Undeveloped estate costing Borders Council just £5,000 a year

by EWAN LAMB

Fears that expenditure following the £10 million purchase of the Lowood Estate by Scottish Borders Council would become a burden on the public purse have been dispelled by the local authority, revealing it spends a mere £5,000 annually on property repairs and maintenance on its 110-acre holding which includes a large country house.

But a local government pundit, contacted by Not Just Sheep & Rugby for a detailed assessment on SBC's recent disclosures associated with the estate deal claimed the £5,096 figure for 2020/21 could not be justified. A number of other factors should have been taken into account, the expert said.

As we reported recently, a start has yet to be made on developing Lowood four years after the property transaction was concluded with the estate's family trust. A consultant's report released to us by the council estimated infrastructure costs of £13.7 million at 2017 prices to facilitate housebuilding and other uses for the land. 

Our list of questions to SBC included this one: "Since acquisition of the estate in December 2018 the council will have incurred costs including revenue costs to service the £10 million purchase. Please provide a breakdown of these costs including money spent on the upkeep of Lowood."

In response the council told us: "  In line with the Council’s Treasury Management Strategy, the Council does not borrow to fund specific projects but only borrows to support the Council’s general cash flow position when required.  Prudent cash flow management allowed the purchase of Lowood to be funded from internal cash surpluses  with no borrowing required at the time of purchase.  

"There are no capital repayment costs associated with the purchase of the estate due to the intention to recover the cost of the purchase from future sale proceeds.  Costs relating to the site are minimal and are centred around property and utility costs which in 2020/21 amounted to £5,096.  These costs are fully met and exceeded by rental property income and grazing income from the site."

According to the unaudited accounts of Lowood Tweedbank Ltd. for 2021/22, the council controlled company set up in November 2018 at the completion of the estate purchase, those property repairs and maintenance costs increased to £5,586 during the last financial year.

The company, which is also a registered charity and has David Robertson, the authority's acting chief executive as its sole director, is in effect a letting firm looking after the Lowood real estate. Financial details included in the latest accounts include turnover of £42,643 with rental income of £37,055 paid to the council following the deduction of those maintenance costs.

Our pundit told us: "The fact that SBC manages cash-flow to minimise borrowing for investment DOES NOT justify the answer you have been given - because even if at the time of first incurring the £10m debt there was no increase in borrowing; there was an opportunity cost in spending the positive cash flow on Lowood, as opposed to spending it on another investment."

We had also asked SBC: "Why was there no Business Case with infrastructure costs published before the estate was purchased? This was commented on at the time by opponents of the deal. If there was a ‘confidential’ Business Case prepared for the council, please provide a copy." 

As part of its detailed response, the council stated: "There was a Business Case with infrastructure costs prepared for the Council when the decision was taken to purchase the remainder of the Lowood estate. This information was considered by Elected Members in private because the purchase was commercially sensitive. 

"It was expected at the time of the purchase that further public sector investment would be needed to enable the housing and business space development ambitions set out in the Tweedbank Masterplan, linked to the City Region Deal and other public funding sources.

"Attached is the financial business case which was prepared four years ago, this document is no longer commercially sensitive and can be released. It is expected that this business case will be updated to support the report being prepared for Council (by March 2023)."

The report in question had been compiled by consultants Ryden, and we recently reported on its contents in some detail.

SBC also attached a second document which is already in the public domain. It was the 2019 Business Case for the so-called City Region Deal and covers proposals for the Central Borders centred on Tweedbank. It is not Lowood specific.

We showed the Ryden Report 'Business Case'  for the Lowood purchase to our pundit. He said: "The Ryden Report which is appended is an options analysis - it is not a Business Case. They appear to have mixed up plans for the Central Borders Innovation Park - where there is a business case of sorts - with the plans for the purchase of Lowood."

And the expert added: "The Ryden report does many things - especially estimating possible infrastructure costs, as well as speculating about possible development approaches. But the Ryden report does not explicitly take one specific, intended, development scenario and elaborate the equation  as well as elaborating timescales and all the risks. That is what a developer would want to see as a business case."