In the autumn of 2020, the Tory leader of Woking council announced he was stepping down. In his valedictory speech, David Bittleston insisted Woking was not merely the best council in the country but was going places. “Ahead of us, this borough has an exciting future,” he declared.
Bittleston’s self-congratulatory boosterism was par for the course. He and the town’s municipal leaders were signed up to a grandiose high-rise vision that would transform the modest commuter town in leafy Surrey into a glittering modern city, Singapore-style economic hub and “premier global business location”.
This week Woking filed for effective bankruptcy after running up a deficit of £1.2bn on a series of risky property and regeneration deals. The place perhaps best known as the inspiration for The Jam’s hit song Town Called Malice has become the biggest financial basket case in UK local government history.
The epic scale of the council’s collapse has sent shock waves through local government. As auditors sift through the wreckage, an astonishing picture is emerging of municipal recklessness, non-compliance with financial rules, over-optimism, egomania, incompetence, lack of transparency and regulatory neglect.
The numbers involved are staggering. Tiny Woking, with an annual council tax take of £11m, is paying £62m a year to service £1.8bn in loans on assets worth £600m less than what was paid for them. “It’s simply eye-watering,” said Rob Whiteman, the chief executive of Cipfa, the public sector accountants body. “It is almost impossible to comprehend.”
No one seems quite sure about how to fix the problem. Woking could put up council tax bills by 15%, sell off all its assets and cut local services to a skeletal legal minimum, and it may still not bridge the deficit. Experts say the government, which approved Woking’s debt pile, must now decide whether to write off the loans.
It is not just Woking council’s head-spinning profligacy – the skyscraper developments, the hundreds of millions pumped into town centre regeneration, the £11m loan to a local private school, the purchase of pubs and farmland – that is coming into focus. It is how, despite warnings, things were allowed to spin out of control.
One local politician who had questioned the plans said: “There were no controls, no proper project management, no financial risk assessment. Just this naive idea that it was cheap money and what could possibly go wrong … You had this magic money tree, and they started playing Monopoly.”
The blame game is in full swing. The ruling Liberal Democrats, who took power in May 2022, say the Tories, who had controlled or led the council for the previous decade, are entirely culpable. The Conservatives claim the Lib Dems supported all of the key investment decisions at the time.
Some point to the role of Woking’s former chief executive Ray Morgan, the most senior official at the council between 2006 and 2021, when he retired. Made an OBE in 2007 for services to local government, people who know him say he was outspoken, cocky and ebullient with a reputation for getting his way. “A big fish in a small pool,” according to one source.
A key architect of the regeneration vision, Morgan overreached his brief, some suggest. “All roads lead to Ray,” one local politician said. Morgan has always insisted decisions were taken collectively. “Various people accuse me of being a megalomaniac,” he told a public meeting in 2013. “But at the end of the day I do what the council decides.”
Morgan was perhaps uncharacteristically unforthcoming when approached about the council’s collapse this week. In a statement to the local news website Surrey Live on Thursday, he said: “I am no longer employed by the council, I do not think it appropriate for me to engage in a public discussion when I am no longer in possession of the facts of the matter.”
What is not in dispute is that Woking had become the most highly leveraged council in the country, with the debt levels of a major city. Yet as a government review revealed last month, it lacked commercial expertise, took major decisions without proper risk assessment or business cases and breached Treasury borrowing rules.
This week’s section 114 notice declaring the council’s insolvency said there was a high probability that much of the internal financial advice that underpinned the council’s investment decisions contained “inaccuracies and misassumptions”. Had these issues been understood earlier, the report suggested, Woking would have struggled to remain solvent as far back as 2018.
Why did the problems not come to light before? In the past three years, Anthony Fraser, a local resident, retired operations director and “armchair auditor” with a keen interest in local government finance, wrote a series of detailed letters to the council, its auditors and ministers at the Department for Levelling Up, Housing and Communities warning of the dire risks Woking faced.
Trawling through the council’s published financial documents, Fraser explained how it had become drastically overexposed, had failed to set aside money to service its borrowing and was in effect using Treasury loans to enable its struggling partner companies to meet day-to-day costs, in contravention of government rules.
The town’s borrowing was out of all proportion to its core ability to repay, putting its solvency at risk, he told Woking’s auditors, BDO, in 2021. “In effect, financially we are a relatively small town tacked on to and heavily dependent on the fortunes of a group of big development companies.”
That letter was not answered. Others were politely batted away. It was frustrating, he said, that no one was prepared to listen. Fraser’s concerns were largely borne out by this week’s section 114 report. “You spell it out to the people responsible for overseeing it, and it gets ignored,” he said.
Some still quietly insist the council was right to be ambitious. One local political figure said the dream of town centre regeneration, affordable housebuilding and green belt protection was basically sound, and would have prevailed had it not been for the pandemic. Over time, they said, Woking would be proved right.
But such optimism is rare. Many see Woking’s crash as a consequence of austerity and laissez-faire policies. Councils were hit by huge cuts in funding, and ministers encouraged town halls to be entrepreneurial and find alternative income streams. Government provided councils with billions in cheap capital loans while cutting core audit oversight of their finances.
Woking joins Thurrock, Croydon and Slough on the list of recent local government bankruptcies. All had borrowed heavily from the Treasury to invest in property and regeneration projects. Whitehall is closely monitoring several more highly indebted councils.
Before Covid, Woking’s financial wheeler-dealing brought in £22m a year to fund services, insulating it from the chilliest winds of austerity. Despite a 40% cut in funding since 2010, the council insisted its commercial prowess meant it had not had to close any frontline services for local residents.
Now, however, its future looks very different. The council’s interim director of finance, Brendan Arnold, signalled this week that things had changed. “The enriched service suite that the borough has enjoyed over a number of years will need to be removed,” he wrote.
In plain language, it means Woking faces a fire sale of assets, unprecedented budget cuts and council tax rises. Municipal austerity has finally arrived.
