A Derbyshire finance chief has said it is an “absolute fabrication” to suggest an under-investigation London council will not repay the £60 million it owes the local authority he works for – but he admitted that “poor decisions may have been made”.
Peter Handford, finance director at Derbyshire County Council, has said he is fully confident that Thurrock Council will repay every penny of the £60 million loaned to it from the authority and the pension fund it oversees.
He said £20 million has already been paid on time.
Thurrock Council, in Essex, is being investigated by the Government over “grave concerns about the exceptional level of financial risk and debt incurred by the council”.
This follows a three-year Bureau of Investigative Journalism investigation which found that Thurrock has, over the course of four years, invested £655 million in companies owned by private business owner Liam Kavanagh, used to develop dozens of solar farms.
However, it found that £138 million in taxpayer money invested with Kavanagh was unaccounted for.
Derbyshire County Council has invested £30 million in the Essex authority and a further £30 million from the Derbyshire Pension Fund it oversees on behalf of more than 330 employers.
A £5 million loan was transferred to Thurrock from the pension fund two days before the Government announced its intervention on September 2.
In a meeting of the county council’s audit committee this week (September 20) Mr Handford said: “This is a classic example of what I think is an old story. It is something that has been happening for 20 to 30 years.
“It became more frequent after the banking crisis in 2008, local authorities used to have access to a range of banks but that changed and local authorities resorted to a peer-to-peer market.
“They (Thurrock) were in a particular need of cash, a short-term need, they have chosen to do a lot of short-term deals, the Public Works Loan Board was offering a slightly higher rate.
“Ultimately, they will pitch in and take the long-term debt from the Government. We have had £20 million repaid so far from the £60 million with £40 million outstanding, and that is out of £490 million invested in total (to other companies and councils).
“Thurrock can’t go bankrupt, they can’t go bust, they have a duty to meet their liabilities and ultimately the Government will pay, they (Thurrock) will have to pay the debt.
“I have got absolutely no concerns that that money will not be repaid.”
Last week, sharing an article from the Local Democracy Reporting Service about the cash invested by Derbyshire County Council, the East Midlands branch of the trade union UNISON said: “We are deeply concerned about another cash crisis at Derbyshire County Council.
“We have requested a briefing to find out who made these decisions and what it means for the council’s already precarious financial position.”
Mr Handford continued: “For the union to say the loans will not be paid is an absolute fabrication.
“We usually have a surplus amount of cash and we want to make that money work for the pension fund, so it was invested short-term, just as you would with money from a savings account.
“There are always lessons learned from every situation. Poor decisions may have been made but that doesn’t mean it is going to impact on taxpayers or pension fund members.
“We take financial management really, really seriously here in Derbyshire. When local authorities like Northamptonshire (county council) started to fall, Northamptonshire got into deep financial trouble and still managed to pay their debts.”
Northamptonshire County Council was overcome by a financial crisis in 2018 with a ban on all new spending due to its inability to pay for all of its services for the coming year, following a Government probe of the authority’s budget. In 2020 it was proposed that the council should be scrapped and replaced with two new unitary authorities.
The Derbyshire Pension Fund, valued at more than £6 billion, provides current and future pension payments for more than 100,000 workers.
This includes council staff, teachers, police officers and firefighters, with more than 330 employers paying into the fund, overseen by Derbyshire County Council.
To date, there are around 34,000 members who are drawing down their pensions from the fund, while the rest of the membership is made up of people who are still paying in.
The county council itself has invested a combined £30 million in loans to Thurrock, made up of three £10 million tranches all transferred to the Essex authority in April and due to provide returns in April 2023.
Meanwhile, the Derbyshire Pension Fund has transferred loans totalling a further £30 million to Thurrock, with a string of six £5 million loans throughout 2022 and one as recently as August 31, with some due to mature later this year and into early 2023.
The office of the Derbyshire Police and Crime Commissioner and Derbyshire Constabulary has invested £6 million in Thurrock Council.
However, it has now announced that “no further investment” will be made from the authorities to Thurrock after September 28.
September 28 is when the £6 million invested by the dual authorities on December 9, 2021, is to mature and be returned by Thurrock.
A spokesperson for the authorities said: “We have noted the Government’s appointment of Essex County Council to the role of commissioner and best value inspector at Thurrock Council, and we will continue to monitor the situation at Thurrock Council as part of our ongoing treasury management activities.”
A spokesperson for Derbyshire County Council previously said: “As the administering authority for Derbyshire Pension Fund we have noted the Government’s appointment of Essex County Council to the role of commissioner and best value inspector at Thurrock Council and we will continue to monitor the situation at Thurrock Council as part of our ongoing treasury management activities.”
