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Home » Thurrock council admits disastrous investments caused £500m deficit

Thurrock council admits disastrous investments caused £500m deficit

by Brayden Avery
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A Tory-led council has admitted a series of disastrous investments in risky commercial projects caused it to run up an unprecedented deficit of nearly £500m and brought it to the brink of bankruptcy.

The staggering scale of the catastrophe at Thurrock council in Essex – one of the biggest ever financial disasters in local government – is contained in a report made to the council’s cabinet, which reveals it has lost £275m on investments it made in solar energy and other businesses, and has set aside a further £130m this year to pay back investment debts.

Thurrock has appealed to the government for an emergency financial bailout and warned that it will have to push through a drastic programme of cuts to local services and staff redundancies, along with a probable fire sale of buildings, land and other assets as it attempts to stay afloat. Council tax rises are also likely.

There was astonishment in the wider local government world at the scale of the financial disaster. “What we are seeing in Thurrock is shocking and unprecedented. I have not seen anything like this in my 30-year career in local government,” said Rob Whiteman, the chief executive of Cipfa, the public sector accountants body.

Thurrock had become one of the most indebted of all English local authorities in recent years after borrowing £1.5bn – 10 times its annual spending on local services – to enable a string of investments in solar energy and other businesses.

Three years of investigations by the Bureau of Investigative Journalism (BIJ) have helped force Thurrock to reveal the full scale of its investments, including hundreds of millions lent to companies owned by businessman Liam Kavanagh to invest in 53 solar farms.

According to the BIJ, Thurrock invested £655m in Kavanagh’s companies, and expects to lose £188m on the deal. It also expects to make a £65m loss on its investment in a company called the Just Loans Group, which went bust in June, and millions more on a series of other deals that turned sour.

In common with many other councils Thurrock attempted to offset the effects of years of austerity cuts to its funding by borrowing cheaply from the Treasury and investing in commercial business in the hope this would provide an alternative income stream. By 2019, English councils had borrowed over £6bn for this purpose.

Concerns over Thurrock’s exposure to risky commercial investments led a panicked government to send in a team of commissioners to run its finances in September. The cabinet report reveals Thurrock’s finances are now in a significantly far worse state than originally thought just a few weeks ago – and could get even worse.

The report predicts a further black hole in its budget of £185m in 2023-24, suggesting that it may have to declare effective bankruptcy. Three councils, CroydonSlough and Northamptonshire, have gone insolvent in recent years, the former two after running up huge debts on borrowing.

“This is a grave position and at this point the council cannot find a way to finance their expenditure in-year and is unlikely to achieve a balanced budget for 2023-24 without external support,” the report says.

The council’s Conservative leader, Mark Coxshall, issued a statement saying that services would continue to operate as normal for now and staff would continue to be paid. But he also warned that there would be “extremely difficult decisions to come” in what he called “uncertain and unsettling times”.

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He added: “These are shocking numbers but the first stage to creating a good plan for recovery is to understand the full extent of the problem. I know that Thurrock residents will be concerned, and rightly so, about what this means for local services. Please rest assured that this report is the first stage of planning for our recovery.”

John Kent, the leader of Thurrock council’s Labour opposition, said Thurrock residents will be paying the price for the Conservatives’ catastrophic handling of the council’s affairs for decades.

“This report lays bare the culmination of six years of Conservative leadership of Thurrock council,” he said. “Just what were those Conservative councillors who make up the council’s cabinet doing? Are we really expected to believe they didn’t notice what was going on under their very noses?

“The Tory cabinet are absolutely complicit in this scandal and with every new revelation their position becomes even more indefensible.”

 This article was amended on 30 November 2022 to remove a reference to the Thurrock council report as being “internal”.

Source : TheGuardian

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