Posted: 21.01.20 at 19:20 by Steve Shaw - Local Democracy Reporter
A SENIOR Thurrock councillor has stood by the council’s financial position, claiming it does not pose a “significant risk” to residents, despite government figures revealing Thurrock has the highest level of debt from short-term borrowing in the whole country.
The council’s latest financial reports show that Thurrock Council has run up a debt of £1.26 billion, with almost £1 billion borrowed in just the past five years.
The deputy leader of the council Councillor Shane Hebb has said it is all part of an investment strategy which is helping to fund local services and freeze council tax (despite the fact that last week the cabinet approved a council tax increase of more than three per cent!). He has also claimed the debt does not pose a significant risk to either the council or residents.
Just over £1 billion of the debt is tied up in short term borrowing and Government figures show that it is not only the highest level of borrowing of this kind in all of the UK but it is so significant that it makes up 11 per cent of the total short term borrowing by councils in the country.
The authority with the second highest amount of borrowing is Lancashire with £622,061,000, followed by Plymouth with 377,000,000
Ludovica Rogers, co-director of Research for Action said: “The short-term borrowing looks the most worrying at the moment.
“Local government is in a funding crisis at the moment and they are trying to scramble and find other funding streams which are sustainable but there is limited long-term understanding of what will happen in the future.
“The probability of councils going bankrupt is pretty high so while they may claim borrowing of this kind is positive, it is likely the only way they are finding funds in current situation.
“Councils are being forced to financialise the way their funding operates and in that sense more and more are borrowing to invest and create margins they can profit from.”
She said she is not in a position to comment on how big of a risk the council is taking with this level of debt but called the borrowing “really worrying” and said it may lead to the council having to take out a long-term loan to pay back lenders.
Thurrock Council’s deputy leader and councillor in charge of finance, Shane Hebb has been more upbeat about the situation, claiming it is all part of the council’s investment strategy which was approved in October 2017.
“In short, that strategy leads to money being borrowed and invested with the returns enabling services to be safe for funding until at least 2023, services being invested in further than statutorily required in our key priority areas, such as environment and anti-social behaviour; and enables general Council Tax levels not being increased by the maximum over the last four years, as well as enabling a tax freeze last year – something that 95 per cent of other councils in the UK have not been able to do.
“Three quarters of our council’s prudential borrowing supports that innovative investment strategy. It has allowed us to put £13million into our environment team and £1million of extra police on our streets.
“This investment strategy, along with in house reforms, have also led to us reducing a £40million deficit of how we afford to pay for services, to a £15million surplus in under four years. Our rainy-day fund – the so-called General Fund Reserves – have also been increased by nearly 40 per cent to £11million. Furthermore two external auditors have assessed the strategy and issued Value for Money statements, underpinning the integrity of the strategy.
“All borrowing for investments will be repaid by the council and reduce debt over the coming years.
“Our debt is well managed, within limits agreed by councillors at Full Council in February 2019, with political leadership being engaged through the year and when specific and significant activity is completed. The borrowing does not present a significant risk to Thurrock Council or the borough’s residents.”
In May last year, a BBC investigation also warned that Thurrock was among eight councils that could run out of money if they keep up their current level of spending. The council acknowledged it had spent 58 per cent of its reserves but insisted this was planned and it is not running out of cash.
See our report on the recent 3.49 per cent rise in council tax and the borrowing position via the red button below.