Posted: 24.05.20 at 19:18 by The Editor
THURROCK Council has issued an unattributed response in the wake of articles published by the Financial Times and Bureau of Investigative Journalism questioning the way it has borrowed more than a billion pounds to fund an investment strategy.
The articles reflected concerns about magnitude of the borrowing, and say it was largely the policy of one senior officer who acted without proper scrutiny, accountability and effectively without the consent of democratically elected councillors.
Thurrock Nub News, which first and exclusively broke the story of the £1 billion borrowing in January, reported on the major new investigation on Friday.
However, without putting the name of any officer or councillor up as accountable for the rebuttal – Thurrock Council has said the figure of £1 billion is ‘inaccurate’, even though - as Thurrock Nub News reported in January - it is the figure stated in it own reports to cabinet.
The council says it is not in debt to the tune of £1 billion – its ‘hard debt’ is actually around £280 million. What the council appears to be saying is that if it sold all its investments, it would realise around £750 million to offset against the billion.
Of course, that assumes the value of its investments holds up – something that experts have questioned as there has been a significant fall in the value of returns on ‘green energy’ investments – which the council has spent heavily on.
The council’s rebuttal also effectively says Thurrock Council’s Labour leader , Cllr John Kent, has not been honest when speaking to reporters about a lack of consultation and information. It says scrutiny of the approved investment strategy has been “integral to further decision-making – there have been over 30 meetings held to which all political group leaders have been invited since 2016.”
Thurrock Nub News has asked opposition group leaders since 2016 if that is true. Three of them have since become Conservative Party members - despite at times being hyper critical of the Tory-controlled council's financial strategies. We await a response.
And with specific reference to the time when Cllr Kent was council leader, the rebuttal says: “The council’s first investment into solar products (the Swindon deal) was completed under delegated officer authority only after officers engaged with all three political group leaders before the May 2016 annual general meeting.”
The FT report, echoed in reports by the Bureau, Thurrock Nub News and other media outlets, says the spending took place without consultation about specific investments and the magnitude of the spending. Cllr Kent has said he had limited, brief and non specific discussion about the potential policy but is adamant the scale of the operation was ramped up without approval or consultation.
There are a number of significant allegations in the FT reports that Mr Clark acted without going to councillors. The council says this is not so, but according to the council’s constitution Mr Clark, as director of finance, has the authority to arrange borrowing “in such form as he deems appropriate” as long as it is within agreed limits, which are voted on by councillors when the coming year’s budget is set each February.
Any “material change” to the strategy during the year requires a new vote at a full council meeting. Yet, in 2018-19, Thurrock’s borrowing exceeded the agreed limit by £103 million without such a vote taking place. The council told The Bureau the rules allowed the limit to be amended “retrospectively”. So it admitted Mr Clark acted without permission - then asked for it afterwards!
The council, in its rebuttal, makes no mention of many other aspects in the report, including the money that Liam Kavanagh, the founder of its Rockfire Capital and its chief executive, has received from the business while his company pulled in many hundreds millions of pounds of public money – £7.7m in dividends since 2015.
Mr Kavanagh has managed much of Thurrock Council’s spending – and in return has sponsored the council's civic awards!
Thurrock Nub News awaits a public face to respond to the many issues raised in the FT and Bureau reports. We believe it is unacceptable that faceless and unnamed bureaucrats can seemingly do as they wish without reference to the democratic process and hiding beghind a wall of secrecy and anonymity.
A call has been made for a special meeting of the council, at which questions can be asked and people held to account. It awaits to be seen if that meeting ever happens.
Meanwhile, we are happy to run the council’s statement, issued today, in full.
Thurrock Council has responded to clarify facts regarding the council’s investment strategy, following a Financial Times article.
A spokesman for Thurrock Council said:
To raise funds to invest in, and protect public services, councils have been entrepreneurial by making commercial market investments for a number of years - to date, this has earned Thurrock Council circa £32m extra income each year. All of this income goes towards enhancing current services for residents and creating new services altogether.
Under the Council’s constitution, and in line with other local authorities’ constitutions across the country, this is a delegated operational authority of the section 151 officer within parameters set annually by Council.
A major debt restructuring in August 2010 was the point where the council moved from long term debt to short term with the aim of securing lower borrowing costs. This has been reviewed and reported on annually and funding included within the Medium Term Financial Strategy (MTFS) to move back to longer term if deemed prudent to do so.
Thurrock Council’s actual investment activity changed in November 2014 where it moved from money market funds to a £20m investment in the Churches, Charities and Local Authorities (CCLA) Property Fund under delegated officer authority. There were two further CCLA investments in 2015 bringing the total with CCLA to £50m.
In May 2016, the council’s first investment into solar products (the Swindon deal) was completed under delegated officer authority only after officers engaged with all three political group leaders before the May 2016 Annual General Meeting (AGM). Subsequent scaling up of investment activity only took place after Full Council voted unanimously to approve the proposed new investment strategy in October 2017.
Scrutiny of the approved investment strategy has been integral to further decision-making – there have been over 30 meetings held to which all political group leaders have been invited since 2016. The investment strategy has featured in reports at Corporate Overview & Scrutiny Committee and Cabinet. The strategy financial parameters are reviewed at least annually at Full Council including February budget meetings in 2018, 2019 and 2020.
Thurrock Council can confirm that these investments continue to provide significant income to the authority, in spite of the covid-19 economic backdrop, there is no indication of a downturn in pay out at this time with all demonstrating continued strong performance.
All these investments are consistent with the agreed strategic approach in that the council does not invest in commercial property investments. The investments are ethical i.e. renewable energy, and improve the national carbon footprint.
The council has diversified investments outside of solar, it continues to hold investments with the CCLA, as well as in wind-generation options, all however within agreed borrowing parameters as set and reviewed by Full Council. Due diligence, research and seeking expert advice is completed on every investment transaction.
Borrowing is short term, cash in nature, and is always repaid on time – the council’s hard debt is circa £280m – not over £1bn as has been inaccurately stated – and has been at that level since 2012. The council borrows from other local authorities because they offer more competitive rates and provide better value.
These loans also generate income for the lending authorities so the council’s approach also supports local government more generally and the UK economy.
In terms of external scrutiny of the council’s investment strategy, two external formal audit processes have resulted in unmodified opinions of the council’s approach. The audits recognised the council’s accounts and financial health with positive value for money opinions. It is worth noting that the short-term borrowing does not add to the national debt, nor lock the authority into undesirable terms such as Private Finance Initiatives (PFI) or further Lender Option Borrower Option (LOBO) arrangements.
It is a safe way of generating reliable income with minimal risk.
By taking this approach, the council has been able to take a more methodical and pragmatic approach to reforming services in a way that services are improved but net costs reduced. The opposite of a short and damaging approach of annual cuts. It has always been the council’s intention to reduce investments over time as the impact of these reviews take hold.