Council debt warning lifted but concerns remain

The government has lifted a warning it issued to a Surrey council over concerns about the authority's debt levels.

Runnymede Borough Council (RBC) had racked up about £600m in debt - roughly 71 times its core spending power - leading the government to issue a Best Value Notice last year.

The government said it was pleased to see action had been taken by the authority but remained concerned about its "significant" debt and the risk it carried.

RBC said it would continue to reassure ministers about the way it delivers local services and deals with its debt.

Money is borrowed on long-term deals from the Public Works Loans Board – but the risk comes when a council can no longer afford to meet its debt repayments and goes effectively bust, as was the case in neighbouring Woking.

The money borrowed by RBC paid for regeneration projects and to fund its own companies, with the idea of using the profits to pay for services it could not otherwise afford, according to the Local Democracy Reporting Service.

The government decided not to extend the notice following steps taken by the local authority which included working closely with Whitehall to make improvements to how it manages its commercial assets and overall debt.

The council has begun selling some of its property portfolio and has set out a long term need to review its larger assets.

Writing to RBC's chief executive, Suzanne Clarke, deputy director of local government finance said: "Based on the available evidence, ministers are reassured as to Runnymede Borough Council's capacity to comply with its Best Value Duty.

"Whilst we are not renewing the notice, the department remains concerned about the significant debt held by the council and the risk this carries.

"We expect the council to continue taking steps to reduce and manage its overall debt."

The council said in a statement: "Lifting the notice is testament to the transparent and open approach we have taken with civil servants in our response to the notice and evidencing our continuous improvement to reassure ministers about the way we operate to deliver local services and manage our commercial assets and overall debt."

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