Thurrock becomes latest council to declare effective bankruptcy

Disastrous investments in risky commercial projects have left Tory-run authority with a £500m deficit

Thurrock council has become the latest local authority to formally declare effective bankruptcy, as it grapples with a £500m deficit caused by a series of disastrous investments in risky commercial projects.

The Conservative-run council in Essex admitted three weeks ago that it faces big cuts and job losses after revealing it had lost £275m on investments it made in solar energy and other businesses, and has set aside a further £130m this year to pay back investment debts.

It is to approach the government for a financial bailout, saying it will not be able to meet its legal duty to balance the books over the next few months. The council will meet in the new year to discuss how it will manage its deficit.

Thurrock becomes the fourth council to issue a section 114 “bankruptcy” notice in recent years, after Northamptonshire county council, Croydon, and Slough. Several other authorities have warned they are also struggling to balance the books.

A section 114 notice, seen as the last resort for financially struggling councils, requires the authority to stop all but the essential spending needed to provide vital services, pay staff and meet its legal duties, while it works out a way of stabilising its finances.

Mark Coxshall, the leader of Thurrock council, said: “Residents and staff should feel safe knowing that our street lights are still shining, our roads are continuing to be gritted during bad weather, and our most vulnerable friends and family are being looked after.

“They can also be reassured that under my leadership we have started to grip our situation and have a clear sight of what needs to be done. The section 114 notice is a clear indication we are on the road to recovery.

“I have already made it clear as the incoming leader that I have been shocked by the position the council is in and we do not take lightly the seriousness of the step we are being asked to take today.”

However, the scale of the crisis in Thurrock has stunned the wider local government world, after revelations by the Bureau of Investigative Journalism showed that senior council officials had ignored warnings from financial experts over the “unprecedented risks” it was taking with public money.

Thurrock had become one of the most indebted of all English local authorities in recent years after borrowing £1.5bn cheaply from the Treasury and fellow local authorities – 10 times its annual spending on local services – to enable a string of investments in solar energy and other businesses.

It has been run on a day-to-day basis by government-appointed commissioners since September after ministers first became alarmed at the exceptional levels of debt and risk incurred by the council.

John Kent, the leader of Thurrock’s Labour opposition, said: “The formal issuing of Thurrock council’s section 114 notice – the local government equivalent of bankruptcy – was, sadly, inevitable. For years, we have been warning about the possible consequences of the Conservatives’ disastrous financial mismanagement, but time and again we were laughed at, fobbed off and misled.

“The suggestion that a section 114 notice is somehow good news – a ‘clear indication that we are on the road to recovery’ or merely a procedural step – is frankly insulting to the many council staff who will be fearing for their jobs, to vulnerable people fearing for the services they rely on and to all of us who will be paying the price for the Conservatives’ disastrous financial mismanagement of Thurrock council for decades to come.”


Patrick Butler Social policy editor

The GuardianTramp

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