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Croydon – Today’s Example of Why We Don’t Let Government Invest For Us

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You don;t have to move all that far left from our staid position to find those who insist that government knows how to invest better than the rest of us do. So, therefore, allow government to do all that investing which society needs.

This then hits that wall of experience. For some local councils have been doing this. Croydon for example. And here is their auditor commenting upon their ability to invest:

The Council has increased the level of borrowing significantly in recent years (£545 million in three years) and used the borrowing to invest in companies it established and to purchase investment properties. The strategy for investing in properties was approved at Full Council using guillotine procedures meaning there was insufficient time to discuss and challenge the strategy and the first purchase was made two months prior to approving the strategy. The Council’s approach to borrowing
and investments has exposed the Council and future generations of taxpayers to significant financial risk. There has not been appropriate governance over the significant capital spending and the strategy to finance that spending.

The Council established a number of companies including wholly owned and part owned companies. The Council’s governance and oversight of the companies shows insufficient rigor and control. Despite heavy investment from the Council, the Council has not yet received any significant return.

There has been collective corporate blindness…

Or, as we might put it, they can’t even piss in a pot without spraying it up the wall.

It invested £30m in the local Croydon Park Hotel in 2018-19. This went into administration in June. It also spent £46m on a shopping centre. The council’s strategy of “invest[ing] its way out of financial challenge” was “inherently flawed”, as councillors did not properly understand the retail and leisure markets, auditors said.

Adults don’t let governments invest in things.

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8 COMMENTS

  1. And on further investigations, which will never happen , the shareholders and directors in the part owned companies have made out like kings.

  2. Local governments investing and owning/part owning businesses, apart from the pointed out fact that they are not skilled in enterprise, has a very pernicious impact on the free(ish) market. Governments, local or national, has an unfair advantage over the private sector, in that they can in-debt their taxpayers to an almost unlimited degree, whereas private companies can only borrow that which the market agrees to lend.

    A local government owned hotel, for instance, reduces the scope for privately owned ones to make a profit, it this example it is the profitable hotel that pays the taxes that funds the local and national governments, government by competing with the private sector reduces the prospect of being able to raise tax revenue. The job of governments is to govern, perhaps primary legislation is required to ensure that they don’t engage in the commercial sector as anything but a customer.

  3. I approved of the South African government’s decision to build synthetic fuel plants. I also approved of Obama’s decision to build missile defences against North Korea.

    As you can see, my investment decisions are governed by my very high paranoia level. I’m always sure those fiendish foreign freaks are out to GET me. (You may well ask why they’d bother, but I know that’s simply a sinister plot to get me to lower my guard.)

    Then again, I don’t approve of the Oz government’s submarine program. Even I could have done it better.

    Really!!

  4. Outside of it’s profitability, the croydon park hotel is quite nice. Has a great lunch buffet. Great for family stuff and work. Gone for a couple job interviews there, good coffee too.

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