Woking Borough Council has been placed under government intervention by levelling up secretary Michael Gove.
He has nominated the three participants who carried out an External Assurance Review on the authority, published today, as commissioners: Jim Taylor, Carol Culley OBE and Mervyn Greer. Taylor will serve in the lead capacity. “The need for support and oversight is so pressing that commissioners must be available to commence work immediately,” Gove stated.
The commissioners will have oversight over all functions associated with the financial governance and scrutiny of strategic financial decision making by the authority. They will also have oversight over section 151 duties to make arrangements for the proper administration of the authority’s financial affairs, and all functions associated with the strategic financial management of the authority.
According to Gove, the External Assurance Review made clear the scale of the financial and commercial risks facing Woking, “which are compounded by the authority’s approach to financial and debt management, corporate governance, including scrutiny of strategic financial decision making, commercial projects and property management”.
Gove also noted the failure of the authority to provide assurance to ministers and the Department for Levelling Up, Housing and Communities (DLUHC) “on the adequacy of the actions that it is taking to address the issues or provide assurance of its capacity to take the necessary action, considering the scale and pace of the response required”.
In an explanatory memorandum published by DLUHC, Woking was described as “the most indebted local authority relative to size in the UK”. As of December 2022, it had £1.9bn in borrowing compared to a core spending power of £14m, DLUHC said. “The authority’s situation is severe, and the improvement and recovery journey is likely to take a number of years,” it added.
The intervention package is formed of actions the authority is directed to take, and powers over authority functions to be enacted by the team of three commissioners.
The directions will be in place for five years – a longer duration than in previous interventions – reflecting what Gove called “the severity of the challenge at Woking, in comparison to other intervention areas”.
The directions require Woking to prepare and agree an Improvement and Recovery Plan to the satisfaction of the commissioners within six months, drawing upon the contents and recommendations of the External Assurance Review.
This should include an action plan to achieve financial sustainability and to identify and close any short and long-term budget gaps across the period of its medium-term financial strategy (MTFS), including a robust multi-year savings plan.
An action plan to ensure the authority’s capital, investment and treasury management strategies are sustainable and affordable must also be produced, alongside a strict debt reduction plan, demonstrating how overall capital financing requirement and external borrowing will be reduced over a realistic but expedient timescale, reducing debt servicing costs.
The authority must also prove it is complying with all relevant rules and guidelines relating to financial management, and provide an action plan to reconfigure its services commensurate with the available financial resources.
Other directions seek to ensure sufficient skills, capabilities and capacity are in place to deliver the Improvement and Recovery Plan, and that value for money during any exit from the authority’s arrangements with its companies, and the revolving lending arrangements between them, will be obtained.
The authority must report to the commissioners at regular intervals.
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Suzanne Clarke, deputy director, local government finance stewardship at DLUHC outlined Gove’s intentions in a letter to Julie Fisher, chief executive of Woking Borough Council. “The secretary of state envisages that most decisions will be carried out by the authority, but with the oversight of the commissioners: they will uphold proper standards and due process and recommend action to the authority.
“The secretary of state’s intention is that the powers he is providing to the commissioners be used to ensure that the authority takes the necessary steps to achieve the best possible outcome for Woking residents and the public purse. The exercise of these functions should enable the commissioners to make sure that the authority has made sufficient improvement within the next five years to be able to comply with its best value duty on a sustainable basis.
“I appreciate that the authority has already started taking some steps in relation to [the directions] and thank you for the detail you have already provided.”
Gove has appointed the commissioners for 12 months, acknowledging that the situation in Woking is “likely to change throughout the period of intervention”. The appointments and directions will be reviewed within six months or “at such a time as the secretary of state finds necessary”.
The directions will remain in force until 25 May 2028 “unless the secretary of state considers it appropriate to amend or revoke them at an earlier date”.
Responding to the publication of the External Assurance Review, Ann-Marie Barker, leader of Woking Borough Council, said she welcomed the recommendations it proposed.
“I am committed to openness and transparency and will continue to keep residents up to date on progress as we deal with the council’s finances,” she said.
“I am pleased that there is acknowledgement of the strong collaboration between officers of the council and the review team on the progress that has been made to address the council’s financial resilience.
“My administration is very clear about the huge challenges facing the council due to the legacy of both the extraordinarily high and disproportionate levels of debt that we have inherited from the previous administration. We are also very clear and focused on the significant risks that the council is now facing up to as a result of that debt.
“We also recognise that these challenges are so significant that the council and its officers cannot deal with these on its own. We therefore fully acknowledge and accept the findings of the report and welcome the support set out by [the government].
“I know that councillors and officers will work at pace alongside the government-appointed commissioners to address the issues identified in the report and achieve best value for the public purse through the preparation and delivery of an action plan.
“When my administration gained control of the council last May, I pledged to take on the challenge of major change and embed affordable, responsible and sustainable principles into how the council conducts its future business and this remains my priority.
“As part of this pledge, we have taken steps to control borrowing, made changes to the governance of our commercial investments and I have instigated independent reviews of all the council’s borrowing and investments.
“I recognise we need to deliver our plans for recovery of the council’s finances with greater pace and urgency and we face difficult decisions in the months ahead. I will work with my officers to ensure, with the support of the commissioning team, we have the capacity and experience to deliver the improvements needed.
“I remain committed to keeping residents, businesses, and community partners fully informed as we progress through this process and develop the detailed plans for recovery with support and oversight from the commissioning team.”
Responding to the news that commissioners are being sent into Woking Borough Council, CIPFA CEO Rob Whiteman said: “Today’s ministerial statement quotes the recent External Assurance Review, which found that Woking Borough Council has ‘no realistic route to returning to financial sustainability alone’.
“The risks associated with borrowing on such a disproportionate scale have come back to haunt Woking. Clearly, the controls put in place by the Prudential Code were not followed.
“CIPFA council member Carol Culley is an experienced and trusted pair of hands from highly regarded Manchester City Council, and I have every faith that she and the other commissioners will provide sound advice on next steps.
“The impact of this council’s conduct will have serious implications for the sector as a whole. Many difficult conversations will be happening at Woking and in central government, and CIPFA will assist where we can.”
Earlier this week, a valuation revealed that Woking Borough Council faces a £490m write-down of its assets after a joint-venture company suffered “devastating” financial losses.
Barker had warned that the authority faced significant financial challenges in 2023 following her re-election in May.
Woking Borough Council has previously reported that its debt is forecasted to increase to almost £2.4bn by 2024/25, with the authority expected to pay back £60m of borrowing debt this year.
In February 2023, the authority also warned that it is in the “territory” of issuing a section 114 notice as a result of the high level of debt.
Prior to this warning, in October 2022, the minister for local government expressed concerns over Woking’s debt and the lending arrangements for major development that the authority is undertaking.
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