Liberal Democrats have inherited a huge headache from the Conservatives in Woking. The Borough is quite small, with a population of around 100,000, and is located in archetypal Blue Wall Surrey, centred around the busy town of the same name. But as we all know there is now a very large patch of orange stretching across the county, and Woking Lib Dems led the way, taking control in 2022. Since the local elections earlier this month we now hold 20 of the 30 council seats, and our Leader is Councillor Ann-Marie Barker.
It’s important to note that the Conservatives were in control from 2011 to 2019, followed by two years of No Overall Control with a minority Conservative administration.
Now it’s common for an incoming administration to blame the previous one for the problems it faces. But this problem is in a league of its own because, as has now been revealed, the Conservatives racked up a debt of around £2 billion – yes, you read that correctly! That makes Woking the most indebted council in the UK, relative to its size, and Government commissioners have now been sent in.
With IMPORTANT correction. Woking Council has debts of £1.9bn and spending power of just £14m (!) – staggering recklessness. Which is why the government has today appointed commissioners to run the council. This was a Tory Council when the unsustainable liabilities were taken on.… https://t.co/y68rF3phZ5
— Robert Peston (@Peston) May 25, 2023
So how on earth does a small Council, in an admittedly affluent area, get into so much trouble? Yesterday the Department of Levelling Up, Housing and Communities published a damning report into the whole sorry affair. It seems that the Council borrowed huge sums to regenerate the town centre.
As a result of past investment decisions, the council has failed its best value duty leaving an unprecedented legacy for the current leadership team, which they have not been able to address.
In a letter to the Chief Executive of Woking Council the Department has outlined the measures it will be taking. The Commissioners will take over responsibility for, amongst others, “All functions associated with the financial governance and scrutiny of strategic financial decision making by the Authority” for the next 12 months, to be reviewed after 6 months.
Ann-Marie Barker has welcomed the Government intervention. The BBC quotes her:
My administration is very clear about the huge challenges facing the council due to the legacy of both the extraordinarily high and disproportionate levels of debt that we have inherited from the previous administration.
We are also very clear and focused on the significant risks that the council is now facing up to as a result of that debt.
We also recognise that these challenges are so significant that the council and its officers cannot deal with these on its own.
We therefore fully acknowledge and accept the findings of the report and welcome the support.
* Mary Reid is a contributing editor on Lib Dem Voice. She was a councillor in Kingston upon Thames, where she is still very active with the local party, and is the Hon President of Kingston Lib Dems.
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With those numbers it is almost impertinent to comment from outside but hopefully the Woking Lib Dem councillors will find their own version of the old adage of “never letting a good crisis go to waste”. Thank you Mary for giving us some accurate context for this situation.
Apparently, according to the local paper, Wokin BC have also just lost 0.7 £Bn on a rather dodgy property investment made by the Tories. I can’t help wondering exactly who benefitted from the council playing at being bigshots rather than getting on with delivering services for their residents. Nearby Waverley was left with £2 million in repair bills for their council offices, which seemed a lot, but getting on for £3Bn…you could build an aircraft carrier that sits in dock needing repairs for that. Gotta love the Tories.
Where were/are the auditors?
Unfortunately Woking weren’t the only ones taking a reckless punt on the commercial property market.
Alex B is right. There are a good number of councils that have borrowed heavily to invest in the commercial property market trying to make up for loss of income from central government funding. Woking probably won’t be the last Tory council where Government commissioners need to be sent in.
A draft statement of accounts was published for the year ended 31 March 2021. The audit could not be undertaken as the prior year audit of the 2019/2020 statements was still ongoing.
The borrowings note for 2020-21 writes “The high level of short term borrowing is due to borrowing taken at low rates ahead of the expected government reduction in PWLB borrowing rates in the November 2020. Whilst some short term borrowing will be retained, reflecting the short term nature of some of the capital projects and loans advanced, the majority will be refinanced as long term loans during 2021/22.”
“The Prudential Code enables a Local Authority to borrow to such an extent as the Authority considers appropriate within a range of indicators that it sets. It is therefore possible to invest to the level that is affordable, prudent and sustainable taking into account the level of income including Council Tax and housing rents. The Council’s treasury management activity was undertaken in accordance with its Treasury Management Policy and Practices and within the strategy and overall borrowing limits.”
“The Council approved Capital, Investment and Treasury Management Strategies in February 2020 alongside the budgets for the year. Updated versions were approved in February 2021 for 2021/22.
How does the old saying go “the road to ruin is paved with …”.
Is the near £2 billion figure the net loss on risky investments or the amount which is owed to the banks? For example, if the council has bought properties to this total, which are now worth £1.5 billion their net loss is ‘only’ £500 million. This is still bad but not quite so bad.
I would guess that the effects of the Pandemic and the recent rise in interest rates are being used as excuses for what has happened but, being as cynical as I am, I suspect sweetheart deals were involved in the original purchases. Has Woking council paid well over the odds in the first place?
The original deals need to be thoroughly scrutinised to ensure that this sad state of affairs is the result of a mixture of incompetence and bad luck rather than something much worse.
Under the Tory reign, they have also built a number of enormous tower blocks. These are totally out of proportion not just with the town but with the surrounding area as they are visible for miles around. Like raising a giant ‘finger’ to everyone else by the Tory council.
Croydon is another council where enormous debts have led to government commissioners becoming involved. What all this says to me is that national government has to accept considerable responsibility for this as it was national government that has been cutting funding and encouraged councils to invest in amongst other things building projects. I hope someone in the party is seriously looking at changing council funding.
Robin Stafford 27th May ’23 – 9:03am:
…they have also built a number of enormous tower blocks. These are totally out of proportion not just with the town but with the surrounding area as they are visible for miles around.
The inevitable consequence of immigration that’s far in excess of the country’s ability to absorb people. Presumably, they should be building low-rise properties on the Green Belt instead?
“Woking Lib Dems led the way, taking control in 2022” – Actually the first Lib Dem controlled Council in Surrey in recent times was Mole Valley in 2019. There are now 30 Lib Dems, 6 Independents and just 3 Tories,
Partly to answer Peter Martin’s comment. The loans were from PWLB, no commercial bank would ever lend on the basis WBC borrowed.
I suppose it would be too much to expect some reflection in the Report by the now Commissioners on the consequences of
a the failure of the Localism Act in prescribing limitations on Borough Council actions,
b the role of PWLB in being a non-discretionary lender and
c the encouragement by Govt of additional (risky) revenue streams to compensate for withdrawal of Govt support.
Not that I am excusing the previous admin’s recklessness just the environment that was created.
From the government web site, for those, like me, who don’t know what PWLB is:
“The PWLB lending facility is operated by the UK Debt Management Office (DMO) on behalf of HM Treasury and provides loans to local authorities, and other specified bodies, from the National Loans Fund, operating within a policy framework set by HM Treasury. This borrowing is for capital projects.”
So the £2Bn is owed to the Treasury, more or less, and one could argue that WBC just borrowed the money central government took away with austerity….
Just what can these Commissioners do that the new Council can’t unless the Government is only willing to provide money to the Commissioners.
Commissioners are usually seasoned executives from other Councils. Slough BC has been overseen by commissioners since 2021. Control of Slough passed from Labour to the Conservatives last month, so the commissioners will be working with a new team there as well https://www.lgcplus.com/politics/governance-and-structure/gove-appoints-new-lead-commissioner-to-slough-22-05-2023/