Schools, care homes and sports clubs sold off to pay spiralling council debt

According to a BBC report, communities around the UK are paying for spiraling levels of council borrowing as a result of a fire sale of publicly owned facilities. Hundreds of buildings are being auctioned, including schools, care homes, a boxing gym, and even an Olympic legacy equestrian center, as struggling councils seek to eliminate a debt pile totaling £122 billion. Dr. Jonathan Carr-West, the Chief Executive of the Local Government Information Unit (LGIU), said that public value will continue to decline until the government provides a long-term solution to council debt. The government said it was aware that the council funding system was broken and was pushing forward with reforms to fix the problem.

Councils around the United Kingdom can borrow money from banks or from the government to finance improvements in their areas, from building new schools to maintaining roads and providing sheltered housing. They can also borrow to make investments that are not intended to produce income. Since 2010, they have acquired shopping centers, office parks, and solar farms, as well as financing large housing projects with borrowed funds. The bulk of the loan was obtained through the Public Works Loan Board (PWLB), and interest rates on that borrowing remained relatively low until 2022. Despite cutbacks placed on borrowing for solely commercial purposes in 2021 last year, the Public Accounts Committee warned last year that debt levels had become "unsustainable. However, the BBC Shared Data Unit found that combined debts increased by 7% last year. Their total debt of £122 billion is now equal to £1,700 per household. Authorities are not allowed to sell off assets in order to fund day-to-day programs such as bin collections or social care. However, increasing numbers of councils in financial distress are now being granted permission by the government to do so. They also encourage councils to take out short-term loans to pay for day-to-day services, but the debt pile continues to rise in the process. This year, 30 councils were granted those powers, while last year, it was 19.

Councils sold £2. Through the Right to Buy program, the public assets in the last two years have grown by 9. 9 billion more than social homes. Those with the highest debts were twice as likely to have been among the top sellers. For Dr Carr-West, the system is unsustainable.

I'm essentially payday loans for local government,

one local government finance officer told me.

We're now seeing the selling of assets, and once they're gone, they'll be gone. So what was public value is now in private hands, and it will not return.

Not all council-owned buildings are directly used by the public in the way that they do, for example, recreation centers. Often authorities have legacy buildings that have been leased for years, such as supermarkets, pubs, and factories. However, Dr. Carr-West said those assets still represent a public loss when they were sold, but that they could be highly useful when councils come to revive town centers, and that local authorities' cheaper rents and longer leases can continue to boost local economies.

'Everything came down to finance'

Among other items, the council in Croydon, south London, invested money into a large housing company, a shopping center, and a hotel. As the Covid pandemic struck, it lost millions and could not pay its debts. The £210 million firesale of public property over the last four years has only insured around 15% of its current £1. Last year, 5 billion debt increased, which continued to rise. According to BBC, the authority's elected mayor Jason Perry said that the council spends £70 million a year on debt repayments alone. Nurseries, community centers, and tennis clubs were among a disposal list of nurseries, school centers, among In February, the new Addington Leisure and Community Centre, which was home to the estate's boxing club, was closed. According to head coach Bill Graham, the club has 300 members and works with men and youth who would otherwise be involved in crime. Although a group of volunteers raised £25,000 to continue attending a nearby school, the school's future remains uncertain.

We help reduce crime, but we encourage children not to go to grab knives,

Mr Graham said. All came down to finance, the bank said we should sell our funds due to the situation we are in, and that's it.

'Meant to inspire a generation'

In the aftermath of the 2012 Olympics, the Greenwich Equestrian Centre was supposed to introduce thousands of children in the south east London borough to the joy of horse riding, according to the centre's then council leader. The £1. Princess Anne's 2013 opening of a 6 million facility was also supposed to offer training

for many people for years. However, the council decided to sell it in November despite a community effort to take over the race, which now has more than 4,500 signatures. Neither the petitioners nor British Equestrian, who paid for the facility, were informed of the decision. The Royal Borough of Greenwich Council saw its debts rise by £268 million last year, mainly because it didn't have to design or buy new affordable housing for the 26,000 residents currently on the housing register, according to the municipality. However, businesswoman Tao Baker, who has submitted proposals to transfer the center to local ownership, believes a sale would be

short-sighted. It would barely make a dent to the debt pile, according to her, though the center's absence will be felt for years to come. At its peak, the center had an 18-month waiting list for free horse riding sessions, and Ms Baker believes it could easily be sustainable with the right guidance. However, she claims that the council leadership is reluctant to meet with her.

I think the reason why the community is so keen to save this isn't simply because it's a one-of-a-kind athletic facility and the only Olympic facility in Greenwich,

the council said.

They knew there was a community petition to save the hospital, but they never announced that they were going to do this. Ms Baker says she has requested multiple meetings with the council leadership over the past year, but none of which have been fruitful.

Anyone who can demonstrate a solid financial business case

is accepted by the council, according to the council. Any viable bids to take over the

defunct

equestrian center, according to a council spokesperson.

We urgently need shovels and roofs over people's heads, as well as the rest of London," he said, and we're proud to have the largest number of new affordable homes start of any borough last year.

'Debt is not inherently bad'

The coalition government aided town hall chiefs to diversify income streams by investing in property in the mid-2010s. They did this by borrowing, and in several cases, council investments are already paying dividends. Debt is not inherently bad, Sarah Calkin, editor of the Local Government Chronicle, said. It depends what it's for. Councils werein risk

when interest rates were low, only to be stung by dramatic rate rises further down the road. Warrington Council's £1. Its 6 billion debt makes it one of the country's largest indebted due to its population size. The council said it had no choice but to invest in Manchester, haulage distribution centers, and a large shoe factory among other things to fill the income gap in income it had received from central government under the revenue support grant to fill a gap in revenue it had earned. Despite the fact that the grant has grown in the years since the pandemic, the Institute for Fiscal Studes found that core budget funding for local authorities is around 18% lower per person compared to 2010. Warrington's chiefs said to be earning between £20 million and £23 million a year from those investments, which meant it would not be making significant reductions to services. However, government-appointed inspectors discovered that the council had a

strong exposure

to rising interest rates and was rapidly eating into its savings. Warrington's population received no or no public benefit from the program's out-of-town investments. Crucially, Together Energy's demise in 2022, a company it held a 5 percent interest in, resulted in damages of just under £9 million. The government sent ministerial envoys in July to help the council's finances return to normalcy. On several occasions, the town's former MP Andy Carter warned the council that the council's policy was uncertain.

We're getting decisions that I don't agree would be taken in a commercial sense - a company wouldn't be risking shareholder funds,

he said. Mr Carr-West said that spiraling borrowing rates were ultimately a result of years of council underfunding.

One third of councils is reminding us that if nothing changes in terms of how they are funded, they are going to go bust within five years,he said.That's down from 50% of councils who told us that in 2024. So we have made some progress.

Dr Carr-West said that calls for the government, which owes 75% of the council debt through the PWLB, are on the rise. The support it received in loans and asset sales, according to Croydon Council, was

not profitablebecause they weresimply contributing to [their] borrowing costs.

We can't become financially healthy and meet our Best Value Duty until a government solution, such as a debt write off,

a spokesperson said.

No such announcements of a debt write-off have been made. Prime Minister Sir Keir Starmer unveiled an update to council central grant funding in June, promising to simplify the complicated funding formula used to distribute funds. Labour claims that the scheme would redistribute grants to focus on the most disadvantaged areas as well. It has also begun work on reorganizing two-tier council areas, those with both county and district councils, to become unitary officials.

While councils are in charge of governing their own budgets, we know that the new funding scheme is broken, which is why we're taking decisive action so local leaders can continue to provide the public services their communities rely on.

We have announced over £3. On top of the £69 billion raised for local services this year, we'll continue to upgrade council funds, and we''ll go further to rewrite the funding structure, including new unitary councils, to ensure it's ready for the future.

Additional reporting by Catherine Heuston, Florence Cook, and Paul Bradshaw.