How business can boost council coffers

"We could do with creating a Silicon Valley in Shropshire, but that might be a bit ambitious," he says.

With a projected black hole of £37 million to fill, the leader of Shropshire Council knows he has to think big. But Councillor Pate insists that, with the right approach, the council will be able to balance the books by turning the county into a magnet for new businesses.

Last week the council announced its new commercial plan, which outlined how the council would need to become more commercially focused. And the plan, by Councillor Michael Wood, lays down some pretty tough targets. It says the council will need to generate an extra £5 million over the next three years, as well as generating a further £50 million from council assets over the same time period. On top of that, the authority is also seeking to reduce administration costs by 25 per cent within two years.

Councillor Wood says Shropshire Council has made considerable savings over the past few years.

But he adds that while using reserves and one-off funding opportunities will allow it to balance the books in the short-term, the underlying gap between revenue and spending is set to grow to £37 million by 2019/20.

"This is largely due to the rising demand and cost of adult social care services, reductions in revenue support grant, and the continuing high costs of operating public services in a rural and sparse county," he says.

Councillor Pate says attracting new industries to the county will be crucial to achieving this. Under the new funding formula, local authorities will no longer receive funding from central government, but will instead receive an income from business rates. However, the money is unlikely to come directly to the authority.

"The details have not yet been finalised, but it is likely that it will go into some regional fund, and it will be distributed according to a formula," he says.

"Confidence is a big word, but I'm confident it will be a better deal than we are getting at the moment."

But generating extra revenue from business rates will still depend on being able to attract more businesses to the county, and Councillor Pate says the council is prepared to invest some of the £50 million it intends to raise from the sale of assets in order to achieve this.

"We need to be attracting inward investment into Shropshire, and that means we will need to be using capital in a sensible way to do that," he says.

"We're looking at providing more infrastructure, for example, which is something you need to do if you are trying to attract investment.

"We have got a lot of brownfield sites which could be developed, but usually if you want to attract businesses you will need to create some sort of infrastructure."

Councillor Pate says the vacant 33-acre site at the former Ironbridge power station, and the Clive Barracks site at Tern Hill – due to close in the next five years – both provide exciting opportunities.

He also identifies a corridor along the M54 which he says has the potential to attract new industry.

"If you are trying to attract new business into Shropshire, the obvious place to do that is where you have got a good motorway link access to Birmingham and the West Midlands," he says.

"The West Midlands has not got enough properties to fulfil its ambitions for housing and industry. If we could take some of that overspill then that could be beneficial for all parties."

As a symbol of intent, Shropshire has thrown its hat into the ring as a possible location for Jaguar Land Rover's proposed new electric car plant, although Councillor Pate concedes this is a long-shot.

"I think it will go to Coventry, but for us it is a learning experience, to see how we can attract new businesses in future," he says.

"We have got to attract and keep younger people into the county, and to do that we need more affordable housing, so people can afford to live here, and better-paid jobs."

He says the new university campus at Shrewsbury is crucial to that. And Councillor Wood cites the Tannery site in the town, where the council has joined forces with a private developer to build a new halls of residence building for students, as an example of how the council is investing to generate a revenue stream.

"The buildings will generate a permanent yield for the council in terms of student and third-party income, rent from retail use, education and training for students, additional jobs, and business rates for the council," he says.

The council has also installed 490 solar panels on the roof of Shirehall, which says will reduce energy bills by £16,000 a year.

However, Councillor Wood says the authority is unlikely to follow the route taken by neighbouring Telford & Wrekin Council, which invested £6 million on creating a commercial solar farm to generate revenue for council coffers.

Councillor Pate says the council is also talking to other public sector bodies in the county about the possibility of leasing empty rooms at Shirehall.

"This will generate us more revenue, and will also allow other organisations to get some money by selling their existing premises," he says.

The authority is also watching Telford & Wrekin's new council-house building scheme with great interest, although Councillor Wood says there are no plans for such a scheme at this stage.

"I suppose it all comes down to whether it would be viable, if we could find a suitable plot of land and it would generate a profit for the council, then we would certainly consider it," he says.

The council's last experiment with commercial enterprise was not a success. The IP & E company, which attempted to generate revenue for the authority by offering marketing and administrative services to other local authorities, was wound up last year, and council chief executive Clive Wright said the authority will not be going down that route again.

"This is not taking services out and trading them on, this is trade within services," he says. "It is about different commercial activity that is nothing to do with existing council services.”

Councillor Wood says the authority is open to most ideas for generating revenue, but due diligence will need to be taken to ensure they do not end up with another failing business on their hands.

"We will look at most things," he says. "If somebody comes up with an idea, we will have a look at it."