The news that plans for a new sixth form centre for students at two of Swindon’s largest schools have been turned down by Luton Borough Council has led many people to ask the same question.

How come a council 60 miles away owns land in Swindon?

The simple answer is, to bring in an income from the rent it would receive.

READ MORE: Sixth form plans suffer an unexpected setback

Luton Borough Council is essentially a buy-to-let landlord for the Arclite building in Peatmoor.

And it’s quite common for councils to buy buildings as a money-spinner – not necessarily in their own area.

Swindon Borough Council, for example, owns the new Zurich headquarters at Kimmerfields in the town centre.

The finance company spent the money to build the new tower, but agreed to sell it to the council at close to £40m.

The council bought it and lets it back to Zurich and gets an income from the rent.

Elsewhere in Swindon, Thurrock Council invested in solar farms around the country, which all began with a £34m investment in Swindon Solar Farm at Wroughton Airfield.

Incidentally, Swindon Borough Council lent Thurrock £7m for its investments, and received £35,000 in interest by the time the capital was repaid in full by 2019.

Local authority finance is often hard to understand, but essentially councils have two budgets - the revenue budget for day-to-day spending on services, and the capital budget for major projects.

While revenue budgets are under pressure, capital budgets often have large amounts of money not yet spent and councils can borrow money at a low rate of interest from the Public Works Loan Board. They also have reserves put aside for a rainy day.

They use those pots of cash as investments until the money is needed and try and make the best return possible.

Crucially, the money the council used to buy Zurich cannot not be used on general services like the libraries and roads, and if the council sold the building the money it gets for the sale can only go into its capital budget.

But the rent it receives from a building such as the Zurich HQ can be used on its general services, and can help to ease squeezed budgets or in an attempt to keep council tax down.

The council uses its capital money to invest, and can use the income on day-to-day services.

And like a Swindonian owning a holiday cottage as an investment in, say, Devon - that property can be anywhere, and the rent can be used for any purpose.