Huge Losses at Thurrock Council

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OurCreature
 
 
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Huge Losses at Thurrock Council

Post by OurCreature »

Thurrock Council has been forced to admit to huge losses on its investments in renewable energy schemes - at least £275 million with more to come; the overall estimate of the losses is around £500 million. The Council borrowed £1.5 billion at cheap interest rates to try to generate income from investments to get round Austerity etc.

Quite frankly, I'm gobsmacked. Those debts for investment are 10 times their annual budget, and it looks the very opposite of the prudent financial management that I was taught in the days when I was studying accountancy for my then Institute of Municipal Treasurers and Accountants qualification.

There should be a massive witch hunt over this. Whose bright idea was it in the first place, who in a position of power then thought it was a really good idea, why did the Members go along with it are just 3 of the questions that come to mind. Thurrock is controlled by the Conservatives but I bet there are plenty of Councils controlled by Labour/Lib Dems and No Overall Control who are thinking there but for the grace of God etc etc as they did with the BCCI collapse many years ago. Do people never learn?
Like the late Chaircat Midge, I am not always right.
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Patience
 
 
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Huge Losses at Thurrock Council

Post by Patience »

Is it uncharitable of me to think that some of these “investments” could have gone to companies with strong links to people making the decisions on where the investments were made?
I hope that those responsible are prosecuted.
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OurCreature
 
 
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Huge Losses at Thurrock Council

Post by OurCreature »

I forgot to post the link for this story - sorry.

https://www.theguardian.com/society/202 ... 0m-deficit
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Huge Losses at Thurrock Council

Post by Panikos »

OC that is wonderful news for me since I live in Thurrock. Though perhaps I won't be able to tell the difference between 'badly run' and 'bankrupt'

Governments both central and local seem to have strange ideas on how to do business with the private sector. I'd like to think that when dealing with millions there'd be experienced accountants, economic experts and lawyers examining every detail. Surely they'd look at a company's historical success rate. Taking into consideration forecasted interest rates, inflation and so on.

In practice it seems like someone says "let's give all the money to that company with the pretty logo. They seemed nice and promised to return a huge profit."

I've made reference elsewhere to the movie Idiocracy, but now I'm picturing the guy in the bath on the bridge of the Golgafrinchan Ark Fleet Ship B.

Patience, It would almost be a relief to find that those in charge had since moved into mansions in countries with no extradition treaty. At least that would make sense.
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Huge Losses at Thurrock Council

Post by eccles »

I've made reference elsewhere to the movie Idiocracy, but now I'm picturing the guy in the bath on the bridge of the Golgafrinchan Ark Fleet Ship B.
Apt. Didn't the Ark's occupants land then use leaves as currency, suffering rampant inflation as a result?
Last edited by eccles on Thu Dec 01, 2022 10:53 am, edited 2 times in total.
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Huge Losses at Thurrock Council

Post by Wildrover »

The Finance Director Sean Clark is the main villain of the piece. Given that he's spent his career in public centre finance how on earth did he have the authority to invest £1 billion of taxpayer money in dodgy private sector businesses? There are plenty of professional fund managers who manage smaller funds than that. He has been suspended but is still being paid his £130K/year salary. It will be interesting to see what happens here - Nick Leeson got a 6 1/2 year jail sentence for speculating with investors' money and losing a similar amount to Clark. My bet is that Clark will not even be prosecuted and will receive a nice taxpayer funded payout to retire or move on just like the incompetent Sharon Shoesmith in the Baby P case a few years back.

There's an interesting Twitter feed here showing the links between Clark and local businessman Liam Kavanagh who received £655 million of the money in question and is enjoying life in his £20 million mansion and private jet courtesy of Thurrock taxpayers. There needs to be a police investigation here and if charges are not brought then the rules regarding authorisation of council spending need rewriting from scratch and a law introduced allowing public sector officials who indulge in this type of behaviour to be prosecuted.
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Huge Losses at Thurrock Council

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WR wrote
the rules regarding authorisation of council spending need rewriting from scratch and a law introduced allowing public sector officials who indulge in this type of behaviour to be prosecuted.
I'm not sure that the rules need rewriting, it may be that the existing rules need enforcing properly. I think WR will turn out to be correct in regarding suspended head of finance Sean Clark as the villain of the piece as there is an online article published by the Bureau of Investigative Journalism which basically accuses him of continuing a policy of making reckless investments even after he was warned by outside experts that he was betting the farm and risking losing it, and other folk accusing him of not telling people in Thurrock Council who should have been told when it all started to go horribly wrong.

https://www.thebureauinvestigates.com/s ... phic-deals

Essex CC is conducting a best value investigation into what went wrong and is due to report to HMG in early January. The Leader of Thurrock Council resigned on 2 September when the investigation began. I hope that they hold the relevant people to account, and I think they will because this has given local government finance practitioners a really bad name and Essex need to demonstrate that local government can clear up its own mess and a willingness to witch hunt out the irresponsible idiots who thought this policy was a good idea. If nobody incurs a severe penalty for this I shall be shocked. I'm used to seeing people like Fred Goodwin, Eric Daniels and Sir Victor Blank, who bring large banks to their knees requiring god knows how much taxpayers' billions to keep their banks afloat and stop the country's financial system from collapsing, escape severe financial and legal accountability but that is because they were private sector big shots and so we expect them to get away with it because that is how things work. I expect better of local government financial accountants and practicioners and I'm very disappointed and rather vengeful when things like Thurrock Council recklessness happen.

When I started in local government there was a provision for officers who lost ratepayers' money through reckless/negligent behaviour to be surcharged. This policy was carried out; there was one instance just over 40 years ago where an officer had literally kept an urgent payment cheque in his desk drawer until long after it should have been sent out and his local authority lost a lot of money as a result. He was sacked and surcharged £65k IIRC which was a hell of a lot of money compared with local government pay in the late 1970s. I think this power has been taken away; maybe it should be restored.

As for Sharon Shoesmith............I blame Action Man Ed Balls-Up for her £600k pay-off. He wanted to get the kudos for taking firm action, and sadly gave Ms Shoesmith a loophole to get that money at an employment tribunal by not following due process in her sacking. It was clear to everybody in local government that her career was dead and buried because a head of children's services from another local authority (HCC as it happens) had been brought in to run her department via herself, and if her Council had been left to itself she would have been got rid of quietly without too much expense. Thank you Mr Yvette Cooper, I'm sure we're all very grateful for your publicity-seeking incompetence.
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Huge Losses at Thurrock Council

Post by Furby »

I dont understand why they are allowed to do risky investments with spending money anyway in the first place. Is it one of those things where its such a stupid thing to do that no one thought to have a law against it until someone did.
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Huge Losses at Thurrock Council

Post by Wildrover »

Yes I agree the three bankers you mention should have received much harsher sanctioins, particularly Goodwin. He lost his knighthood and half his pension but iin he US he and the others would have been sued by shareholders for everything they owned as their reckless behaviour caused a massive loss for investors. I'm also surprised that in Goodwin's case he was allowed to keep any bonuses or pension seeing as RBS would have gone bust without government intervention.
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Huge Losses at Thurrock Council

Post by Furby »

Thurrock are bankrupt now. Does that make it al ok and will be money for emptying panikos bins now. Who pays for the free debts that declaring bankrupcy grants anyway. If it's so easy will other councils do the same thing and spend money they want to spend but can't afford and go bankrupt later. It seems all a bit too easy.
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Huge Losses at Thurrock Council

Post by OurCreature »

Furby wrote
Thurrock are bankrupt now.
Here's a link to an article in the Grauniad about it. You'll see it covers all the points raised by WR and myself earlier in the thread, so the HF Gang (those who are interested) can say 'We read it here first!'

The formal issuing of the S114 notice means that Thurrock can spend money only on its statutory functions like emptying Pani's dustbin and has to come up with a plan for dealing with this mess. There will need to be some sort of bail-out but that itself will have consequences for Thurrock, which is now Conservative-controlled and since 2016 has had a Conservative-led administration.

The article mentions 3 other local authorities that have had to issue S114 notices. Northamptonshire County Council (Conservative, 2018 S114 notice issued) was so steeped in the mire that it was thought best to turn it into 2 unitary authorities and start again. Croydon issued its S114 notice in November 2020 when it was under Labour control; I don't know what sort of mismanagement led to its difficulties. Slough (Labour) issued its S114 notice in 2021, having run into problems similar to those of Thurrock - lots of borrowing for loss-making investments; IIRC I noted at the time that the chief executive, Josie Wragg, had been sacked for her part in the debacle.

Not a happy time for local government.

https://www.theguardian.com/society/202 ... bankruptcy
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Huge Losses at Thurrock Council

Post by Panikos »

OC, I'm getting better information on how this works in this topic than I can elsewhere :)

They certainly are emptying my bins as I saw this morning. There may be other consequences for me, but I don't really use any council facilities that might close over this so not in the short term. The long term might be another matter.
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Huge Losses at Thurrock Council

Post by OurCreature »

Glad to be of service, Pani. I don't think much more will happen until the results of the review of this disaster are published in January 2023 - which I shall be looking out for.
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