Concerns over Warrington’s debt trigger best value inspection

Michael Gove has instructed the local government ombudsman to visit Warrington Council to try and “get to the bottom” of the authority’s “extremely high debt”.

The Secretary of State for Leveling Up, Housing and Communities asked ombudsman Paul Najsarek to give his findings by the end of August, once he has assessed the council’s books against local government ‘best value’ rules.

The moves come along with publication of a 36-page report commissioned by government and carried out last year by the Chartered Institute of Public Finance and Accountancy. The report has only just been published.

Among the recommendations is the creation of an independent panel to help provide clarity to Warrington’s “uniquely complex” investment portfolio and “give specialised support to the portfolio’s forward development.”

Writing on Gove’s behalf, Max Soule, deputy director of local government stewardship, described concerns over the “authority’s extremely high levels of debt and borrowing.” In a letter sent this week to Steven Broomhead, chief executive of Warrington, Soule wrote: “As of 31 March 2023 Warrington Borough Council was c.£1.80bn in debt, a figure that is 5.5 times its total service expenditure. Warrington has the second highest borrowing relative to its size for a unitary council in England.”

In a statement responding to the government report and impending inspection, Warrington Council said: “The inspection will undoubtedly have our full cooperation, and we will work positively, openly and at pace with the inspector.

“Equally, we welcome the CIPFA review report being made public, following their review in February 2023. We have supported the report being made public since receiving the draft report in September 2023.

“While DLUHC recognises that we have taken steps to address areas for improvement, we will continue to identify any learning and further improvements that can be made as part of this inspection process.

“Finally, we would like to reassure residents and businesses that this review will not impact the valuable services that you depend upon. We will continue to make sure that our day-to-day services remain at the standard you expect and deserve.”

The largest element of the council’s debt stack relates to loans to housing associations. There are also commercial property loans and investments relating to solar farms and energy companies, The Hut Group, supermarkets, developer Salboy, Birchwood Park, elements of the New Bailey project by English Cities Fund in Salford, Warrington town centre regeneration and more.

‘Invest to save’ commitments in Warrington’s portfolio. Credit: CIPFA report

Much of this is managed under the ‘invest to save’ capital programme aimed at deriving revenue from making loans, which is itself entirely funded from borrowing. Increased debt servicing due to interest rates rises since 2022 is funded through additional borrowing, according to the report.

Last year the council agreed to reduce borrowing but did not set a target for the reduction, according to the government.

CIPFA said it couldn’t “get to the bottom of all the issues in play in such a complex and challenging portfolio.” Gove will be hoping the ombudsman returns with a full picture.