Report finds debt-ridden council lost £100m
BBCA cash-strapped council under pressure to turn around its precarious financial situation lost £100m through its controversial investment strategy, a report has found.
Warrington Council racked up around £1.8bn of debt in the last 15 years from its commercial investment programme and prompted the government to send in ministerial envoys to work with the authority last year.
The envoys said that, with the exception of loans to housing associations, "all remaining investments had failed to generate surplus income".
Warrington Council said the report reflects what the authority "willingly" accepts and it was "firmly committed" to finding new ways to work.
In their report the envoys, who were appointed to "support, challenge, and advise" the council, said the authority was now "showing clear signs of acceptance to challenge and change".
Earlier this year, the council admitted that it had borrowed too much and taken on too much risk, which led to it having one of the highest debt levels among local authorities across England.
Investments in recent years included local schemes such as the Birchwood Park business park and town centre development Time Square.
Other investments went into out-of-area businesses like supermarket buildings in Greater Manchester and solar farms in Yorkshire.
'Defensive culture'
The envoy report into their first six months of involvement with Warrington Council was published earlier.
They said they were "pleased" with the support from councillors and officers, but the scale of the financial challenge and the change required was "significant".
In the report, they acknowledged the work that had seen the council slash its debt from £1.8bn to about £1.4bn.
The envoys said local regeneration was the initial "driving factor" in the council's commercial investment portfolio, but over time those investments became "more complex", carried "much greater risk" and were "clearly driven by the primary purposes of generating income".
In total, the commercial income generated over the last 15 years was £165m, they said.
"All remaining investments have failed to generate surplus income and have overall resulted in a net loss over the period of circa £109m based on the most recent asset valuations," the envoys said.
The envoys also said they found governance structures to be complex and led to a "defensive culture" within the authority.
But they said they were "confident" the council was "now showing clear signs of acceptance to challenge and change".
They added their work gives an "open and transparent picture" of the council's financial position and investment programme "for the first time", and that it would "present a significant challenge for the council, its staff and residents".
"The next six months will be critical for the council," they added.
Local government minister Alison McGovern said she noted the "good progress" in understanding the council's financial position and that the report presented a "sobering picture".
Hans Mundry, the leader of the council, said the authority welcomed the publication of the report.
"The report reflects what we as a council willingly accept - that we need to address the failings with our commercial portfolio, that we need to work quickly to address our financial challenges, and that we need to drive widespread organisational changes to ensure that we can become an efficient, stable, and sustainable, organisation," he said.
He added the council needs to "fundmentally change" how it operates.
"We know that some services will become smaller, our workforce will need to reduce, and there may be facility closures," he said.
"Despite tough decisions ahead, we are firmly committed to finding new ways to work with, involve and empower our communities, to make sure we can collectively support and improve the lives of the people who call Warrington home."
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