TFA warns against Peterborough council estate sell-off

A cash-strapped council is being warned against the “knee-jerk reaction” of selling off its tenant farms from its rural portfolio.

Peterborough City Council could generate about £21m if it sells its 1,214ha rural estate, and a further £500,000 through the sale of three houses and a 0.6ha yard.

A report prepared by the Chartered Institute of Public Finance and Accountancy (CIPFA) recommends the council “needs to be more ambitious” with the disposal of some of its assets “to provide an influx of resources”.

See also: Calls for more council-owned farms amid sell-off backlash

According to the CIPFA report, Peterborough council’s rural estate is largely tenanted, consisting of Grade 2 (very good quality) and Grade 3 (good to moderate) soils. It says a restructuring of the estate is under way with the aim of reducing the number of holdings to seven as existing tenancies expire.

The strategy was six holdings of 162ha and one of 202ha for a new tenant to farm. All holdings would be let on a 15-year farm business tenancy (FBT) agreement, but the report recommends no new FBTs are signed.

“The agricultural holdings could be sold as tenanted investments or preferably untenanted land, where this is possible, to maximise value,” says the report, noting that there is a “strong market” for both, including institutional as well as private interest.

CIPFA auditors calculate the estate returns £400,000/year, equivalent to a yield of 1.9% on the value of £21m. They note further capital investment in grain stores is also required.

But the authors question the future viability of units of this size, considering the capital requirements for equipment and machinery and reducing subsidies.

Wider benefits

The Tenant Farmers Association (TFA) has warned Peterborough council against a “knee-jerk reaction”, insisting that a better-run estate could contribute to the financial performance of the local authority and provide wider socio-economic benefits.

A TFA spokesman said: “Other local authorities have shown that it is possible through sound estate management to take significant capital value from the rural estates, particularly where development can be obtained, while maintaining the area of estates largely intact so they continue to derive rental income and wider societal benefits.”

The Ministry of Housing, Communities and Local Government commissioned CIPFA to undertake an external review of the financial position and management of Peterborough council and seven other councils.

Council response

Councillor Wayne Fitzgerald, leader of Peterborough City Council, said: “The financial reports commissioned by the Department for Levelling Up, Housing and Communities contain some important recommendations for us to consider and will require strong and decisive action from the council to achieve lasting financial sustainability.