The towers of Woking: the skyscraper symbol of the municipal debt | Immovable
A a cluster of skyscrapers that looks more like Singapore than Surrey rise above the center of Woking. Called Victoria Square, the trio of towers – the tallest is 34 stories – is unusual for a brand new historic development in that support for them has not come from a Gulf state, Chinese investors or of a global asset manager. Instead, the proud owner of Britain’s tallest buildings outside a major city is Woking Borough Council.
The towers are the pinnacle of a nearly £2billion debt-fueled investment scheme that has divided local opinion, been echoed by councils across the country and raised alarm bells at within the national government.
Not all council projects have been successful. He offered a firm £250million to redevelop the city’s football stadium and build 1,000 homes, but the project ran into buffers after planners said it was only suitable for 93 accommodations.
“It’s gotten absolutely ridiculous,” says Graham Chrystie, an adviser who in 2019 switched from the ruling Conservatives to the Liberal Democrats over borrowing levels, tipping the council into no overall control. Now retired, he fears the pile of debt will prove unsustainable. “The borough seems to have transformed itself into a property developer – from £5million projects in the center of Woking to those worth £500million. We are in a rather desperate situation.
With Woking’s debt set to reach £2.4billion within five years – the highest borrowing figure, relative to its size, of any local authority in Britain – the city, which has just over 100,000 inhabitants, was placed on a government watch list in May.
Local councils have embarked on a borrowing and investment spree to try to avoid the impact of austerity. With government-backed purchasing power slashed by more than 50%, far more than council tax hikes, many local leaders say they had little choice. Most of the spending was funded by an obscure arm of the Treasury – the Public Works Loan Board (PWLB).
However, ministers worried about soaring borrowing figures and some questionable investment decisions. At least five other debt-laden councils have also been redlisted: neighbors Woking, Spelthorne and Runnymede, as well as Eastleigh in Hampshire, Thurrock, Essex and Warrington in Cheshire. Ahead of last week’s political upheaval, councils had been warned that the leveling department was pushing through new rules giving it the power to intervene in their financial affairs, including limiting borrowing and forcing asset sales. Until a new prime minister is appointed, the government has said it will continue to push forward legislation currently in parliament.
A government spokesman said the changes would make it easier to intervene when councils make ‘excessively risky investments’ with taxpayers’ money. “Communes are responsible for managing their own money, but they must comply with the prudential framework, which establishes codes of conduct…and prevents them from borrowing excessively.”
Singapore to Surrey?
Woking’s skyscrapers arose in part because of the city’s location, surrounded by a greenbelt. Planners felt that the high-rise buildings would help accommodate its growing population while keeping the residents of the surrounding leafy villages happy. But the town known as the setting for much of HG Wells War of the Worlds has seen its own battles as locals accuse the council of trying to convert their home to Singapore-on-Wey.
As well as Victoria Square – Woking’s biggest asset and liability, in an investment worth £605m – the council has spent millions elsewhere, including taxpayer-funded loans worth £11million to a private school.
Nearly £500million is linked to his wholly-owned ThamesWey group of companies, which operates a social housing provider, low-carbon energy provider and property developer – businesses that were the bread and butter of consulting work before a wave of outsourcing. Although now more unusual, such tactics have won praise in towns such as Preston and Stockton-on-Tees, where councils have taken a similar practical approach to regeneration.
In Woking, ThamesWey is building more than 1,000 homes, a leisure center and shops as part of a six-year regeneration plan for Sheerwater – a suburb first expanded in the 1950s to rehouse Londoners from the is destroyed. Not all residents are happy to see bulldozers demolish post-war homes to make way for the new master plan. But Jonathan Lord, the city’s Tory MP, says he was backed by the Lib Dems and should be a net positive for the region.
“Citizens expect council to continue to improve the fabric of our borough while meeting all of its financial obligations,” he said.
However, ThamesWey encountered problems. Plans by its energy arm to provide district heating in Milton Keynes, 60 miles from Woking, have been described as “money pitafter the project racked up £32million in debt.
The council has already struggled to choose the right partner. He had lined up a £250m taxpayer-funded loan to back a plan by Hertfordshire property developer Wayne Gold to nearly quadruple Woking FC’s stadium capacity to 9,000 and build 1,000 homes.
Gold had failed with a similar stadium and housing plan in Braintree Town, Essex. A group of cross-party advisers criticized his lack of experience and said the local authority failed to carry out credit reference checks when offering the £250m loan.
Gold, who could not be reached for comment, told the board last year that he had “successfully moved” football clubs in Maldon, Bishop’s Stortford and East Ham. Despite backing from local authority officers, councilors in Woking rejected the plans. An appeal was later rejected by the Secretary of State for Housing, ending the council’s development and financial agreements with Gold.
Amid the economic chaos caused by the coronavirus, questions have also been raised about the future of downtown businesses and high-rise buildings. Woking has lost branches of Debenhams and Topshop, both of which went bankrupt during the pandemic.
The council’s partner in Victoria Square – Northern Irish property company Moyallen, which owns 52% of the project – saw four of its other holding companies fall into administration with debts to the Bank of Ireland worth 188 million of pounds sterling.
Two of these companies together control the Peacocks shopping center in Woking, adjacent to Victoria Square, and Moyallen’s main holding company is more than six months behind in filing accounts at Companies House for 2020. Moyallen said the question was being processed. Woking Council said Victoria Square was unaffected.
“The more you borrow, the more the numbers increase‘
The National Audit Office estimates that councils across England invested almost £7billion in commercial property in the three years to March 2019, almost 15 times what they had spent in the previous three years. In the UK, local government debt levels have jumped nearly 50% since 2014 to reach £130bn at the end of last year.
Neighboring Spelthorne Council, whose MP is Business Secretary Kwasi Kwarteng, is in the spotlight after buying a BP research campus and shopping center in deals worth hundreds of millions of dollars books.
Advisers in Labour-led Warrington bought a 50% stake in utility company Together Energy, before it went bankrupt in January amid soaring energy costs. The authority has also lent money to billionaire Matt Molding – owner of online retailer and Conservative party donor The Hut Group – and owns shares in a bank backed by former Tory treasurer David Rowland.
Most have invested within their local borders, using cheap funding from the PWLB, which offers low-cost long-term borrowing based on UK sovereign interest rates. But some have gone further, sucking business assets further afield and lending taxpayers’ money to generate a financial return.
Local leaders say the hunt for investment income was an inevitable response to a decade of austerity, with council purchasing power cut by more than a quarter since 2010. That hasn’t stopped the Lib Dems to arm Woking’s debt in last month’s local elections: he took full control of the council amid a wider collapse of the ‘blue wall’ battlegrounds.
Ann-Marie Barker, the council’s new Lib Dem leader, said the reaction on the doorstep was clear: alongside issues such as Partygate, the council’s debt levels and plans for great height have returned time and time again.
“We didn’t want Woking to become Croydon or Singapore,” she said, saying the Conservative leadership “didn’t seem to be worried” about the debt. “Obviously it’s a concern when you get a letter like that [putting the council on a watchlist] of a government department. But I guess in some ways it wasn’t a surprise. We have the highest per capita borrowing in the country.
However, Barker faces questions about what changes she could make. Simon Ashall, the former Tory deputy leader of the council, who lost his seat to the Lib Dems in May, accuses his opponents of dropping support for the spending plans only after they sniffed out an election opportunity.
Woking has so far borrowed around £1.8billion from the PWLB, repayable over the next 50 years, and Ashall is confident that despite Covid the council will repay its debts.
“Woking went further [than other councils]. The more you borrow, the more the numbers increase. It cannot be denied. But do I think £1.8billion in profits will accrue to Woking – maybe not in the next 18 months, but over the next 50 years? Absolutely.”