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No government checks on council’s borrowing for 15 years

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CROYDON IN CRISIS: Scandals and revelations from other busted boroughs demonstrate a deliberate lack of diligence by the Tory government

No controls: the scandal at Thurrock, as uncovered by the BIJ, highlights the lack of financial controls over local councils

Government failures to keep a check on the runaway borrowing of Croydon and other local authorities is likely to come under additional scrutiny, as further scandals emerge.

Last week’s Panorama looked at the basket case borough of Thurrock, where it has accumulated debts of £1.3billion after the council’s finance director had “unlimited authority to invest in anything he felt fit”.

Mostly, this involved shovelling public money towards a series of investment schemes brokered by dodgy businessman Liam Kavanagh, who is reckoned to have skimmed off at least £130million which he spent on flash cars, a country estate, private jet and luxury yacht.

The BBC programme was based on three years’ worth of digging by Gareth Davies, the former Croydon Advertiser reporter now editor of the Bureau of Investigative Journalism.

The programme highlighted the absence of any proper, external scrutiny from Whitehall, and drew comparisons with Croydon (where the accumulated debt is £1.6billion) and other failing councils.

These include Woking, which has a revenue budget of £16million yet has eye-watering debts of £1.8billion, mostly accrued through borrowing from the Government’s Public Works Loan Board – which failed to carry out any checks on the Surrey council’s loans for 15 years.

This absence of any due diligence or scrutiny from the local government lenders was revealed at a conference last month by Brendan Arnold, who took over as Woking’s interim finance director in March, just weeks before the authority became the sixth council to issue a Section 114 notice since 2020.

Minimalising: Michael Gove is trying to pretend there’s only a few councils in crisis

Arnold said delays in getting audits signed off had contributed to Woking’s debt getting so large. Croydon currently has three sets of annual accounts that have not been passed by its auditors.

“Woking has not had an opinion from its external auditor on its financial accounts since 2018,” according to Arnold.

“This is a long time ago, and I would expect that had that been in place, perhaps the size and value of the Section 114 we’ve seen in Woking would have been significantly smaller,” he said.

Arnold said that Woking’s borrowing from the PWLB had begun in 2007-2008, and began to accelerate in 2016. “It wasn’t until 2022 that anyone from the Public Works Loan Board phoned up to enquire what was going on in Woking.”

Michael Gove, the Secretary of State for Levelling Up, Housing and Communities, meanwhile continues to try to claim that the cases of Thurrock, Woking, Croydon and others are somehow isolated instances and nothing to do with 13 years of Tory Government deliberate under-funding all local councils.

“Big” Eric Pickles, one of Gove’s cabinet predecessors, started the rot with his Localism Act which removed the District Auditor – and essential safety net for struggling councils – as well as other “reforms”.

It is becoming increasingly clear that it is the DLUHC, and Gove himself, who have been at fault for the wretched state many councils, including Conservative-run authorities, have found themselves in.

Gove has recently increased the powers of the improvement panel he appointed to oversee Croydon’s travails, so that it now “instructs” how the council spends its money, rather than simple “guides”, thus rendering the borough’s £82,000 per year Mayor Jason Perry powerless. But not before Gove allowed Perry to hike Council Tax by 15per cent, passing on yet more pain to hard-pressed residents.

Such Council Tax increases might have been avoidable if Gove and his department had been doing their jobs properly. A panel of experts brought together by the DLUHC to determine whether local authorities’ governance and accountability framework was “fit for purpose” has failed to meet since November 2021. With Gove’s latest quango, Oflog, about to get to work, the “local authority accountability framework review panel” is being quietly wound-up.

It has also emerged that Gove’s department is handing back £1.9billion to the Treasury that was originally meant to tackle England’s housing crisis, after struggling to find projects to spend it on.

The Inside Housing website estimates that by not allocating the cash, DLUHC has wasted an opportunity to build 5,000 homes in the middle of a housing crisis.


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