Slough Council will sell more properties to plug financial hole

The local authority became the third council in England to issue a section 114 notice, which freezes non-essential spending, after facing a £174m deficit by 2025.

Historical accounting errors, borrowing quadrupling to £760m, and other problems were unearthed by external auditors in the 2018/19 accounts as well as SBC’s new finance team discovering further issues.

Councillors met at a full council meeting on Thursday, July 22, to endorse the local authority’s new chief finance officer’s, Steven Mair, section 114 findings.

He revealed the £174m black hole will change as his team uncovers and understands the council’s financial situation more – which will lead to requesting the government for a £200m capitalisation directive in September, which would allow the borough to sell some of its assets to fill this void.

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This figure has massively increased from the original request of £15.2m and the council were looking to sell some of their £200m-worth of non-operation assets, meaning properties not used by council but are used as revenue generators, to plug this.

However, Mr Mair warned this figure could rise to £400m and stressed SBC must not move to a “fire-sale”.

He said: “The £200m suggestion is clearly a round number. It is a target; it is a suggestion. But remember we have to find around about £200 million to pay for the capitalisation direction assuming MHCLG [Ministry of Housing, Community, and Local Government] accepts this and assuming any changes from the £174m number.

“If you then add another £200m, which is a notional figure on, that would require a £400m-worth of asset sales. So, we’re trying to be realistic at the same time setting targets for this council to achieve to get its borrowings down.”

The leader of the Conservatives, councillor Wayne Strutton (Haymill and Lynch Hill) said the £100m assets identified in the 2021/22 budget has been reduced to £67m because of the changes in the market value and rental return. He asked what the council’s current level assets at its current value.

(left) Paul Dossett, external auditor, and SBC's section 151 officer Steven Mair

Mr Mair confirmed it is £67m but are looking through all of the investments to see what has changed, which will be reported back this year.

He also said the council’s balance sheet is £1.4 billion – but is subject to the team to value and assess it – and is made up of a variety of assets.

The leader of SBC, councillor James Swindlehurst (Lab), hinted services could be reconfigured to free up some assets to sell.

Another shocking figure is that Slough is the third highest unitary authority in borrowing per head of its population. In previous years, it was £1,200 per head – but now it’s £5,000 per head.

Mr Mair also said SBC has no choice but to make “challenging” decisions and take “radical action” to find £20m savings, such as cuts in statutory services, such as adult social care, in later budgets in order to pay off its borrowing.

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This means the council is spending 20 per cent of its budget on debt charges –  when the full minimum payment on debt isn’t paid for several months and the creditor writes it off as a bad debt.

Mr Mair described it as borrowing a lot of money to buy a large house but not setting any money aside to pay the mortgage payments.

To keep spending as low as possible, freezing non-essential spending could remain in place until at least March 2022.

Mr Mair told councillors: “My personal expectation is that this will take four years to turn around from previous experience and this is going to require some very significant decisions.

“Saving £16m, £18m, £22m, and potentially a further £20m in the years thereafter is going to take a lot of hard work by the council and members.

“It also assumes that MHCLG and CIPFA have confidence in the council plans and our ability to deliver them on time and on budget.”

Josie Wragg, chief executive

SBC’s chief executive, Josie Wragg, said the local authority has been “punching above its weight” – but is taking actions with “urgency”.

She said the council has set up “stringent” expenditure control panels, briefing sessions for staff, and identifying in-year and next year’s savings – which will be finalised by the end of September.

Ms Wragg also mentioned there is “much stronger” governance around SBC’s companies, such as Slough Urban Renewal.