Woking Borough Council has effectively declared bankruptcy after admitting that a risky investment spree in hotels and skyscrapers, overseen by its former Conservative administration, has left it facing a deficit of £1.2 billion. The council issued a section 114 notice on Wednesday, acknowledging it cannot meet current expenditure in what is thought to be the biggest financial failure in local government history.
The tiny Home Counties authority in the affluent London commuter belt warned it had failed for the past 15 years to set aside enough money to keep up with payments on a vast debt pile amassed under its former Tory leadership. The debt, racked up to finance commercial assets including a four-star Hilton hotel and sky-high towers, is forecast to hit £2.6 billion. The council has written down the value of its investment portfolio by more than £600 million, reflecting that its property holdings are worth far less than anticipated.
Ann-Marie Barker, the Liberal Democrat leader who took over after the Tories were voted out last year, warned that services could be cut. 'We're going to have to provide the services in a very different way in future. Inevitably it's not going to be such a good service as it was in the past,' she said. The council was put into special measures by ministers last month, and a team of expert commissioners will oversee the process.
Most of the council's spending was financed by the Public Works Loan Board, with £1.3 billion in borrowing that Woking may now struggle to repay. Meg Hillier, Labour chair of the Commons public accounts committee, said the government needed 'stronger oversight' of council investments, adding: 'We have seen too many councils borrow multiple times their annual budget at huge risk and real cost to local council taxpayers.'
Kevin Davis, the Conservative group leader on Woking council, apologised to residents but argued the investments were made in good faith to regenerate the town amid cuts to central government funding. He suggested further investigation was needed into whether the former administration had adequate checks and balances, saying: 'It's likely the answer is that, no, it was not robust enough.'
