Six councils across Essex have amassed debts of more than £200 million with experts predicting an “extreme and long-lasting” effect on local services. It comes as research has found authorities in the UK are £122 billion in debt.
UK councils owe a combined £97.8 billion to lenders, according to BBC analysis of data from the Department for Levelling Up, Housing and Communities. That’s equivalent to £1,455 per resident, as of September 2023.
Across Essex‘s 14 local authorities, excluding Essex County Council, there has been more than £3m worth of debt amassed. Thurrock Council had the highest total (£1,415,889,000) whereas Chelmsford City Council had the lowest level of debt (£1,135,000).
The council’s with the most debt per person were Harlow (£2,269), Brentwood (£2,815) and Thurrock (£8,049). Taking into account all types of local authorities however, such as police and crime commissioners and combined authorities, the debt pile rises to £122.2 billion.
Councillor David Kendall, Brentwood Borough Council’s Chair of the Finance, Assets, Investments & Recovery Committee, said: “What this data doesn’t give is any context or commentary around our position. To reassure our residents – the Council’s medium term financial strategy is robust and our governance process is robust.
“The value of our assets far outweighs our overall debt, and the returns we get on these assets provides additional income that we invest back into the services we provide. We also have mitigations in place to reduce the negative impact of unforeseen economic events.”
A Harlow Council spokesperson said: “The reason this debt figure is higher than other councils in Essex is because we own our housing stock of over 9,000 council homes. Not all councils own housing stock or directly provide social housing like we do, and we have one of the biggest council housing stocks in Essex.
“In 2012 we had to borrow £208m to pay back the government due to national changes to council housing finance. As a result, the council took on that debt and this is included in the data. If this figure is removed we have very little debt when compared to other councils. The council maintains a strong financial position overall, and this housing debt does not impact on our position.”
Thurrock Council did not provide a statement for publication.
Birmingham has higher levels of debt than any local authority in the country. The council owes £2.9 billion according to the BBC’s data. That’s followed by Leeds at £2.2 billion, Woking at £1.9 billion, Warrington at £1.7 billion and the City of Edinburgh at £1.6 billion. However, when you take population into account it’s Woking that is the worst off.
The council’s debt there works out as the equivalent of £18,756 per person. That’s the highest ratio in the country. Spelthorne has the next highest ratio with their £1.1 billion debt being the equivalent of £10,415 per person.
Warrington’s debt works out as the equivalent of £8,236 per person, Thurrock’s is £8,049 per person, and Runnymede’s is £7,270 per person. You can see how your local authority compares by using our interactive map:
Dame Meg Hillier, chair of the Public Accounts Committee and MP for Hackney South and Shoreditch said: “Some of the outlier examples of high local authority debt are staggering, and the impact on services for residents is liable to be extreme and long-lasting. There are of course many drivers of the present situation, not least the day-to-day pressures experienced by local authorities with squeezed spending power and ageing populations living through difficult economic times.
“Small district councils have very little room for manoeuvre when finances are squeezed, relying on charges (such as parking fees) for a lot of their income. Unitary authorities are facing the demographic pressures on social services, social care and special educational needs. But beyond these day-to-day pressures, the PAC warned in 2020 that some councils had not only pursued strategies of commercial investment exposing them to high levels of risk, but normalised behaviour and optimistically believed that there was little downside to commercial activity.
“Add to this the delay in public sector audits and many councillors and taxpayers were blind to the risk. Government action to address this behaviour was too little, too late at the time, and though it agreed with our recommendation to ensure that future interventions are more timely and effective, our latest scrutiny in this area indicates that there is much more work to do to ensure the future stability of local government finance.
“In particular, the impoverished state of the local financial audit landscape has left the vast majority of English local authorities without signed-off accounts. There is a potential as a result for financial disasters to grow undetected at other local authorities in the future.”
For the past decade, councils have been encouraged to make commercial investments to provide an alternative source of income aside from the usual mix of grants, council tax, rates and fees and charges. Town halls across the country have bought hundreds of commercial assets from shopping centres to office parks, cinemas, energy companies and housing developments.
But council leaders, who have seen government grant funding reduce by 40% in real terms since 2010, have had to borrow increasing amounts to pay for those investments. This has mainly been through an arm of the Treasury known as the Public Works Loan Board.
In recent years, various commentators have warned that the debts held by councils – which must balance their budgets every year – are unsustainable. In 2020, chair of the Public Accounts Committee Dame Meg Hillier said the Government was “blind to the extreme risks” of council borrowing levels.
Since then, six more councils have had to issue section 114 notices declaring themselves effectively bankrupt: Croydon, Slough, Thurrock, Birmingham, Woking and Nottingham. In the case of Croydon, Slough, Thurrock, Woking and Nottingham – those effective bankruptcies could be directly linked to failed investments and spiralling debts. Thurrock’s £469m funding black hole, for example, was caused by a series of failed investments in solar farms.