THE idea that local authorities should be looking to make commercial profits is controversial.

So eyebrows are sure to be raised when Bradford Council’s Executive devotes a good part of its first meeting of the year next week to discussing how it can grow its income beyond the primary sources of council tax and business rates.

Councils face a stark choice between continuing to cut their services and pushing hard-pressed households and businesses to stump up more to pay for them.

While many believe there is always more than can be done in any organisation to find efficiencies through restructuring, sharing functions and tighter control of costs, there comes a point where the effort that goes into finding them outweighs the value of the savings made.

And if councils can’t provide the vital, core services they are there to offer, the whole rationale of local democratic control is called into question.

More and more local authorities are reaching the point where they feel they have gone as far as they can go with austerity measures and are, instead, turning to a more business-oriented model of local governance which relies on commercial activity to help fund or enhance future service provision.

It’s a reality that is starting to take hold at City Hall. As Council leader Susan Hinchcliffe says: “The only way we can continue to provide vital services in the face of severe budget reductions is to try and raise money from all the other sources available to us.”

The change of emphasis is bound to face fierce opposition in some quarters and generate some serious soul-searching in others: a contributor to a recent report on the issue questioned whether it would put the whole “moral purpose” of councils in doubt.

For council tax-payers it may be a simpler equation: would you sooner the Council raises income through increasing council tax and chasing more parking fines, for instance, or sensibly investing some of its resources?

Jonathan Carr-West, chief executive at the Local Government Information Unit, the local democracy think-tank which advises on the transformation of authorities, believes the answer is simple: “People don’t worry who is providing their services unless they are failing to be delivered.”

There are, of course, legal limitations on what councils can and cannot do but there is nothing to stop them generating income over and above local taxes.

Charging for discretionary services (although they can only charge the full cost and not make a profit), trading commercially and making money from the use of assets are all ways for them to bring in more funds.

In the case of commercial trading, legislation allows councils to set up companies to sell their services elsewhere providing they can create a business case. And the Localism Act of 2011 gave councils the “general power of competence” to do anything that individuals may generally do as long as they first set up a company like any other private firm established under the Companies Act 2006.

There are more and more examples of councils stretching their remits to make money from such companies. In Bristol, for instance, the council has established a wholly-owned company to generate and supply low-carbon affordable energy, and other authorities have become involved in setting up new banks.

Thus far, Bradford Council’s external income generation has mainly been focused on raising revenue through its property assets.

The authority has an annual rental income from its 600 properties (worth about £45 million) of £2.8 million and has started to look at extending this through bigger assets, such as the recent purchase of the lease of the NCP car park in Hall Ings.

The report to Tuesday’s executive meeting, by Stuart McKinnon-Evans, the strategic director of corporate services, says the Council also has a £4.1 million stake in the Leeds City Region’s £20 million Revolving Investment Fund, which invests in commercial ventures such as housing, property and commercial ventures, and returns are reinvested in the Fund for re-lending.

The report, however, urges the executive to look at the possibility of investing in property outside the district to maximise returns.

It’s a strategy that has served many people’s pension funds well over the years and, although good returns are not guaranteed, there’s no doubt that owning property in London, for instance, is likely to produce more cash to spend on services than just buying in the Bradford area.

All investment carries major risks but, in this new era of local government, councils must balance that risk against a failure to provide vital services with the sort of resources now available to them if they stick to traditional funding routes.

According to major accountancy firm Grant Thornton, more and more councils are turning to creative entrepreneurism and innovation to provide extra benefits for their local communities.

Their report last year into income generation for local authorities showed that UK councils are way behind those in other parts of the world: Tokyo, for instance, derives 92 per cent of its revenue from its own sources; Paris brings in 82 per cent; and New York, 70 per cent.

London, the UK’s biggest, generates just 26 per cent of its own income.

There is, clearly, quite some way to go and Bradford is just at the start of what could be a very long journey.