Brighton and Hove City Council loaned £10 million to another local authority after concerns were raised about the massive investments it was making in a solar park company.
Thurrock Council is now being investigated by the Government due to its “exceptional level of financial risk and debt” after the company it loaned hundreds of millions of pounds of taxpayers’ money to went bust.
Concerns about the investments were first published in May 2020 by the Bureau of Investigate Journalism, whose three-year investigation has uncovered troubling details despite Thurrock council chiefs’ attempts to keep them secret.
However Brighton and Hove City Council, which is one of dozens of local authorities who have loaned nearly £1 billion to Thurrock, insists the loans are safe because they are Government-backed.
A council spokesman said: “Councils are ultimately government-backed. This means there is no risk of default. The loans will definitely be repaid.
“We were aware when we made the loans that concerns had been expressed about Thurrock’s financial situation.
“However, there was no risk that this would have any bearing on them repaying their loans.
“Even councils in severe financial difficulties always have to repay their loans.
“Croydon and Northamptonshire are two recent examples of this. They have faced financial problems but have always repaid their loans.”
Brighton and Hove City Council first loaned £5 million to Thurrock on 12 May, 2020 – just days before the Bureau of Investigative Journalism published their first report into the Essex council’s finances.
The loan was made via a mechanism called a short term deposit, and for a term of two years.
The council says this has been repaid – but on the day after was due, 12 May this year, Thurrock was loaned another £5 million, which is due to be repaid on 11 May next year.
In the meantime, a further £5 million was loaned, again as a short term deposit, in October 2021 and is due to be repaid next month.
This was after the Bureau reported that a high court judge had raised doubts over Liam Kavanagh’s integrity.
The decision to loan the money was made by officers in the council’s treasury management team, but using a list of institutions to which loans can be made which is approved by all councillors alongside the annual budget.
Councillors on the policy and resources committee are given twice-yearly updates on what loans have been made.
Brighton and Hove News approached leaders of the council’s three political groups – Greens, Labour and Conservatives – but did not receive a reply.
I’m not a politician or an accountant or a dodgy financier but I did study local government financing at the London School of Economics. My first degree was a Bsc(Econ).
I am now a Doctor of psychology and a therapist.
Please trust me when I say
(i) there is no risk of non payment on loans between councils.
(ii) Council investment in companies that provide local jobs and income from rates can be a brilliant idea, a failed experiment or a corrupt scam.
(iii) Thurrock’s investments look irresponsible to me but our council assisting them with liquidity – cash flow problems – is not irresponsible at all.
To analogise -it’s is just like friends who have different monthly pay days regularly lending each other a weeks wages so that credit card payments can be made on time, saving late fees and interest.
Council financing is ‘lumpy’. Monthly expenditure is predictable and varies marginally. But monthly income can vary by more than 100 times. So when annual budgets are tight it becomes crucial to save on unnecessary interest charges. Just like the friends who save each other £20 direct debit fee, credit card late fee £12, unauthorised overdraft fee £20 etc by loaning each other money short term.
So good for Brighton for helping the people of Thurrock avoid even more debt.
But please can someone tell us what Brighton Council’s investment portfolio is?
Please follow my example by writing to their Chief Exec at the Town Hall and asking for full details under the Freedom of Information and Local authority finance.
I think we can trust the Council to provide this information in copious detail. If politicians have made dodgy investment decisions these need exposure.
Some loans to private companies are government backed. So even if the company is liquidated the central state will return the council its money – eventually. it’s possible that Thurrock’s investments are mostly guaranteed. Let’s hope so for their residents.
We need to get Brighton’s portfolio checked out for free by local investment experts. There are loads in Hove. Any of them reading this could do the community a public service, benefitting them as local residents and make potential customers aware of their business services by joining the debate.
Well we’ve seen the last of that. Just like the three million quid that vanished from the parking takings while no one was looking. Add to that the millions spaffed up the wall over the i360 and you can see why the city needs to be in special measures with grownups in charge.
Don’t forget the £10m per year that the Greens have managed to get allocated for a slush fund for any projects they want – including LTNs, bike sheds, and tree planting – this must be about £100 per household per year.
I wonder how much of the funding the council receives actually goes on supporting the needs of residents and local businesses, and how much to Green Party schemes with no defined benefits?
I agree. If you add up all these silly green schemes (that are not remotely environmentally friendly) that’s a lot of money wasted that could be better spent on the city infrastructure. Why are we loaning money out when our roads are worse than the ones bagdad?
This council needs to be in special measures big time.
The green party in Brighton really should change there name, false advertising to be using the word green. Busy body party would be a better idea
This is another non story. The loan is part of away to allow Thurrock council to operate after the collapse of the company they had invested in. Thurrock is a Tory run council. As was Northampton.
Basildon, Colchester and Brentwood Councils are just a few of the many councils that have loaned money to Thurrock through the scheme. These loans are backed by central government so there is no risk to the lenders.
I think there is a case for independent examination of the Councils non secure investment portfolio. This is true of all councils. Done by local voters, preferably many of them already investment experts. Know any?
Totally agree.
‘insists the loans are safe because they are Government-backed.’ translates to ‘the tax payer will pick up the tab….
The council needs to get it’s own house in order before loaning money out.
We were consulted on LTNs and cycle hangers, it’s what the people want and it is supporting the needs of residents and local businesses.
Yes!
To say the loan is safe because the government will pay it back is a joke This council is simply driving the city into the ground It can afford to give out millions in so called loans But cannot even keep its own streets clean
Read my piece. It is not. It adds to overall income, giving the council more money. But other investments could well be. The 360 was definitely dodgy. We need to find out.