More financial woe for Michael Gove’s local authority as Surrey Heath Council incurs more debt amid tense exchange

15 December 2023, 12:51

Leaked Recordings Show Michael Gove "Confident" in Now Debt-Ridden Conservative Council's Finances

By Henry Riley

@HenryRiley1

LBC has obtained further worrying information about the state of finances as Surrey Heath Council as well as a tense exchange between Michael Gove and a local resident.

Back in September LBC broke the news that Michael Gove's local council faced "effective bankruptcy within two years" due to what was described as the "horrific financial mismanagement".

In some part, this was due to two significant purchases.

In November 2016, Surrey Heath borough council purchased The Square and the House of Fraser for a combined £113 million.

Yet the sites have declined significantly in value and now have a combined value of just £33 million.

Representing a potential loss of 71% or £79 million in valuation.

The local authority has been run by the Liberal Democrats since May 2023, after nearly 49 years of almost consecutive Conservative administration.

Read more: Nottingham City Council declares itself 'bankrupt' with £23m funding gap

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LBC can now reveal further instances of financial difficulties for the council.

For the tax year ending 2022-2023 the council lost an additional £799,000 from its property portfolio as a result of high interest rates and falling rents - as well as paying off borrowing, loan repayments and interest.

The council also anticipate that there will be an additional £300,000 of taxpayers' money needed for minimum revenue provision - money put aside to pay back some of the loan

Recently Moodys, the independent credit agency, ranked Surrey Heath as the sixth worse English council with high levels of debt for their size.

The council estimated that debt was £170 million - but LBC can reveal that there is an extra £30 million worth of debt - meaning councillors now estimate debt at £207 million.

Indeed, LBC has obtained a recording from April 2019 from a ‘town hall’ event for residents which was not broadcast. The meeting heavily focused on the property purchases of the council and saw Conservative County Councillor Edward Hawkins declare “property is my business” and that “none of us in this room, who are residents of Surrey Heath, are at risk from the money we have borrowed”.

Also present at the meeting was the local MP and Cabinet Minister responsible for Local Government, Michael Gove.

Whilst the decisions of the council are separate from Mr Gove, the Tory MP said he had “every confidence” in the decisions made by the council going “to plan”.

Within the leaked recording to LBC there was also a tense conversation between Michael Gove and a local resident. The Surrey Heath voter is heard questioning the policies and borrowing of the council, to which Michael Gove – attempting to explain his perspective – is interrupted and shouts “wait until I have finished”.

In response, a spokesperson for the Department of Levelling Up, Housing and Communities said “Local authorities overall have seen an increase in Core Spending Power of up to £5.1 billion or 9.4% in cash terms compared to the previous financial year, with almost £60 billion available for local government in England, of which Surrey Heath Council received £12.4 million.

“Councils are ultimately responsible for the management of their own finances, but we stand ready to speak to any council that has concerns about its ability to manage its finances.”

Whilst a Tory source told LBC "This is yet more nonsense from the Surrey Heath Lib Dems in what appears to be an attempt to justify future council tax hikes on local residents.

“The council’s own independent financial officer indicated at the Levelling Up Select Committee just two weeks ago that the council was not in financial distress with sufficient reserves for the next fours years and a balanced budget.”

That refers to Bob Watson, the Strategic Director for Finance, telling a Parliamentary Committee that the council was “not in immediate financial distress” and was “predicting the use of reserves”.

The Conservative source continues “The Lib Dems should stop playing politics and focus on delivering for the residents of Surrey Heath. Local people deserve better than this Lib Dem circus.”