Failed investments threaten ‘financial viability’ of UK council

The scale of losses facing Thurrock council in Essex as a result of failed investments has “undermined its financial viability”, according to county inspectors who said residents will have to pay higher taxes for bare bones services for years to come.

Thurrock’s Conservative-led local authority is one of the UK’s most indebted, having racked up £1.3bn in borrowings. It is the latest of several councils to have declared effective bankruptcy after investments designed to make up for central government funding cuts by providing an additional income stream failed to deliver expected results.

The government in Westminster appointed Essex county council to carry out an inspection last year and Thurrock issued a section 114 notice last December that it was unable to fulfil its statutory duty to balance the books.

The county inspectors’ report issued on Thursday said that Thurrock’s deficit in the 2022-23 financial year was in the order of £470mn. That is more than three times its annual budget and one of the largest budget black holes declared by a local authority in the UK. The deficit would run to a further £184mn in 2023-24.

“The council will require significant external support, as well as large increases in council tax and the delivery of an extensive savings programme for years to come,” the report said.

Thurrock council admitted last year that it faced losses of £275mn of public money from its investments, which have mostly been in solar energy.

The Essex inspectors found that elected members and senior officers in Thurrock council had initially tried to conceal the bad news “and avoid public scrutiny” after repeated failures both in its investment strategy and the delivery of infrastructure projects.

“This pattern of failure, and the nature of the council’s response, has been enabled by dereliction in political and managerial leadership, inadequate governance arrangements and serious weaknesses in internal control,” they said.

As a result of the financial challenges facing the authority, many services would have to be reduced to the statutory minimum “for the foreseeable future,” they added.

Despite the crisis, the Conservatives narrowly maintained their majority in Thurrock at elections last month, although the council leader and cabinet member for finance were among those who lost their seats.

Responding to the government report, the new Conservative leader of the council Andrew Jefferies, said he was “deeply sorry for the shocking and unacceptable failings of the past”.

“Under my new leadership the council will never repeat these mistakes . . . The report will now shape our recovery as we build back from this,” he added.

Thurrock’s chief executive Dave Smith, said: “This is a turning point for Thurrock council . . . The serious and significant failings that took place here cannot be understated. We will not shy away from the hard truths about the way the council was operating and the changes that need to be made.”