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Labour-controlled council taken over after property bets leave £100m black hole

·3-min read
Slough high street
Slough high street

A bankrupt Labour council has been taken over by ministers after blowing a £100m black hole in its finances following a string of major property investments.

Slough council has been forced to implement a three-year rescue plan overseen by Government-appointed commissioners.

The town's leaders have admitted that it needs more than £100m of additional financial support in 2021-22, far higher than initial estimates of £15m.

The borough spent £96m betting on commercial property before Covid hit, with investments including a cinema in Basingstoke and superstores in Gosport and Wolverhampton.

Slough is now trying to sell off half of its £1.2bn of assets, and ministers have criticised the council's leadership for “deeply concerning” mismanagement of its finances.

The problems are likely to spark concerns that the Government will have to step in at a slew of other councils after the pandemic battered their already squeezed budgets.

Rob Whiteman, chief executive of the Chartered Institute of Public Finance and Accountancy that carried out a review of Slough’s finances for the Government, said: “If we do see any more councils in that position. I think it's going to be a handful rather than a significant number.

“The decision of the Secretary of State to intervene is really a culmination of several years of mismanagement rather than Covid. Covid may have accelerated their position.” 

Councils spent around £6.6bn of taxpayers' money buying commercial property in the three years to 2018-19, according to the Public Accounts Committee. 

Critics fear this spending spree could now backfire because of a fall in prices after Covid triggered a shift towards online shopping, several large retailers went bust and home working became widespread.

Slough was handed £15m after Covid hit as part of a Whitehall rescue that also propped up nine other councils.

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It then effectively declared itself bankrupt in July after discovering the bigger black hole in its finances.

The intervention now proposed by Michael Gove, the local government secretary, will give commissioners power over the council’s financial management and strategic decisions if its leaders fail to deliver on a supervised improvement plan.

Kemi Badenoch, a minister in Mr Gove's department, said damning reports into how the council is run “paint a deeply concerning picture of mismanagement, of a breakdown in scrutiny and accountability, and of a dysfunctional culture”.

“The council’s contract management is weak and has resulted in rushed procurement, missed exit opportunities, and has delivered poor value for money. There is little evidence that the Council understands the entirety of its commercial investments and their impact on its finances,” she said.

Ms Badenoch said the review concluded that Slough “cannot become financially self-sustaining without considerable government support. The council cannot demonstrate a track record of making difficult decisions or of taking decisive action to bring about improvements.”

James Swindlehurst, the Labour leader of Slough council, said: “There are still many difficult decisions ahead of us. We are financially in a very challenging place, and we will be asking government for a level of capitalisation direction which has never before been made by a local authority.

“I accept the Government intervention; understand why they feel it is necessary and I look forward to welcoming the commissioners to Slough and working with them.”

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