Borough council needs unprecedented level of support from government as debts reach £2.1bn, says minister

The Minister of State for Local Government and English Devolution, Jim McMahon, has warned that Woking Borough Council is in an “extreme position” that will require unprecedented support from government to resolve, after a report from the authority’s Commissioners revealed the council has an outstanding debt of £2.1bn.

McMahon’s comments came in his formal response to the Commissioner’s third report, which was sent to the Secretary of State for Housing, Communities and Local Government on 29 May 2024.

The Commissioners, who were appointed just before the council issued a section 114 notice in June 2023, concluded: “The extremely serious financial position is now understood. The financial challenges are unprecedented in local government, illustrated graphically by an outstanding debt of £2.1bn for a local authority district council with a population of circa 104,000 and an overall core spending power of £16.9m.”

They added that “sound governance has been absent for some considerable time, with the local authority failing to fulfil its fiduciary duty to deliver Best Value services to its citizens”.

However, the third report acknowledged that there was an increasing awareness of the changes that must be made in governance and commercial activity and these were progressing.

“[A]dvances have been made in establishing robust and resilient governance arrangements but what remains to be done is a process whereby sound decision making is embedded in member/officer ways of working and risk management is embodied in all parts of the Council’s operation,” the Commissioners said.

The third report also said culturally, behaviours and ways of working were being radically overhauled as well as clear accountability for performance.

The Commissioners acknowledged that progress had been, and was being made, in delivering fundamental change in the council’s operation. “But concerns remain in terms of the capacity to fulfil these improvements in a timely fashion. Moving the organisation through transformational change is problematic given the declining size of the workforce, when capacity to achieve the necessary outcomes is critical. The commitment of the Council leadership and workforce is clear but the sense of urgency, now more apparent, must be increased if the pace of change is to match the timescale set by the Improvement and Recovery Plan.”

In his response to the Commissioners, the Minister of State said: “As you are aware, historic commercial mismanagement and major governance failures led to Woking Borough Council accumulating an extraordinary level of debt, far exceeding usual levels of borrowing for a council of its size. This is an extreme position for a council to be in, and will require unprecedented support from government to resolve. Woking clearly requires a significant programme of change to ensure it is operating to the required standard…..

“I am pleased that the Council remains committed to working with you to deliver fundamental change through its Improvement and Recovery Plan. Woking’s strong relationships between the Commissioner Team, the Council and the Ministry is a good example of how we can work in partnership to support a shared focus on recovery and reform.”

McMahon warned that there were “lots of obstacles ahead”, but said he was confident that the Commissioners and the council had a good understanding of the challenge. "Woking’s financial challenges require a measured approach to achieving value for money for residents, and I am satisfied with the progress to date in delivering a robust plan of improvement.”

The Minister added that he would be reflecting on external auditor Grant Thornton’s recent public interest report on Woking’s historic investment practices.

Two large investments in the council's portfolio – Victoria Place shopping mall and a housing regeneration project in Sheerwater – account for the majority of its debt.

The Grant Thornton report found that Woking failed to secure value for money in the years leading up to its section 114 notice and highlighted a series of "potentially unlawful" decisions.

The public interest report found, amongst other things, that the authority's former monitoring officer failed to challenge the former chief executive officer and former s151 officer over decisions to borrow large sums of money with no credible plan for repayment.

It also suggested that the local authority's legal services team were under-resourced, given the scale of the council's investment activities.

On the public interest report, the Minister of State said: “I will also be reflecting on this report to consider what lessons it can provide on the drivers of council failure, and I am urging all councils to consider whether they could be doing more to ensure they are delivering the sound decision-making that residents deserve, including considering the characteristics of a well-functioning authority as set out in Best Value guidance.

“It is imperative that all councils are fit, legal and decent. We are working to fix the foundations of local government; to ensure that government is protecting against failure and working in genuine partnership to deliver better outcomes.”

Commenting on the Minister’s response and the Commissioners' third report, Woking said it remained committed to working with the Commissioners to deliver fundamental change through its Improvement and Recovery Plan.

Cllr Ann-Marie Barker, Leader of Woking, said: “We welcome publication of the Commissioners’ third report to Ministers and the accompanying Ministerial response.

“It is helpful that there is a recognition of the capacity challenges we face in putting the council on a stable footing and, at the same time, working through systematically the plethora of legacy issues which have culminated in the significant debt faced by Woking….

“Through the Improvement and Recovery Plan, we are taking systematic and decisive action to strengthen governance, improve financial management, and rebuild trust with our residents.”

At an extraordinary council meeting this week (20 November), the council agreed to issue a formal apology and said it accepted the findings of Grant Thornton’s public interest report.

It added that with the support of its Commissioners, it would now check whether there were any additions it needs to make to its existing Improvement and Recovery Plan to take account of the public interest report.

Following the meeting, Cllr Barker said: “Publication of the Grant Thornton public interest report confirmed what many residents already felt - that their council has let them down. Years of mismanagement, poor governance and a disregard for the risks have left our community burdened with unsustainable debt.

“These systemic failings betrayed the trust residents placed in the council and have had far-reaching consequences.

“On behalf of Woking Borough Council I want to apologise for these unacceptable failings of the past.”

She added that, as Leader, she was committed to ensuring that such failures were never repeated. “Accepting the report’s recommendations in full is a critical step. Embedding them into our ongoing Improvement and Recovery Plan will strengthen governance, improve financial management, and rebuild public confidence in the council.”

Sir Tony Redmond, Lead Commissioner, said: “Commissioners strongly support the independent auditor’s recommendations and are currently liaising with relevant professional bodies and enforcement agencies where appropriate.

“However, this is not solely about individual failings. Not only are there crucial lessons for Woking Borough Council but, more broadly, the public interest report highlights a number of issues that will need to be considered by Government.”

Philip Hoult