Peter Handford, Derbyshire County Council’s chief financial officer, said he was fully confident Thurrock Council would repay every penny of the £60million lent to it by the authority and the pension fund it oversees. He said £20m had already been paid on time.
Thurrock council in Essex is the subject of a government investigation into “serious concerns about the exceptional level of financial risk and debt taken on by the council”.
It follows a three-year Bureau of Investigative Journalism investigation which found that Thurrock had, over the course of four years, invested £655million in businesses owned by private business owner Liam Kavanagh, used to develop dozens of solar farms.
However, he found that £138m of taxpayers’ money invested in Kavanagh went unaccounted for.
Derbyshire County Council has invested £30m in the Essex Authority and a further £30m from the Derbyshire Pension Fund which it oversees on behalf of more than 330 employers.
A £5million loan was transferred to Thurrock from the pension fund two days before the government announced its intervention on September 2.
At 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. This is something that has been happening for 20 to 30 years.
“It became more common after the 2008 banking crisis, local authorities had access to a range of banks but that changed and local authorities used a peer-to-peer market.
“They (Thurrock) had a particular need for cash, a short term need, they chose to do a lot of short term trading, the Public Works Loan Board was offering a slightly higher rate.
“At the end of the day, they will participate and take on the government’s long-term debt. So far we have repaid £20m of the £60m with £40m outstanding, and that out of £490m invested in total (to other companies and councils).
“Thurrock can’t go bankrupt, they can’t go bankrupt, they have a duty to meet their commitments and ultimately the government will pay, they (Thurrock) will have to pay the debt.
“I have absolutely no fear that this money will not be returned.”
“We have requested a briefing on who made these decisions and what this means for the council’s already precarious financial situation.”
Mr Handford continued: “For the union to say the loans will not be paid is an absolute fabrication.
“We usually have excess cash and we want to put that money to work for the pension fund, so it has been invested for the short term, like you would with money in a savings account.
“There are always lessons to be learned from every situation. Bad decisions may have been made, but that doesn’t mean it will have an impact on taxpayers or pension fund members.
“We take financial management very, very seriously here in Derbyshire. When local authorities like Northamptonshire (county council) started to fall, Northamptonshire got into serious financial trouble and still managed to pay its debts.
Northamptonshire County Council was overcome by a financial crisis in 2018 with a ban on further spending due to its inability to pay for all its services for the coming year, following a government inquiry into the budget of the authority. In 2020, it was proposed that the council be abolished and replaced by two new unitary authorities.
The Derbyshire Pension Fund, valued at over £6billion, provides current and future pension payments to over 100,000 workers.
This includes council staff, teachers, police and firefighters, with more than 330 employers contributing to the fund, overseen by Derbyshire County Council.
To date, about 34,000 members draw their pensions from the fund, while the rest of the membership is made up of people who are still contributing.
The county council itself invested a total of £30m in loans to Thurrock, made up of three tranches of £10m, all transferred to the Essex authority in April and expected to provide returns in April 2023.
Meanwhile, the Derbyshire Pension Fund transferred loans totaling a further £30million to Thurrock, with a series of six £5million loans throughout 2022 and one as recently as August 31, with some due mature later this year and in early 2023.
The Derbyshire Police and Crime Commissioner and Derbyshire Constabulary’s office has invested £6 million in Thurrock Council.
However, he has now announced that “no further investment” will be made by authorities in Thurrock after September 28.
September 28, when the £6 million invested by the two authorities on December 9, 2021 will mature and be returned by Thurrock.
A spokesperson for the authorities said: ‘We have taken note of the government’s appointment of Essex County Council as Commissioner and Inspector of Best Value to Thurrock Council, and will continue to monitor the situation on the Thurrock Board as part of our ongoing cash management activities. .”
A Derbyshire County Council spokesperson previously said: ‘As the administering authority of the Derbyshire Pension Fund, we have taken note of the Government’s appointment of Essex County Council to the role of Commissioner and Inspector of best value to Thurrock Council and we will continue to monitor the situation at Thurrock Council as part of our ongoing cash management activities.