Like something from a Dickensian tale of corruption and social plight, the new year stalks the streets of this East Anglian Unitary Authority with bad news and no glad tidings.
Bad decisions
It was in 2016 that Thurrock Council began to invest in a series of solar farms. In 2018, some agencies started to become concerned, with one financial consultancy describing the council as going “well beyond the tolerances of what we consider to be prudential risk-management boundaries”. By October 2019, the Bureau of Investigative Journalism began to ask questions of Thurrock Council about those investments. It took over three years, with the Council attempting to block the Freedom of Information Act requests at every turn before the Information Tribunal finally ruled against them.
In late November 2022, reality dawned. It was widely reported that Thurrock Council had made staggering losses of over £270m on investments in those solar farms, and had to set aside a further £130m to cover the interest on that debt.
Since then, the financial reality has made sober reading for all concerned.
The reality of cuts to services
On 19 December 2022, Thurrock issued a Section 114 notice, in effect declaring itself bankrupt and limiting spending on only ‘statutory obligations’. So it was inevitable that there would be cuts to future projects.
The services defined as statutory obligations include education services; children’s safeguarding and social care; adult social care; waste collection; planning and housing services; road maintenance; and library services. But even with those protections, the impact is still being felt by the community.
On 20 December it was reported that the departing Chief Executive Lyn Carpenter, who had resigned with immediate effect a few days earlier, was still to receive £50,000 in notice pay. The financial director, Sean Clark, remains suspended, but on full pay.
The news broke on 22 December that Thurrock had repaid a £15m loan to Newcastle City Council, with interest, and was in the process of paying back all the other loans from other Councils. This was from £850m obtained from the Government in October 2022.
On 29 December it was confirmed that a £26m project for affordable housing was being cancelled as it was no longer financially viable.
The other East Anglia authorities involved
In total, over 50 local authorities from around the country had loaned money to Thurrock at some stage during the time of the investigation. This included at least thirteen councils in the East of England region, which lent over £60m between them:
- Cambridge City Council loaned £15m;
- Bedford Borough Council loaned £14m;
- Epping Forest District Council loaned £14m;
- Peterborough City Council loaned £5m;
- Tendring District Council made two loans of £3m each, totalling £6m;
- Cambridgeshire and Peterborough Combined Authority loaned £5m;
- West Suffolk Council loaned £5m;
- Basildon Borough Council loaned £5m;
- Castle Point loaned £3m;
- Maldon District Council loaned £2m;
- Brentwood Borough Council made two loans of £1m each, totalling £2m;
- Colchester Borough Council loaned £1.5m:
- Huntingdon District Council confirmed they had made a loan but did not disclose how much.
Normal? Well, not quite
The practice of short term lending of money between councils to aid with cash flow is known. It’s widely considered an accepted method to limit the use of banks and obtain a low interest rate. However, it was the number and size of the loans taken out by Thurrock that was concerning. While a local authority has never defaulted on a loan, it was not clear if the government would underwrite Thurrock’s position, based on its investments at the time these loans were made.
What is remarkable is that all of these investments took place under the noses of the Counter Fraud & Investigation Department (CFID) in Thurrock, a combined service with Southend-on-Sea, which had been formed in 2013 specifically to safeguard Council finances. The team had the power to use intrusive surveillance powers and yet, despite the outside agencies raising concerns, and Freedom of Information Act requests, they did nothing. The department lasted until 2019 when Southend chose to split from Thurrock.
A bleak outlook
Local Authorities are traditionally funded by Council Tax and a share of business rates which is their largest source of income, and by direct funding from government. The government has stepped in to pay off Thurrock’s loans to other councils and has appointed Essex County Council as ‘Commissioner’ and ‘Best Value Inspector’ to oversee the financial functions of the beleaguered council. In a statement on its website, Thurrock Council says,
“On Monday 9 January 2023, an Extraordinary meeting of Full Council will discuss the Section 114 notice and its implications, along with the council’s response to the financial challenge it faces and proposed actions.
“We are due to receive a response from the Secretary of State early in the year on the Intervention and Best Value Inspection reports submitted to the government.
“We will be asking for exceptional financial support from the government over a number of years to stabilise our financial position and give us time to have balanced budgets. Alongside this support we will use asset disposal, efficiency savings, council tax increases and funding flexibilities from the government. We have already begun to reduce non-essential spending and are working hard to reduce our overspend.”
For some years to come, residents and businesses in Thurrock will be paying – with interest – for the errors of their council, and of those elsewhere who turned a blind eye despite all the warning signals.
