WAVERLEY plans to invest millions of pounds in “income generating” property to help offset the funding shortfall caused by cuts in government grant.

New guidance under The Localism Act means the borough council can expand its portfolio of investments to include property and assets, but borrowing purely to invest for return is still deemed unlawful.

At last week’s Waverley executive meeting, members agreed the council should adopt an Investment Strategy and establish an Investment Advisory Board to oversee it.

Councillors also agreed £2 million of General Fund capital receipts, subject to budget constraints, and  £1 million of the 2017/2018 New Homes Bonus funding, should be transferred initially into a new Property Investment Fund.

It was also agreed the executive would decide which opportunities to invest in, based on the advice from the Investment Advisory Board, which will comprise the council leader and Waverley’s portfolio holders for property, finance and economic development plus a non-executive member.

The board will be supported by professional advisors and what they cost the council will initially be met by the investment fund and then set against the income it delivers.

The investment strategy will be to invest in “a diversified and balanced portfolio to manage risk and secure an annual overall rate of return”.

Officers reported to the committee: “The adoption of the investment strategy and its implementation could have a significant impact on the council’s finances. While the investment strategy has the potential to generate significant income for the council in future, there are major risks in this.

“The governance arrangements outlined, including the requirement for each investment to have a robust business case approved by the investment advisory board, provide the necessary control of these risks.”

Speaking before the debate, non-executive member Farnham Residents councillor Jerry Hyman said: “Is it wise to become property investors? I urge great care. Are there any figures for the cost of hiring consultants against the projected addition in income. That cost and the legal advice costs may make it unviable. I’m concerned it may be difficult to make more money.”

Frensham councillor Ged Hall responded: “There are no defined profit projections yet. It is still in the build phase. It is indeed a strategic change. Due to the loss of revenue support grant Waverley has to look to opportunities to provide income.”

Godalming councillor Tom Martin said: “It works very well at Surrey County Council, which has invested locally in Brightwells Farnham regeneration scheme and will reap the benefits in the future, as Waverley will.”

• Waverley’s executive also agreed to accept the government’s four-year settlement offer to provide more certainty about funding support going forward, and to submit Waverley’s Efficiency Plan in order to take up the offer.

Members also agreed officers should “reinforce” to government, Waverley’s objection to a negative grant of around £814 million being applied in 2019 to 2020 if its current prediction is correct.