Woking Council declares bankruptcy over £1.9bn debt

Woking Borough Council has issued a Section 114 Notice following the local authority’s debt reaching £1.9bn. 

Under legislative requirements, a Section 114 Notice stops all but essential spending, with the aim of enabling the Council to continue provision of services to its most vulnerable residents.

The Council faces this extremely serious financial shortfall owing to its historic investment strategy that has resulted in unaffordable borrowing, inadequate steps to repay that borrowing and high values of irrecoverable loans.

The Notice is required because the expenditure of the Council is set to exceed the financial resources available, and therefore it can no longer balance its budget for the current financial year nor subsequent years.  

Against the core funding of £16m available in the 2023/24 financial year, the Council faces a deficit of £1.2bn.

Julie Fisher, Woking Borough Council’s chief executive, said: “The issuing of a Section 114 Notice is a very serious matter that rightly reflects the scale and breadth of the acute financial situation facing the Council.

“Following the Secretary of State’s appointment of a Commissioning Team, I will be seeking their expertise and using their critical insight to help the council deliver an Improvement and Recovery Plan at pace to ensure we take actions that are in the interests of the public purse. My first report on these actions will be to the Thursday 13 July meeting of the Council’s Executive.”

Rob Whiteman, CIPFA CEO, said: “Today’s section 114 notice from Woking Borough Council highlights the risks associated with borrowing on this scale. Borrowing must always be proportionate and this is an extreme example of what happens when that principle is ignored. 

“This is a dark day for everyone in the local government sector and there is no doubt that the framework for accountability and improvement has failed. Further detailed investigation is needed, but based on what has been reported, the areas of weakness are financial management, governance, leadership, and scrutiny and challenge.”

He added: “Clearly the controls put in place by the Prudential Code were not followed. This was only recognised recently by the incoming CIPFA qualified finance director who immediately raised the alarm, as we would expect from our members. 

“While his actions have prevented further loss of public money, this again highlights the need to implement the recommendations of the Redmond Review and ensure we find a swift and effective solution to the current audit crisis, with both preparers and auditors of accounts having specialist public sector knowledge and skills.”