this should not be the case and to some extent I have sympathy for that view – nevertheless, Islington Council have a clear duty to enforce the letter of the law.

But more to the point, what Labour most definitely are saying is that the best value can be achieved by raising rents.

Indeed, although the Islington Tribune has criminally failed to join the dots, they state so quite clearly:

The council’s outside independent advisor, Erinaceous, produced an options appraisal weighing up the financial benefits of retaining the portfolio against selling it off.

Cllr Greening added: “That was based on the current rental income of around £2.5 million. But I have seen a new document produced by Erinaceous, which now estimates the rental will to go up 50 per cent to £3.7 million within the next few years.

“My belief is that that, in the long term, the council will lose money. Within 30 years you will hit the break-even point – when the benefit of the sale and having the rent will be equal.

“That’s when council tax-payers will have to pay.”

In other words, the Labour supposition is based on a policy of increasing the rents by 50%.

This is slightly nonsensical because if the potential value of the assets is so high, the bids are likely to reflect that fact. They have a point only in so far as the council may need to revise its reserve price. But they are most definitely saying that regardless of whether the properties are kept by the council or sold off, the shopkeepers can expect a hike in their rent. The only real difference here is whether the shopkeepers should be given the opportunity to buy their own property, or not.

The bottom line is, this is happening all around the country, and it is happening as a direct result of national (Labour) government policy. The only thing Labour has to say to the shopkeepers affected is that the Lib Dems aren’t proposing to fleece them nearly enough.

Meanwhile, I do wish the Tribune at least occasionally attempted balance, instead of this hyperbolic nonsense (on the other hand, if it was boringly unbiased, I probably wouldn’t make a ritual out of reading it every week).

2 thoughts on “Islington Labour – the shopkeeper’s friend?

  1. I suspect that the Council would fall foul of borrowing rules if it tried to borrow against the value of the property. Under Prudential Borrowing they need to demonstrate an income stream to repay the money borrowed. The fact that they have an asset is not really relevant as local government borrowing does not work in that way as it does for private individuals.

  2. I did smell a rat about that as well (wouldn’t you just love it if you inherited the running of a council that was having to pay off such a massive debt? Remind you of, well, pretty much every Labour-run council you care to mention?) but I didn’t know the details. Thanks for the info.

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