Surrey council on brink of insolvency with debts of nearly £2bn

theguardian.com:

A local council in Surrey has signalled it is close to effective bankruptcy after amassing debts worth almost £2bn to fund a property investment spree, raising fresh questions over the fragile health of local authorities after years of austerity.

Woking borough council said it was “in the territory” of being unable to meet its financial obligations, amid a surge in debt interest costs on its investments, which include a shopping centre, residential skyscrapers and 23-storey Hilton hotel.

The council, one of several in England with big debt problems, said it was at risk of issuing a section 114 notice, which effectively signals insolvency. Although councils cannot technically go bankrupt, a section 114 is able to force central government to intervene to ensure local services are sustainable.

The process is seen as an admission by an authority that it lacks the resources to meet current expenditure, that its reserves are depleted and that it has little confidence it can bring its finances under control in the near future.

Woking is currently subject to a government review of its finances. Control of the council passed to the Liberal Democrats last year, after a fraught local election which partly focused on the vast debt pile accumulated by the former Conservative administration.

The development comes as Michael Gove’s levelling up department turns the screw on local authorities with high levels of debt. The government has ordered inspectors to review the finances, investments and governance, or has directly intervened, at several authorities, including Slough in Berkshire, Thurrock in Essex and Warrington in Cheshire.

Woking said it would increase council tax by 3% in 2023-24, but added: “It is not evident at this stage,