Councils are for emptying bins – ban them from playing monopoly with our money
These are the damning descriptions of council officials in charge of investing the hard-earned money of thousands of taxpayers in Spelthorne.
A review commissioned by the Government uncovered a 'prevailing sense of insularity' in the Surrey borough, where the mountain of debt stands at more than £10,000 per resident.
To put it simply, the council is a gargantuan failure.
Its shambles – which have now sparked government intervention – are symbolic of problems across the UK. Too often, egotistical council officials believing they are the next Elon Musk attempt to flex their feeble muscles in the property market only to fall flat on their faces.
With no risk to their personal finances, officials can blow holes in public funds with no accountability while residents are punished with increased tax bills and reduced services.
It begs the question as to whether local authorities should possess the 'general competence' powers bestowed upon them in 2012. They give councils the remit to do anything an individual can do, paving the way for a scourge of risky investments.
Many local leaders will say they've had little space to come up with creative money-making ventures due to continual funding cuts from central government. Yet the gung-ho decision-making is incredibly damaging.
The prime example is Thurrock, where the council ignored what Essex County Council called 'multiple red flags' and poured £665m of taxpayers' money into alleged sham solar farm investments. A Serious Fraud Office investigation into the deals is ongoing.
Thurrock was left with debts of £1.5bn at the time of its bankruptcy, and saddled residents with a 23pc tax rate increase in the past three years.
This is what happens when councils – which people simply want to empty bins, repair roads and clean the streets – are given free reign to act like big shot financiers. It very rarely works.
In 2020, the Commons Public Accounts Committee found risky council investments in commercial property had ballooned 14-fold in just three years. In total, 91pc of the £6.6bn spend was financed through borrowing.
The Tory government was accused of being blind to the shenanigans occurring on its 'sleepy watch'.
Councils took on large debts to invest in new sources of income, such as offices and shopping centres. The latter was a mind-boggling trend considering the death of the high street and rise of internet shopping.
The pandemic hit, interest rates soared, commercial property values slumped and councils were left scrambling to pick up the pieces.
Spelthorne borrowed £1.1bn against annual core spending power of £11m. That's like a mortgage-holder somehow managing to borrow 100 times their income. An inspection report released in March said 'inherent risks are beginning to materialise and could accelerate rapidly'.
Such recklessness wouldn't happen in the real world, yet councils can play monopoly with public money.
And it's not just risky investments in existing property. Councils also believe they can become developers.
Blowing millions on building a leisure complex which then fails to attract commercial tenants or visitors due to expensive parking is all too common. The usual spiel of 'we'll regenerate this area into a thriving community hub' generally results in a very costly white elephant.
Look at Brighton's i360, Woking's cluster of skyscrapers (a failed Singapore) and Crewe's £11m car park used by 80 cars a day. The list is endless.
Last week, we analysed West Norfolk Council's embarrassing failure to sell a single flat at its new seafront complex in Hunstanton.
As well as reportedly going £2m over its £7m budget, the council enforced a ban on selling any of its 32 flats to second home owners in an effort to prioritise locals.
But 19 months after hitting the market, the council reversed the second homes restriction after facing the impending threat of its own empty homes premium triggering a self-inflicted £100,000 tax bill. You couldn't make it up.
Local government has well and truly become the byword for incompetence.
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