Woking Councillor Says, ‘We Face a Mountain of Unsustainable Debt’

Published on: 23 Feb, 2023
Updated on: 23 Feb, 2023

By Chris Caulfield local democracy reporter

and Martin Giles

Woking Borough Council is close to effective bankruptcy after amassing debts worth almost £2 billion to fund a property investment spree.

Annual servicing of Woking Borough Council’s massive £2 billion debt is set to hit an unsustainable £62 million a year, according to its own budget forecasts.

Councils cannot go bankrupt but are required by law to have balanced budgets. If a council cannot find a way to finance its budget then a Section 114 (S114) must be issued. Such a notice means they cannot make new spending commitments and can also lose control of their day-to-day running.

A report to an extraordinary council meeting tonight (February 23) reads: “The council is in the territory of s114 but, as of the date of this report, a s114 notice is not required.

The Liberal Democrats won overall control of Woking in May 2022.

The figures were published ahead of its full council meeting where members are expected to sign off a council tax increase of 2.99 per cent. This is the maximum permitted for the borough council’s share of the council tax charge most of which goes to Surrey County Council

The financial crisis at Woking is such that the borough’s deputy leader said the council needed government support following years of failed borrowing plans under the previous administration.

According to budget papers, the council borrowed about £1.8bn for investment purposes but is only bringing in £38.5 million annually, rising to £43.3 million next year, far below the £62 million in annual interest payments – leaving the council in a financial black hole and under investigation by the Department for Levelling up Housing and Communities (DLUHC).

DLUHC has confirmed that no immediate decision is pending, while borough deputy leader Cllr Will Forster thinks the government is unlikely to put the council in special measures, given the recent changes both in its senior officers and political make up.

The department’s report into the council’s finances, investments and related governance will be made available on the government’s website.

Cllr Ane-Marie Barker

Council leader Ann-Marie Barker (Lib Dem, Goldsworth Park) told The Municipal Journal (MJ): “Since my administration gained control of Woking BC, getting its finances under control and presenting a balanced budget for 2023-24 has been our priority.

“It remains unclear how the council will establish future balanced budgets without making difficult decisions around the continued delivery of some services.

“Further cost savings are inevitable to reduce the unsustainable reliance on the council’s financial reserves.”

Cllr Dale Roberts

Portfolio holder for finance, Dale Roberts (Lib Dem St John’s), added: “We face a mountain of unsustainable debt, together with an uncertain and challenging future.

“It will require painful decisions about which services we can deliver.”

Will Forster, deputy council leader (Lib Dem, Hoe Valley) thinks the council cannot get out of its mess without help.

Cllr Will Forster

He said: “We are still waiting for a report from the government inspection team which we will check for accuracy and information and it’s too early to predict what it will find.

“However, Woking needs government support, there’s not a problem with decision making and we have full faith in the officers.

“But the council can’t afford to pay off its debt, not even service the debt.

“The papers are quite stark. £60 million a year just to service the debt -repaying the debt is even more.

“We need help.”

Cllr Forster said the council would be in section 114 by the 2024/25 financial year, “at this point I can not see how it can make a sustainable budget, which is terrifying,” he said.

As a comparison, Surrey County Council’s capital borrowing requirement is about £2.4billion. By 2026/27 Woking Borough Council is expected to reach the same level. The difference is that Surrey has an annual budget of about £2 billion, while Woking Council’s is closer to £55 million.

To put it another way, Woking has the equivalent of a £2m mortgage, on an annual salary of £10,000.