MHCLG Commissioners are sent in to deal with reckless Tory borrowing
Statement from Spelthorne Liberal Democrat Council Group
Jim McMohan MP, the Minister of State for Local Government and English Devolution, has appointed Commissioners to oversee the running of Spelthorne Borough Council. This is a direct response to what the government sees as the past financial irresponsibility of the Council, when it incurred debts of more than £1bn and took on the risky business of property investment.
The Liberal Democrat Council Group are disappointed that this action has been seen to be necessary but understand why the government has taken this step. Over the last six years the Liberal Democrat group has taken the lead in raising the standard of scrutiny of the property portfolio and working to get members properly informed about the underlying performance and risks inherent in this type of commercial activity. This has been difficult to progress because of the complacent attitude of the Conservative Group when they were in power coupled with the requirement to respect commercial confidentiality.
For many years councillors were told that we should be grateful for the income that was being generated by the properties. What this initial success masked was that the income could not be guaranteed to be sustained across the full 50 years of the loans, and specifically did not account for drops in income which arise when leases end. Some of the deals are excellent and produce a good return for the borough, but some others are now a burden on the Council’s budget.
The last few years have not been good for commercial property, and it is true that the COVID pandemic and Ukraine war have hit the portfolio. Despite these adverse conditions the properties have performed better than the market average. The value of the property portfolio has fallen by 40% against original purchase costs, and over the next five years will produce an average surplus of only £4.7m before any provision for future liabilities – a return of less than half a percent on £1 billion of borrowed public money.
Liberal Democrat councillors are committed to working positively with the Commissioners and making sure that the actions they propose do not harm Spelthorne residents.
The Leader of the Liberal Democrat Council Group, Cllr Lawrence Nichols said “Be in no doubt, this action by MCHLG is a direct consequence of the cavalier borrowing undertaken by the Conservatives between 2016 and 2019. They borrowed money when it was cheap but did not understand the long term risks they were taking on. These chickens are now coming home to roost.”