Kent County Council loaned £20m to authority now under investigation due to ‘exceptional’ debt

During the financial year 1 Apr 2021 & 31 Mar 2022, Kent County Council (KCC) lent £20m to Thurrock Council which is now under investigation due to its “exceptional level of financial risk and debt”. The Government has appointed commissioners to take over Thurrock Council’s finances after concerns were raised about commercial investments made by the Essex council.

Thurrock has been identified as one of the most in-debt local authorities in the country after racking up £1.5billion in borrowing which includes £900m in short term loans from other local councils.

An investigation by the Bureau of Investigative Journalism found that hundreds of millions of pounds that Thurrock had borrowed had been invested in solar farm projects. It found that £655m from Thurrock had gone to one company and that £138m of that money is now “missing”.

South Somerset District Council borrowed £5m from KCC to buy property investments. Apparently the properties purchased now need to be refinanced and, as the auditors point out, at much higher interest rates – all of which is going to leave the authority in some difficulty.

Local Government is slowly disintegrating before our very eyes, a slow motion car crash.

Lets not forget Northhamptonshire County Council , Croydon LBC, Slough, Northumberland Council, Nottingham, Copeland, Prembrookshire CC and others have issued a Section 114 notice regarding unlawful expenditure, as their spending controls proved not to be sufficient.

“A s114 notice is an incredibly significant action for a council to take for several reasons. Not only is it a very public declaration that its budget cannot be balanced, it also results in a suspension of additional spending.“

Rob Whiteman chief executive of Chartered Institute of Public Finance and Accountancy.

It would be wise and prudent of the new Secretary of State for Levelling Up, Housing and Communities, Simon Clarke MP, to introduce a requirement that all Councils disclose their lending and borrowings to and from other local authorities.

It should become a requirement of an updated Transparency Code; which must be given teeth to allow councils to be punished for not being transparent.  Any such disclosure must consider, but not be limited to –

• A)  Purpose of the loan required;

• B) The amount;

• C) Interest Rates;

• D) Date loans borrowed, returned;

• E)The amounts of interest paid.

• F) A risk default rating;

• G) Any sums loaned or borrowed to other local authorities above £0.5m at District, or £2.5m at County level, to be approved by full council alone.

Such a measure would allow the ratepayers to assess if the most senior financial officer employed within an authority (s151 Officer); who is not simply a servant of the Council, but holds a fiduciary responsibility to local tax payers, and as such owes a duty of care to the public in managing Council resources on our behalf; is lending or borrowing responsibly, as per their duty.

Such data would appreciatively assist the public, as

A – the Council would not be able to use the austerity claim, when lending £70m, as KCC have done.

B it would allow full council to know exactly what the purpose of the loan is for and if it is risky and/or value for money.

The last thing KCC should have done is lend £20m to another Conservative council on the verge of going bust. Or another £50m to other councils, when it knows it will have to make some difficult decisions during the setting of the 2023-24 budget to ensure resources continue to be prioritised and money is directed to where it is needed most.

They should be investing the £70m in things like fixing school buildings, investing in children’s social care, better SEND provision and other important matters.

The KCC Conservative council has the wrong priorities, especially when it needs to cut further spending, from future budgets, while it continues to loan money to dodgy councils for risky ventures.

The Shepway Vox Team

Journalism for the People NOT the Powerful