Could we end up like Slough?

WOKINGHAM Borough Council’s Finances are in an interesting place. Our reserves have been hit hard by the pandemic, but we are not any way near the trouble that Slough Borough Council is in – they have effectively declared bankruptcy.

Councils are not allowed to go bankrupt, so when they are in financial difficulty they issue a Section 114 notice and are bailed out by central government.

In the case of Slough, their services are being cut to the core with strict limits on spending.

Looking at the details of what has happened with our near neighbour, their borrowing quadrupled from £180 million in 2016 to £760 million now, largely as a result of funding various ambitious projects.

They have also failed to properly collect their expected council tax and business rates over a number of years.

Predicted

Could this happen to Wokingham Borough Council?

Well, according to our current Medium Term Financial Plan in the year 2023/24 our borrowing from external sources is expected to rise to

£580 million with £166 million from internal sources.

That is a total of £746 million.

This predicted figure is very similar to that at Slough, and it needs to be paid back somehow.

It is not all bad – some of the money is being borrowed ahead of expected receipts from developers, so we can build roads, schools, infrastructure and other fun things right now instead of waiting until housing is built.

However some of the money borrowed is for Property Investment and the Wokingham Town Centre Regeneration.

These assets will hopefully generate an income and eventually a profit although, several years after work started, these projects are now only just covering the annual finance charges and have provided no additional income to the Council to spend on services.

The finance charges will always need to be paid but the income is never guaranteed.

Unforeseen things happen – such as a Covid Pandemic, increases in interest rates, or property price falls.

Like it or not, WBC’s finances need to be carefully watched and questions will continue to be raised by the opposition.

We need to learn from our near neighbour, not try to hide from difficult questions.