“Grave financial situation” at Thurrock as report shows £470m funding gap

A report on Thurrock Council has revealed that the local authority is planning to request exceptional financial support from the Government in order to resolve a £470m funding gap partly resulting from solar farm investments.

The "grave situation" has been outlined in a financial update report set to be presented to Thurrock's Cabinet next week which states the total projected funding gap is so significant that the council cannot deliver a balanced budget in 2022/23 within existing resources.

In September, the then Secretary of State for the Department of Levelling Up, Greg Clark, drafted in Essex County Council to exercise Thurrock's strategic financial functions and assess whether there are failures in other functions to mitigate any further risk to services.

As commissioner, Essex County Council prepared and agreed on the financial update report.

According to the report, 75% of Thurrock's investment portfolio, which has a book value of £1 billion, is classed as "high value and high-risk".

In addition, council advisors identified that the value of four of the council's investments are "subject to significant impairment," resulting in losses totalling £275.4m. A further £129.2m is being set aside to repay investment debt, resulting in a total in-year funding gap of £469.6m before mitigation.

The report goes on to outline a budget gap of £184.4m for 2023/24, which includes money that must be set aside to write down the debt associated with the remaining investment balances and the interest payable on that debt. This also includes the write down of the exceptional financial support that will be sought from the Government in respect of the 2022/23 funding gap.

Responding to the report, Cllr Mark Coxshall, who was appointed as leader of Thurrock Council in October, said these are "shocking numbers but the first stage to creating a good plan for recovery is to understand the full extent of the problem".

Cllr Coxshall added that the report is the first stage of planning for the council's recovery.

"Everybody now has a fuller understanding of the gravity of the issues we face. We know the council cannot find a way to finance its expenditure in-year and will not achieve a balanced budget next year without external support," he continued.

He admitted that the council would have to accept exceptional financial support from the Government over a number of years to stabilise its financial position.

Alongside this support, he stated that the council would have to use other levers, including asset disposal, efficiency savings, council tax increases and funding flexibilities from the Government.

"Although it is impossible for local authorities to go bankrupt, it is clear there will be incredibly difficult decisions to come. These are uncertain and unsettling times but there are no immediate changes to services for residents, and the council's much valued staff will continue to deliver for Thurrock's residents and be paid.

"I am absolutely determined to break the council's past culture of secrecy with complete openness, honesty and transparency. Simply by publishing this information I am making it clear that is not how Thurrock Council intends to work going forward and that this takes place in a way that can be scrutinised by all councillors and the public.

"Further reports will come to Cabinet and update the position before setting a budget in February. Thurrock Council continues our work with the Commissioners to develop a plan that addresses the scale of this challenge and takes us towards a stable and sustainable financial position in the medium to longer term."

The news follows word last month that a solar farm business which reportedly owes Thurrock Council more than £650m went into administration.

The council also received a pre-action protocol letter from the Good Law Project in August, which claimed that its investments "raise serious concerns" that the council may have breached its fiduciary duty to taxpayers, failed to take account of relevant considerations in making its investment decisions, and failed to comply with principles of transparency around decision-making.

Adam Carey