A cluster of skyscrapers that look more Singapore than Surrey rises high over the centre of Woking. Called Victoria Square, the trio of towers – the biggest is 34 storeys – is unusual for a brand new landmark development in that backing for them didn’t come from a Gulf state, Chinese investors or a global asset manager. Instead, the proud owner of Britain’s tallest buildings outside of a major city is Woking borough council.
The towers are the pinnacle of a near-£2bn debt-fuelled investment programme that has split local opinion, been repeated by councils across the country, and set alarm bells ringing in national government.
Not all the council’s projects have been as successful. It offered one company £250m to redevelop the town’s football stadium and build 1,000 homes, but the scheme ran into the buffers after planners said it was suitable for just 93 dwellings.
“It’s gone absolutely ridiculous,” says Graham Chrystie, a councillor who in 2019 defected from the ruling Conservatives to the Liberal Democrats over borrowing levels, tipping the council into no overall control. Now retired, he worries that the debt pile could prove unsustainable. “The borough seems to have turned into a property developer – from £5m schemes in central Woking to ones worth £500m. We are in a pretty desperate situation.”
With Woking’s debt expected to grow to £2.4bn within five years – the highest borrowing figure, relative to its size, of any local authority in Britain – the town, population just over 100,000, was placed on a government watch list in May.
Local councils have been on a borrowing and investment spree in an attempt to sidestep the impact of austerity. With government-backed spending power slashed by more than 50%, significantly more than the rise in council tax, many local leaders say they had little choice. Most of the spending has been financed by an obscure arm of the Treasury – the Public Works Loan Board (PWLB).
However, ministers grew concerned at soaring borrowing figures and some questionable investment decisions. At least five other debt-laden councils have also been put on the red list: Woking’s neighbours Spelthorne and Runnymede, plus Eastleigh in Hampshire, Thurrock, Essex, and Warrington in Cheshire. Before last week’s political upheaval, the councils had been warned that the levelling-up department was pushing through new rules giving it the power to intervene in their financial affairs, including limiting borrowing and forcing asset sales. Until a new prime minister is appointed, the government has said it will continue to progress the legislation currently in parliament.
A government spokesperson said the changes would make it easier to step in when councils make “excessively risky investments” with taxpayers’ money. “Councils are responsible for managing their own money, but they must comply with the prudential framework, which sets out codes of good practice … and prevents them from borrowing excessively.”
Singapore in Surrey?
Woking’s skyscrapers came about in part because of the town’s location, ringed by greenbelt land. Planners reckoned high-rise blocks would help house its growing population while keeping residents in surrounding leafy villages happy. But the town known as the setting for much of HG Wells’s War of the Worlds has seen battles of its own as locals accuse the council of trying to convert their home into Singapore-on-Wey.
As well as Victoria Square – Woking’s biggest asset and liability, in an investment worth £605m – the council has spent millions elsewhere, including taxpayer-funded loans worth £11m to a private school.
Almost £500m is tied up in its wholly-owned ThamesWey group of companies, which operates a social housing provider, a low-carbon energy supplier and a property developer – activities that were the bread and butter of council work before a wave of outsourcing. Although now more unusual, such tactics have won plaudits in towns such as Preston and Stockton-on-Tees, where councils have taken a similar hands-on approach to regeneration.
In Woking, ThamesWey is building more than 1,000 homes, a leisure centre and shops in a six-year regeneration plan for Sheerwater – a suburb first expanded in the 1950s to rehome blitzed-out east Londoners. Not all residents are happy to see bulldozers tearing up postwar homes to make way for the new masterplan. But Jonathan Lord, the town’s Conservative MP, says it was supported by the Lib Dems and should be a net positive for the area.
“Residents have an expectation that the council will continue to improve the fabric of our borough whilst meeting all its financial obligations,” he says.
However, ThamesWey has faced problems. Plans for its energy arm to supply district heating in Milton Keynes, 60 miles from Woking, have been called a “money pit” after the project amassed £32m of debt.
The council has had previous trouble with picking the right partner. It had lined up a £250m taxpayer-funded loan to support a plan by Hertfordshire property developer Wayne Gold to almost quadruple capacity at Woking FC’s stadium to 9,000 and build 1,000 homes.
Gold had failed with a similar stadium-cum-housing plan at Braintree Town, Essex. A cross-party group of councillors criticised his lack of experience and said the local authority had not done credit reference checks when offering the £250m loan.
Gold, who could not be reached for comment, told the council last year that he had “successfully relocated” football clubs at Maldon, Bishop’s Stortford and East Ham. Despite the backing of the local authority’s officers, Woking councillors voted down the plans. An appeal was later rejected by the secretary of state for housing, ending the council’s development and financial agreements with Gold.
In the economic chaos wrought by coronavirus, questions have also been raised over the future of town centre shopping and high-rise housing. Woking lost branches of Debenhams and Topshop, both of which went bust during the pandemic.
The council’s partner in Victoria Square – Northern Irish property company Moyallen, which owns 52% of the project – has seen four of its other portfolio companies fall into administration with debts owed to Bank of Ireland worth £188m.
Two of those companies between them control the Peacocks shopping centre in Woking, adjacent to Victoria Square, and Moyallen’s main holding company is more than six months late filing accounts to Companies House for 2020. Moyallen said the matter was being addressed. Woking council said Victoria Square was unaffected.
‘The more you borrow, the bigger the numbers become’
The National Audit Office estimates that councils across England ploughed almost £7bn into commercial property in the three years to March 2019, almost 15 times what they had spent over the preceding three years. Across the UK, local authority debt levels have surged by almost 50% since 2014 to stand at £130bn at the end of last year.
Nearby Spelthorne council, whose MP is the business secretary, Kwasi Kwarteng, is in the spotlight after buying a BP research campus and a shopping centre in deals worth hundreds of millions of pounds.
Councillors in Labour-run Warrington bought a 50% stake in utilities firm Together Energy, before it went bust in January amid soaring energy costs. That authority has also loaned money to the billionaire Matt Moulding – owner of online retailer and Conservative party donor The Hut Group – and has shares in a bank backed by former Tory treasurer David Rowland.
Most invested within their local boundaries, using cheap funding from the PWLB, which offers low-cost long-term borrowing piggybacking on the UK’s sovereign interest rates. But some went further, hoovering up commercial assets further afield and lending taxpayers’ money to generate a financial return.
Local leaders say the hunt for investment income was an inevitable response to a decade of austerity, with councils’ spending power slashed by more than a quarter since 2010. That didn’t stop the Lib Dems weaponising Woking’s debt position at last month’s local elections: it won full control of the council amid a wider collapse in “blue wall” battlegrounds.
Ann-Marie Barker, the council’s new Lib Dem leader, says the reaction on the doorstep was clear: alongside issues such as Partygate, the council’s debt levels and plans for high-rise buildings came up time and again.
“We didn’t want Woking turned into Croydon or Singapore,” she says, arguing that the Conservative leadership “didn’t seem bothered” about debt. “Clearly it’s a concern when you receive a letter like that [putting the council on a watchlist] from a government department. But I suppose in some ways it wasn’t a surprise. We do have the highest per capita borrowing in the country.”
However, Barker is facing questions over what changes she might make. Simon Ashall, the council’s former Conservative deputy leader, who lost his seat to the Lib Dems in May, accuses his opponents of dropping their support for the spending plans only after sniffing an electoral opportunity.
Woking has so far borrowed about £1.8bn from the PWLB, repayable over the next 50 years, and Ashall is confident that despite Covid the council will make good on its debts.
“Woking has gone further [than other councils]. The more you borrow the bigger the numbers become. That can’t be denied. But do I think £1.8bn of benefit will accrue to Woking – perhaps not in the next 18 months, but over the course of the next 50 years? Absolutely.”