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Region loans £15m to bankrupt Surrey council

A total of £15 million of West Midlands public money has been loaned to a bankrupt council in Surrey prompting criticisms of “reckless” lending.

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The Lib Dem run Woking Borough Council announced it could no longer balance its books on June 7, issuing a Section 114 notice – a warning which restricts all new spending.

But the council had alerted the chaos to come in February when it issued a statement it was in “Section 114 territory” due to £1.2 billion of debt mostly attributed to vast borrowing for investments in sky scrapers and hotels by the former Conservative led administration.

Despite this, other local authorities have since loaned Woking BC £40 million, most coming from the West Midlands Combined Authority (WMCA).

A recent investigation by the Local Government Chronicle (LGC) revealed the figures which show three loans of £5 million each – two paid on April 25 and one on July 19 2023, due to be paid back by March 2024.

This has prompted a backlash from some of the region’s politicians, although a WMCA spokesperson has stated the loans are “standard practice” and is confident they will be repaid.

Birmingham City Councillor Jamie Tenant criticised the move at a time when the region is facing transport funding pressures with tram building projects going over budget and producing less than expected revenue.

He said: “It’s worrying that the Mayoral Authority have lent money to a council bankrupted by the Tories while locally Andy Street has a black hole in our transport budget.

“This is a risky and reckless use of public money by Andy Street.”

Acting leader of Wolverhampton Council and cabinet member for inclusive city economy Coun Stephen Simkins found it “insulting” to hear about the loans from a reporter and is “angry” that loans to a bankrupt council had taken place without asking for the opinion of councillors.

He said: “We could use that [money] one hundred times over just to resolve some of the deprivation we’ve got within our city.

“Surely it’s the duty of national government to adequately fund local government.

“That’s where the crux of the matter lies, so minister of state Michael Gove should show some responsibility and explain to us as leaders, and as councillors within West Midlands Combined Authority, why he’s allowed this to take place.”

Wolverhampton Conservative Group leader Wendy Thompson was also frustrated by the news which came as a surprise to her, something she said is common because her party “isn’t allowed” a spot on the WMCA by the Labour-led council.

This view was challenged by Coun Simkins who said representation on the WMCA is determined by how well parties do in local elections.

Coun Thompson said: “Woking [BC] is one of a number of councils that are having difficulty; I don’t know the circumstances.

“What I do know is I live in the West Midlands and I would have thought that £15 million, if it is surplus, should be spent within the West Midlands.

“Or it should be that we are reducing the precept to the rate payers, the taxpayers in the West Midlands combined area.

“I do know things should be very transparent, particularly in finance matters, and certainly the Conservatives in Wolverhampton would like to be kept fully informed of what is taking place and the decisions that are made.”

Walsall Council leader, Aftab Nawaz said: “I’m pretty shocked.

“There are lots of areas of Walsall in need of support and if the Combined Authority’s got £15 million to loan, it would be better spent on the constituent parts of the Combined Authority that actually require that money to help our most vulnerable people.

“The deprivation in Walsall is hugely greater than it is in Surrey.

“There’s many people that I talk to, that I represent as a local councillor, not just the leader of the Labour group, that could do with a helping hand and £15 million would go very far, particularly in our community in Walsall.”

A WMCA spokesperson said: “The West Midlands Combined Authority has three short-term loan agreements with Woking Borough Council totalling £15 million.

“These loans were agreed before the council issued a Section 114 notice, and are in line with our Treasury Management Strategy and standard practice in the sector, given inter authority investment is transactionally safer and more efficient.

“It should also be noted that we are not aware of any local authority defaulting on a trade of this kind.

“We are in contact with Woking Borough Council and remain confident that the loans will be repaid as they mature throughout 2024.”