In a significant development for local government finance, Thurrock Council, based in South Essex, is preparing to initiate legal action against over 20 other local authorities. This follows the council’s failure to recover from a financial crisis that led it to declare a state of effective bankruptcy two years ago, with an overwhelming debt amounting to £1.5 billion. The financial downfall was attributed largely to the council’s risky investments and borrowing practices that ultimately failed.
Thurrock Council’s significant borrowing was aimed at investments, notably in solar projects. However, a contentious element of their strategy hinged on the valuations provided by the Association for Public Service Excellence (APSE), a group owned by local councils that advises on best practices. Thurrock is claiming negligence on the part of APSE, alleging that the valuations they supplied were inflated and thus misleading. According to the council’s leaders, this erroneous assessment contributed substantially to the financial losses that have imposed a heavy burden on local taxpayers.
The impending legal action has caused considerable unrest among the councils named in the lawsuit, which include prominent areas such as Luton, Southampton, Cardiff, South Tyneside, and Wolverhampton. The Bureau of Investigative Journalism highlighted this development, indicating that the ramifications may not only affect the implicated authorities but potentially all 250 councils affiliated with APSE. The chief executive of APSE, Mo Baines, expressed her concerns regarding these legal actions, denouncing them as frivolous and highlighting the excessive legal costs they might impose on other councils, estimated at approximately £25,000 each for seeking independent legal advice.
Baines advocated for a resolution that would not entangle all councils across the United Kingdom, seeing undesirable implications if Thurrock proceeds. She raised a rhetorical question about the fairness of public taxpayers from places as distant as Norwich or Northumberland bearing the financial consequences of decisions made by a council they had no relation to.
The council’s representatives have framed the lawsuit differently, emphasizing that the claim is designed to be against a representational group from the APSE membership, hoping to contain the financial impact on all involved parties. A spokesperson for Thurrock noted that according to court procedures, a ruling against the representative councils would bind all APSE member councils.
The legal responses are not limited to inter-council disputes; Thurrock Council is also pursuing High Court action against businessman Liam Kavanagh and his firm, Rockfire Group, with whom it made substantial investments. A report commissioned by the government last year indicated that Thurrock, previously overseen by a Conservative administration, incurred severe financial losses due to systemic leadership failures and poor financial management practices.
John Kent, who leads Thurrock Council since Labour regained control in May 2024, emphasized the council’s duty to explore all recovery options to counter the crippling debts. The council made attempts to manage its debts by divesting, successfully reclaiming £513 million last year, which was directed towards covering loans. This year, another £90 million is projected to be fetched through similar strategies, although the running debt still stands persistently around £1 billion, with the council’s annual budget for 2024-25 set at £172.4 million.
Harmful legal entanglements could spell trouble for many councils, as Thurrock’s case may set a precedent that triggers widespread implications throughout the public sector, making it crucial for associated bodies to monitor developments closely. The full list of councils at risk of being caught up in the legal entanglements affecting Thurrock includes notable councils such as Bolsover, Derbyshire; Bournemouth, Christchurch and Poole; and Vale of Glamorgan.
As the situation progresses, the financial landscape for local authorities may shift dramatically, underlining the serious consequences of financial mismanagement and reckless investment strategies within public governance.
