Broomhead bullish about Warrington’s £1.8bn debt
The chief executive of the council says he relishes a meeting with inspectors after the government launched a best value inspection due to concerns about the authority’s finances.
Speaking at Place North West’s Cheshire Development Update on Thursday, Warrington Council’s Steven Broomhead said the £1.8bn figure should not be considered debt, instead describing it as an investment.
He said: “A lot of what we’ve done in Warrington has been what I call ‘civic entrepreneurism’. We’ve been very commercial in the way we’ve operated.
“We’ve been so commercial that we’ve attracted the attention of government who are carrying out a best value inspection in what we’ve been doing.”
He added: “We haven’t been borrowing money to invest for a return. We’ve been borrowing money for regeneration. What the hell is wrong with that?”
Last month, secretary of state Michael Gove instructed the local government ombudsman Paul Najsarek to visit Warrington Council to try and “get to the bottom” of the authority’s “extremely high debt”.
A 36-page report commissioned by the government and published by the Chartered Institute of Public Finance and Accountancy stated Warrington Council was £1.8bn in debt as of March 2023.
Large tranches of this are attributed to loans to housing associations.
Commercial property loans and investments also featured in the report.
Many of these are related to solar farms and energy companies such as The Hut Group, supermarkets, developer Salboy, Birchwood Park, elements of the New Bailey project by English Cities Fund in Salford, and town centre regeneration.
Speaking at the development update, Broomhead said he welcomed a showdown with the inspectors.
He added: “I look forward to justifying the decisions of the council to these inspectors when they arrive.
“A lot of it is political, there is absolutely no problem for our economy, no problem for the council in terms of facing these inspectors – in fact I want to face them with relish to tell them the success story.”
Asked by Place North West editor Julia Hatmaker whether people should be worried about the £1.8bn debt figure, Broomhead answered: “I respect the fact the government want to look at all of that.
“We’re not in debt. We’ve made £1.8bn of investment. All of the investments we’ve made have been secured against property, or 95% have been against property.
“It’s not the council’s fault that the government, the Prime Minister, the chancellor wrecked the economy and property values, going back just two years given the decisions they made.
“All of our investments are long-term, with low interest rates, and they’ve been used for regeneration and investment.
“We’ve spent an enormous amount of time and money on due diligence, our decision-making was all recorded, and governance very strong.
“There are some councils that make decisions to invest in retail centres, shopping centres, and probably have not done the same amount of due diligence that we’ve done.”
“We’ve had a success story in Warrington we want to give these inspectors and it shouldn’t get in the way of the ambitions of the council and its partners in relation to its investment and the economy.”
At Warrington Council’s cabinet meeting next Monday 10 June, members will be asked to vote on proposals to implement an action plan addressing the concerns raised in the best value report.
This plan includes setting up an independent advisory panel to review its commercial schemes, providing a planned schedule of borrowing for the foreseeable future, and to develop a specific plan in conjunction with the DLUCH to reduce the authority’s debt levels.
How is it bona fide local regen when you lend hundreds of millions to the likes of Salboy to build towers in Central Manchester? Local Authorities acting in the capacity of developer, investor, lender etc. is a recipe for disaster as they do not employ the right people to manage the risk and ensure appropriate risk adjusted returns.
By John W
Unbelievable. I live in Warrington and I’ve been watching this slow motion crash take place over the last few years. Several years ago I wrote to my then MP expressing concern over the Redwood Bank investment (we were £10 million in at that point) and asking her to discourage WBC from investing further.
She wrote to Mr Broomhead and sent me a copy of his response, which was rather patronising about my lack of understanding about how banks are financed.
Hmm. Most of the £30 million we invested in Redwood has gone, as has all of the £18 million we invested in Together Energy. We don’t know what the £200 million we loaned to The Hut Group is secured against. I don’t know how many millions we’ve loaned to Betfred, but why is a council lending money to a gambling giant?
On it goes. Such inappropriate overconfidence isn’t what we need from councils.
By Jim Sullivan
When faced with insufficient funds to cover essential services for vulnerable people, there is no choice but to look at other ways of generating income. Many of us lost imoney in the lockdown and the world has changed since then particularly with regards to commercial property.
Many councils are in same position after 14 years of austerity. Tax cuts inevitably have a cost and the cost is essential services.
By Bob
If only you could feel and live the investment they’ve made in regeneration as a local resident. There was huge investment in Times Square but many units remain vacant – the rest of the town centre is struggling because of the Council’s decision to expand the centre when demand isn’t even there to fill what we’ve got. Would love to know what return on the ‘regeneration’ investment at Time Square is actually making… is anyone actually paying any rents yet???
By Warrington resident
While I applaud council’s taking decisions to invest in regeneration in their area they should always proceed with caution, take appropriate level of risk against their scale and do all they can in terms of structure of deals and oversight to limit their liability. I don’t think councils’ should themselves be taking the place of commercial core or mezzanine funding in more risky investments. Housing is usually safe and solid, other commercial property has swung wildly in recent years. Broomhead here comes across as arrogant – maybe the investment position justifies it. But it doesn’t instil confidence. He’s accountable to his local politicians and the public now, yet he still sounds like he’s lording it at the NWDA (R.I.P. not missed in the slightest).
By Sceptic
Must admit, I can’t share the doom laden comments from other comnentators. It is clear the current government wasn’t going to invest in the north apart from a few scraps everyone has to compete over. Full credit to Warrington for trying to do something constructive. Not every investment will come off, but at least they tried.
By Peter Black
What is the daily cost of this this eye watering debt // where has this money come from ? Borrowing from government or local tax payers. Interest payable would provide a considerable winter fuel payment to local pensioners
By David