Agenda item

The Leader, or their nominee, to answer any questions raised by members of the public in accordance with Standing Order 13.

One question has been received from a member of public (see attached).

The Mayor reported that, under Standing Order 14, one question had been received from a member of the public.

Preamble and Question from Mr R O’Brien:

Preamble

As a Lender of monies, it is Westminster’s responsibility to run due diligence and underwriting activities, of any loans made to Spelthorne Borough Council. With the anticipated use of these funds being well documented and publicly available, over the years.

Spelthorne Borough Council (up to now), have a sound credit relationship, meeting their annual debt repayment obligations, for the past 8 years.

A Lender holds the risk for default and manages this through interest fees on the principal loan amounts. If similar actions were taken by a Mortgage Lender or Bank seeking to change fixed and agreed loan interest rates, there would be FCA (Financial Conduct Authority) or other Watchdog authorities, protecting the rights of the borrower.

Local Government serves as a vital check and balance on overt Central Government control. With the Courts playing their role to inspect legislation and it’s legal interpretations.  

Independent treasury advice was sought from Arlingclose to interpret the legislation and this has seemed fit for purpose these past 8 years. Under these circumstances it should be the Courts to decide grey areas of Government legislation. Not the Government marking their own homework, especially as the financial ramifications for Spelthorne Residents, are so great!!

The Risks to Reward ratio are asymmetrical, (costs of seeking legal counsel are miniscule when compared to the monies and impacts saved from changes to loan repayments).

Question:

Would the Leader of the Council please explain how they’ve decided to abandon all financial responsibility to their Residents, by not engaging with Legal advice or seeking a judicial review into mid-term loan changes from the PWLB funds?

We have seen the highly unusual approach of Westminster assigned Commissioners interpreting the legal framework of Loans and subsequently imposing an increase per year, of loan repayments, from £22.9million to £56.1million. A rise of 144% and exposing Spelthorne Residents to incredible debt risks.

Response from the Leader of the Council:

Thank you for your question. It relates to two main issues:

·         How the Council sets money aside each year to pay off its debts (this is called Minimum Revenue Provision, or MRP), and

·         A decision made in November 2025 to reorganise and reduce the Council’s loans.

Spelthorne Council borrowed around £1.1 billion to buy investment properties. The plan was that rent and income from these properties to help pay for local services, especially services that the Council are not legally required.

This level of borrowing was extremely high. It works out at over £10,000 ofdebt per resident, compared with an England average of about £1,300 per person. To make this work, the investments needed to earn at least 8.5% every year just to cover the cost of the loans.

In reality, the property investments performed badly. From 2016/17 to March 2025, they made losses overall and fell in value by about 43%. Councils are legally required to protect public money, so losses of this scale meant the situation could not continue without action.

In February 2023, the previous government formally raised concerns about the Council’s level of debt. 

Then, in May 2025, the Secretary of State issued a legal instruction (called a Statutory Direction) requiring the Council to produce an Improvement andRecovery Plan. This required the Council to:

• set aside the correct and lawful amount of money each year to cover its debts (MRP),
• reduce borrowing as quickly as reasonably possible, and
• sell assets where appropriate.

MRP is not a loan repayment. Instead, it is money councils must legally set aside each year from their budget (funded by council tax and other income) to make sure borrowing is being properly dealt with over time. By law, it must be set at a prudent level and follow government guidance.

Independent reviews including those by CIPFA, government inspectors, and the Council’s external auditors all reached the same conclusion:

·         the debt was too high,

·         the amount being set aside for MRP was too low, and

·         the situation threatened the Council’s long-term financial stability.

In November 2025, the Council restructured its loans, in line with established Public Works Loan Board rules. This reduced total debt by £342 million, nearly one-third of what was owed. Although the new loans have higher interest rates, this will fall accordingly as and when we dispose of the assets.

At the same time, the Council changed its MRP policy so that it now fully meets legal requirements and government guidance.

This approach was discussed with government officials, CIPFA, and the external auditor. The refinancing was carried out using normal processes through the Public Works Loan Board, which any council can use. This means the risk of legal challenge is very low.

Although the refinancing increases costs in the short term, much of this is offset by the £342 million debt reduction, which is spread over ten years (around £34 million a year credited to the budget). As more assets are sold, the financial position will continue to improve.

Overall, these actions do not increase risk for residents. They reduce debt, fix past problems, and put the Council on a more stable and sustainable financial footing for the future.