Ministers have agreed to give bankrupt Woking council an “unprecedented” £500m taxpayer bailout under government plans to merge a dozen local authorities in Surrey. The communities secretary, Steve Reed, said the government would repay a significant chunk of the debt owed by the former Tory-run local authority, in one of the biggest financial failures in local government history.
The bailout helps to smooth over the creation of two new councils in Surrey, effectively splitting the county in two. The plan will result in the merger of 11 district and borough authorities with the county council to create two new ‘mega council’ unitary authorities. Labour is pushing ahead with the most far-reaching reorganisation of local government in England for decades, as part of a “devolution revolution” to find efficiency savings and spearhead economic growth.
Woking declared itself effectively bankrupt two years ago after its former Conservative leadership ploughed vast sums of borrowed money into skyscrapers, a luxury hotel and other risky investments that turned sour. The local authority, now controlled by the Liberal Democrats, racked up debts of more than £2bn. The Guardian revealed earlier this year that ministers had been asked to write off £1bn in debt to enable a merger between Surrey’s 12 local authorities.
Reed signalled that Labour had been left with little choice but to provide a “significant and unprecedented” package of taxpayer support. In a letter to local leaders, he said: “This is a significant and unprecedented commitment given historic capital practices at the council.” He suggested further support could be forthcoming if Woking council is unable to raise sufficient funds from asset disposals and normal grant funding.
Surrey was selected as part of the first wave of Labour’s shake-up, in part because ministers wanted to tackle the financial situation in Woking. Woking will be merged with five other boroughs to become part of a new West Surrey council, while East Surrey will be created from five other districts. Ann-Marie Barker, the Lib Dem leader of Woking council, said the bailout was “extremely positive news” and would help the new unitary authority have the best chance of success.
