Huge Losses at Thurrock Council

[OurCreature]

All very wise, Furby. This particular property spree involved regenerating Woking town centre with hotels, business units, skyscrapers (the tallest buildings in the UK outside a big city so it seems) and Woking racked up £1.9 billion in debt and now faces a deficit this year of £1.2 billion on a budget of £24 million. The Grauniad refers to annual core funding of £16 million; I have not the slightest idea what they mean by that. WBC has warned the debt could zoom up to £2.6 billion and they have written down the value of their property investments by £600 million. What a mess!

Meanwhile we have the usual bland drivel from HMG.

A government spokesperson said: “Following serious ongoing concerns about the financial situation of Woking council, the government announced an intervention into Woking’s financial position in May and commissioners have been appointed. We will continue to work closely with the authority and will take action if necessary.”

Much of the debt (£1.3 billion) is held by what the Grauniad refers to as an obscure arm of the Treasury - the Public Works Loan Board. The PWLB certainly isn't obscure to local government finance practitioners as it's a major source of local government capital finance and has been around for decades. The Treasury wonks who run it might like to tell the rest of us why they lent WBC such vast sums of money compared with the authority's annual budget for what essentially was a huge property speculation.

Still, WBC holds a record of sorts - according to the Grauniad Woking's plight is thought to be the biggest financial failure in local government history.

[OurCreature]

Here's the Grauniad take on the Woking fiasco today. I thought this quote particularly instructive:-

"Versus its council tax receipts, Woking is thought to be the most indebted local authority in history, beating even the tiny Spelthorne borough council, also in Surrey, where crisis hit in 2020 after a £1.1bn investment spree. This line from Woking’s 114 notice captures the size of the mess: “If the additional charges of circa £75m in each year were to be funded by service reductions, this would mean the council could no longer afford to provide any services at all and would still see a net budget shortfall.”

https://www.theguardian.com/business/ni ... to-be-told

[Furby]

Many other councils will be just waiting to be discovered won't they. Twas ever thus and councils lost millions on bbci mess and in that case they got some money back decades down line but massive losses or massive paybacks seems to make little difference to council taxes or cuts in services. That still happens based on national narratives.

Its a sad world that people everywhere can't behave sensibly without regulations and often not even then. Do we need rules that essential services must be funded by council taxes and government grants and councils will have to cut cloths. All the gambling money can fund the extra things councils want to do for their current favourite groups of people. What cyclists have done to be this chosen group this year escapes me I hardly ever see a cyclist in person they can't really have that much effect on voting patterns. With local councils I do have a bit of sympathy because national government makes rules on what's essential to provide but doesnt worry itself with how that can be funded if denand exceeds supply so councils have to get money somewhere.

[Wildrover]

We should do what the US does and strip the perpetrators of their pensions, the tax payer funded part at least. It won't make much of a dent in the debt they have created but it might make employees think twice in future - this should also have been done in the bankiing industry. My council is going to fail to balance their budget this year but it hasn't stopped them trying to employ even more people and expecting the tax payer to pick up the bill.

[OurCreature]

AT LAST! The official report into Thurrock's financial disaster has been published - yesterday. I shall comment when I have had a chance to read it. Here's the link if anyone wants to beat me to it.

https://www.gov.uk/government/publicati ... ion-report

[OurCreature]

What a can of worms. I have skimmed less than 1/3 of the report - I simply couldn't bear to read the catalogue of failure. Basically all internal controls either broke down or were non-existent which meant that the S151 officer who oversaw the investment strategy could do what he liked with no challenge either internally (this was actively discouraged) or externally.

The people who ran this show failed completely in their duty to their electorate and taxpayers. It was more than poor practice - it was recklessness with public money. For the first time in my post-qualification life I think people should end up behind bars for this. This fiasco, and probably the other ones alluded to in earlier posts, show stupidity and recklessness on a grand scale to the extent I previously thought impossible in local government finance. No longer.

I'm really ashamed of my profession in allowing this to happen, and I agree with WR that the miscreants should at least have their pensions docked; by around 3/4 which would roughly equate to the share of their employers' contributions towards their pensions.

[Furby]

I didn't read the report because I thought why know someone who knows about finance and councils and be reading terribly tedious reports when I can let oc read it and tell me the tale.

Is there any reason why all the checks and balances failed that seems to be the main lesson. But lessons are never learned are they it's just something said every time for every bad thing.

There does seem to be a modern world where recklessness is seen as a good thing. They have other names for it like dynamic and flexible and modern. Also that anyone who reminds people that rules were rules for reasons is in trouble and people who just work there can't do anyhing except leave. Been like this in private business for years and now its showing up in councils too. We are well out of it and this government acts surprised when older people are leaving the workforce.

[Furby]

Birmingham council is now bankrupt and doing that thing where they only do what's essential. I am not sure who pays for what's essential because if no money left no money left it doesn't just appear if you say ah but I need it for essentials.

Maybe councils have just decided to spend what they like knowing someone else will step in when they run out of money so why be making difficult decisions to stop spending. The problem I can see is that only the first few failed councils get things paid for by someone else once it's quite a few more decisions have to be made to even stop
essentials isn't enough fictious money to bail out everyone who over spent.

[OurCreature]

I had a quick read about it and basically the political ruling group (Labour) seem to be doing their best to blame it on Ten Years Of The Great Austerity; I am not so sure that is 100% of the reason because so far only a handful of local authorities have issued S114 notices.

However, there is no doubt in my mind that financial resources for local authorities are scarcer than they used to be, and local authorities have had to be innovative in either doing the same for less, raising funds from sources other than taxation, or cutting back on spending on the 'nice to haves'. Many authorities have reduced expenditure on libraries and museums, and many of those that are still there are kept going by volunteers - such as Fleetwood Museum. As we know all too well, some local authorities have tried to play the property game and now are facing horrendous losses. My former employer has gone down the shared services route and now keeps the books for god knows how many other local authorities but that trick can't be worked for ever and the wheels are predicted to come off in a few years time if there isn't a full-scale reform of local government finance...............or HMG decides to reduce the number of statutory functions of local government.

I think the number of local authorities that issue S114 notices is going to rocket in the next few years. I'm so glad I retired when I did in 2011.

[OurCreature]

I see Birmingham are also blaming heaven knows how many back years of equal pay claims.

[eccles]

Slough and Woking are two more in trouble from getting their fingers burned with dodgy investments.

[OurCreature]

Especially Woking - I think I mentioned earlier in this thread that Woking's could be the biggest local government bankruptcy in history at £2.6 billion.