Inspection ordered into Warrington Borough Council as figures reveal £1.85 billion of debt
ITV Granada Reports correspondent Andy Bonner joined Lucy Meacock and Gamal Fahnbulleh in the studio
The government has ordered an investigation into Warrington Borough Council as figures reveal it is almost £1.85 billion debt.
It follows a report which found the council is the most indebted unitary authority in the country, with "their portfolio of debt-funded investments... concerning" which put not only the council at risk, but could also have "significant impact" for local residents.
The report also raised "some concerns with decision-making, governance and oversight".
Simon Hoare, the Minister for Local Government, announced the 'best value' inspection on 8 May which will see an inspector investigate whether the council can work to control its debt and reduce it over time.
The council says the move will have no impact on its day-to-day operations.
Conservative MP for Warrington South Andy Carter he said the knock on for those living in the area could be "significant".
"The downside for local residents if these investments do go wrong is about £10,000 per household, that's a really significant level of risk for every household in Warrington," he said.
"We're seeing that in Birmingham where decisions were taken by the City Council and we're now seeing council tax is going up by 20% to pay off those decisions, we've got to be really aware in Warrington that the decisions taken by Labour in the town hall are with public money, not shareholders money, and that risk falls to the public, the tax payers in Warrington."
He welcomed the inspection, adding he has been warning people about the dangers from the "reckless decisions" for some time.
He added: "I have been warning this would happen, the council have borrowed a sum of money, £1.8 billion, and what we've seen over the last few weeks is significant evidence of reckless decisions with organisations going bust, investments into properties which are making losses, and even investments into junk bonds which are causing losses for the council.
"It is something I have raised in Prime Ministers Questions on a number of occasions and I'm really pleased the Secretary of State has taken these powers and is introducing an independent inspection into the council."
The Labour-run council said the inspection would not impact services and they would remain at the "standard you expect and deserve".
A spokesperson said: “The inspection will undoubtedly have our full co-operation, and we will work positively, openly and at pace with the inspector.
"While DLUHC recognises that we have taken steps to address areas for improvement, we will continue to identify any learning and further improvements that can be made as part of this inspection process.
"Finally, we would like to reassure residents and businesses that this review will not impact the valuable services that you depend upon.
"We will continue to make sure that our day-to-day services remain at the standard you expect and deserve."
What has happened to get to this point?
May 2022
The Department for Levelling Up, Housing and Communities (DLUHC) begins monitoring Warrington Borough Council as it has "high levels of indebtedness relative to their revenue budgets, reserves or Council Tax base".
March 2023
The DLUHC commissions the Chartered Institute of Public Finance and Accountancy (CIPFA) to undertake a detailed review of Warrington's capital finances.
July 2023
The report is published, but it is not made public for another 10 months, in May 2024.
8 April 2024
The Conservative party made an official complaint about a property investment decision, the worth of which they say had fallen from £10 million to just £1.3 million.
The Conservative councillors group said it believed the investment decision was "unconstitutional", with the truth about the financial difficulties "hidden from councillors".
In response, the council’s cabinet member for corporate finance, Labour councillor Denis Matthews said the report, available online "presents a very different picture".
17 April 2024
The issue is raised at Prime Minister's Questions by MP Andy Carter.
But, the council’s cabinet member for corporate finance at the time, Cllr Denis Matthews, denied the authority was heading "towards bankruptcy".
He said: “It is time we had an honest conversation about the council’s borrowing and investments.
"For too long the message pushed out by many is that Warrington Borough Council has massive debt, and that we are heading towards bankruptcy. This is simply not true."
He added that the council had invested money because it had been told by the national Conservative government "they should look to find other sources of income generation".
He added: “Without finding other sources of income, further cuts in the essential services that are expected by all Warrington residents would have been unavoidable."
23 April 2024
Just a week later, on 23 April, political row erupted once more after the then leader of the Conservative group on the council, published a 73-page report on a £10 million investment into Altana Corporate Bond Fund.
The report discusses a timeline of the investment decisions made since 2018 and the associated council treasury management reports.
The council’s decision-making is reviewed, along with the associated rules in Government statutes, professional guidance, and the council constitution.
The report concluded that, in the author’s opinion, the council failed to get the necessary permission before it spent the £10 million, and for the next three years it issued misleading reports about the type of its investment, its valuation, and its returns.
In response the council said: "The local Conservative group are obviously entitled to their views, but it is in my opinion a sign of their failure to deliver any positive improvements for their residents in the past three years that they have here raised an issue already investigated and fully resolved."
8 May 2024
DLHUC announces Paul Najsarek as Lead Inspector to assess the Council’s compliance with its Best Value Duty.
In a written statement, Simon Hoare MP said: “Warrington Borough Council is one of a small number of councils carrying the biggest risk in terms of debt leverage.
“The council is the most indebted unitary authority in England, with a capital finance requirement of £1.85 billion – 5.5 times its total service expenditure (as of March 2023).
“My department commissioned the Chartered Institute of Public Finance and Accountancy (CIPFA) to undertake a detailed review of Warrington's capital finances.
“The review, which we are publishing today, found that their portfolio of debt-funded investments is very large and uniquely complex – to a degree that is concerning and puts the council at risk. The report also raises some concerns with decision-making, governance and oversight.”
"A lead inspector has been appointed to assess the council’s ‘compliance with its best value duty’, and specifically in relation to council functions of governance and section 151 of the Local Government Act 1972 and the strength of associated audit with particular attention to the decision making and scrutiny and risk arrangements, the capacity and capability across the organisation but particularly the finance function, and whether this is sufficient to meet the ‘best value duty’, the adequacy of the council’s plans and capacity to address the recommendations made by the CIPFA capital review and to control its debt levels and reduce them over time, what an appropriate level of capital risk would be for the authority, with regard to the statutory guidance on ‘best value standards and intervention, the impact the investment portfolio and its management has had on service delivery, and the prudence of financial decision making.
"The lead inspector has been asked to report findings by August 30, or ‘such later date as may be agreed’, and will be able to request the appointment of assistant inspectors."