Date: Thu 20 Feb 2020

Concern over Council overspend and borrowing

Tandridge District Council is continuing to buy investment properties with large sums of borrowed money underwritten by Council taxpayers. That's despite the Government's warning to all Councils about the potential risks of such investments because, if things go wrong, it is the Council taxpayer who pays the price with cuts to services and/or raised taxes.

The borrowing comes at a time when the Council has a projected overspend for this year of £1.3 million - that's more than 10% of its annual budget - and is using its financial reserves to plug the deficit. Much of the overspend is due to a failed change programme called Customer First which was brought in to save the Council money but has ended up costing it a fortune and has led to the loss of many experienced staff.

Against this background, the Council has approved borrowing of up to £200 million to buy investment properties. Our worry is that the Council is using the property income as the only way to balance its books, and as a result is taking on too much debt. It's already borrowed £43 million for property purchases with another £64 million earmarked for spending in the next financial year. OLRG and linked Independent Councillors are concerned about the size and speed of the borrowing which is supported by the Conservatives and Liberal Democrats - joined together, they outvote us.

The Council has low financial reserves and so buying investment properties with large loans requiring large annual repayments, seems particularly risky on this scale. That is because the Council has no financial resilience to withstand a rainy day and there is no safety net to deal with a downturn, for example if any of these properties loses its tenant.

We have suggested instead that shared services with other Councils are explored immediately as a way to cut costs to try to prevent borrowing at this very high level.

For more details see item 8 'Council Tax 2020/21 and revenue budget setting' of last week's Strategy and Resources Committee webcast click here

And also the CIPFA (Chartered Institute of Public Finance and Accountancy) local authority resilience index for 2018/2019 click here. Set filters to lower tier and Tandridge and either nearest neighbour or non-metropolitan district. On the reserves sustainability measure, TDC is at the bottom of the list among the 16 neighbouring Councils and second from bottom of all the non metropolitan districts. The index also shows Tandridge at the bottom of the list among the 16 neighbours for reserves and for the change in reserves.