Surrey councils fear that Woking BC’s debt will be shared across all the new unitaries following reorganisation.
Woking issued a section 114 in June 2023 and commissioners were appointed in December of that year. The district has debt of over £2bn and the latest commissioner report for Woking warned “there is no means by which the council can repay all the debt from its own resources”.
In the application for Surrey to join the Devolution Priority Programme, county leader Tim Oliver (Con) said that the “unique, significant financial risk of the level of debt” needs to be addressed before devolution and reorganisation takes place and requested the government “write of these debts”.
As well as Woking, a number of Surrey’s other ten districts have significant debt, including Runnymede and Spelthorne BCs.
In the letter to Ministry of Housing, Communities & Local Government early this month, Cllr Oliver called for the postponement of elections to “allow time to give consideration in any business case to how to best manage the unique, significant financial risk of the level of debt currently held across the Surrey local government footprint”.
The county council is seeking to reorganise into a number of unitaries and then form a combined authority for devolution.
While the 11 district leaders in Surrey signed a joint statement against plans to postpone elections for the county this year, they have shared similar concerns over the potential debt affecting the future of local government in the county.
Debt across Surrey districts
Woking is not the only Surrey district with high levels of debt.
Runnymede BC was issued a best value notice in December 2023 as a report from the Chartered Institute of Public Finance and Accountancy, said the council’s £653m borrowing, as at 31 March 2022, represents 71 times its core spending power. The Ministry of Housing, Communities & Local Government confirmed in December 2023 that a further best value notice was not issued due to their actions taken to “self-reflect” and improve governance and risk and investment reporting.
However the best value inspection procedure was extended at Spelthorne BC in November 2024 due to continued concerns over their debt and the timing of the general election. Spelthorne has the second highest level of debt among district councils after Woking, with a debt load 52 times greater than its total service expenditure. However, council sources have told LGC this debt is not considered “irrecoverable” but set at a fixed rate attached to assets.
Guildford BC considered issuing a section 114 notice in October 2023, and imposed “financial controls” to manage its £300m debt. Since then the council has undergone a transformation plan, which includes sharing a joint leadership team with Waverley BC since 2021. A recent report by Local Partnerships found the partnership generated an estimated £603,000 in savings since 2022.
Surrey Heath BC has reported debt of around £170m from investments in retail property in 2016. Due to a drop in footfall in the town centre, high inflation and interest rates, the council has warned this will be “unsustainable” within two to three years.
Tandridge DC leader Catherine Sayer (Ind) said potential plans to “spread” out Woking’s debt with new unitaries in Surrey is a “nightmare”.
Cllr Sayer said if residents in her district had to cover the debt it would be “so completely unfair, certainly to us, because we’ve struggled away and managed to get ourselves financially stable”.
The Local Government Association commended the efforts at Tandridge DC to “turn itself around with a transformation programme taking it from the brink of bankruptcy four years ago to being confident in its financial position”, in a case study published this week.
Tandridge, with a population of around 88,500, entered a transformation programme in 2021 due to identifying a £3.1m funding gap for 2022-23 and 2023-24 in their medium term financial plan and a gap of £920,000 in the 2020-2021 budget.
Cllr Sayer, who has been the leader since 2021 when the recovery efforts began in Tandridge, told LGC how it has been a “real joint effort” and “such a success”, which has been dampened by “this threat of somebody else’s debt being dumped on us”.
Cllr Sayer believes the government “has to have some responsibility” for the situation in Woking because the Public Works Loan Board “just kept lending” and “it was encouraged at the time”.
She said: “My concern is Tandridge residents will have to pay for what was a rogue council and a bizarre situation where they were just lent more and more money for what’s turned into huge, huge bad debt.”
Collaboration savings
During a press conference last week, leader of Waverley BC Paul Follows (Lib Dem) said that even “if the government decides that Surrey is too hard because there are too many issues in the county to deal with, like all of everyone else’s debt”, his council will continue its partnership with Guildford BC.
Cllr Follows said: “There is no unitary combination physically possible in this county that doesn’t involve Guildford and Waverley being together.” His preferred option would be a “south west Surrey” unitary with the two districts and “maybe one other partner at most”.
According to Cllr Follows, “Waverley is not really a place” because there is a “huge overlap” between the neighbouring districts and warned against politicians who “further undermine the trust in our democratic institutions and politicians by scaremongering”.
With a population size of approximately 1.1 million people, Surrey is around 400,000 short of the “default assumption” of the proposed size for a strategic authority outlined in the English devolution white paper.
Surrey CC, which is negotiating with MHCLG, has told LGC that there has not been any “firm steer” regarding the debt in the county and it is “too early” in the process to confirm further details.
Woking BC leader Ann-Marie Barker (Lib Dem) said the council “remains focused” on its improvement and recovery plan to “ensure that Woking enters into any new arrangements in the best possible position” and new authorities “have the best chance of success”.
Cllr Barker added: “There needs to be a solution for the high level of debt across Surrey authorities before any new unitaries are formed and we are continuing to work with Government colleagues to find a permanent solution to Woking’s overhanging debt.”
MHCLG has been approached for a comment.
