Woking council on brink of effective bankruptcy

It comes after the council amassed debts worth almost £2bn to fund a property investment spree – putting the council “in the territory” of being unable to meet its financial obligations, due to a surge in debt interest costs on its investments.  

Its leaders have said its at risk of issuing a section 114 notice – effectively signaling insolvency. Such a declaration is made when a council believes it will be unable to meet its expenditure commitments from its income.  

The notice means the council cannot make new spending commitments and must meet within 21 days to discuss what to do next. And, while the government has the powers to intervene in how council services are run, this does not automatically happen when a section 114 notice is issued.  

All this news comes ahead of an extraordinary council meeting to decide on its financial plans for the upcoming financial year, which will take place on Thursday (23 February). As part of this balancing work, it has announced a council tax charge rise of three percent from 1 April 2023.  

Speaking ahead of this meeting, Dale Roberts – portfolio holder for economic development and finance – said: “Let me be clear. We face a mountain of unsustainable debt, together with an uncertain and challenging future.

“It will require painful decisions about which services we can deliver. Significant obstacles lay ahead including an over-dependence on commercial rent and parking income, unaffordable debt and budgetary restraints usually applied under a Section 114 notice. 

“Rescuing the borough’s finances will require implementing a fundamentally revised budget beyond this Medium Term Financial Strategy, optimising the council’s investment portfolio, and improving governance and controls. It will also require significant debt restructuring and that is not our decision to make. 

“The path ahead is long, narrow, uncertain and precarious. Yet it is the only one available to us to rebuild a council focused first on delivering services, investing in local priorities, is prudent, has regained the confidence of government and most importantly has restored the trust of residents.”