Ministers have appointed external commissioners to in effect take control of a Surrey council with debts expected to reach £2.4bn – 100 times its annual net income – after spending heavily on commercial property.
Woking borough council, which spends £14m a year and has an annual net income of £24m, now has a total debt of £1.9bn. But it is forecast to hit nearly £2.4bn by 2024/5, a written statement from Lee Rowley, the junior levelling up minister, said.
The council, described by Rowley as the most indebted council in England compared with its financial resources, risks effective insolvency after a surge in debt interest costs on its investments including a shopping centre, residential tower blocks and a 23-storey Hilton hotel.
In February, Woking said it was at risk of issuing a section 114 notice, which signals insolvency. Councils cannot technically go bankrupt, but such a move obliges central government to intervene to ensure local services are sustainable.
Rowley’s statement said the council faced “the most challenging financial position of any local authority in England”, and that his department had increasing concerns about the size of the debt and how it was being managed.
In January, the levelling up department commissioned three experts on local government to carry out an external review. While this has not yet been published, and is likely to be redacted in part due to commercial sensitivities, Rowley quoted it as concluding that there “is no realistic route to the council returning to financial sustainability alone”.
He has thus appointed the same three experts to become commissioners with wide-ranging powers over the council, including financial and commercial decision-making, and restructuring the authority.
They are Jim Taylor, who was chief executive for three metropolitan councils; Carol Culley, the deputy chief executive of Manchester city council; and Mervyn Greer, a senior Cabinet Office official with responsibilities for local government.
The decision to appoint the three, taken by Michael Gove, the communities secretary, “reflects the acute situation in Woking and the urgent need for commissioners to begin work immediately to ensure that the council takes steps to secure compliance with their best value duty”, Rowley’s statement said.
The council, which was run by a Conservative administration when the investments were made but now has Liberal Democrat leadership, said it welcomed the move as the “challenges are so significant that the council and its officers cannot deal with these on its own”.
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Ann-Marie Barker, its leader, said: “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 set out by the minister in his letter.”
