The Tory-led Thurrock council, which is on the brink of bankruptcy after losing hundreds of millions of pounds on failed commercial investments, repeatedly ignored warnings from financial experts over the “unprecedented risks” it was taking with public money, it has emerged.
According to documents obtained by the Bureau of Investigative Journalism (BIJ), Thurrock’s top finance official failed to act despite being cautioned about the scale, speed and risky nature of the council’s investments.
According to the BIJ, Sean Clark, the corporate director of resources at Thurrock council, was the senior official behind a string of business deals in which it borrowed £1bn – several times its annual spending on local services – to invest in bonds linked to solar energy and other businesses.
They included £655m invested in a solar farms company, Toucan Holdings 1, which went into administration this month, and £94m in Just Loans Group plc, a business lender which went bust in June. These two deals alone have left the council exposed to potential losses of up to £250m.
Thurrock admitted on Tuesday that it faces a near £500m budget deficit this year – thought to be the biggest of its kind seen in local government – after writing off £275m on deals that went sour and setting aside a further £130m to pay back investments debts.
The council has been forced to go cap in hand to the government for a bailout to keep it afloat and has warned it may have to drastically cut services and jobs, sell off assets and raise council tax as it attempts to recover from what opposition politicians called the “catastrophic handling” of its affairs in recent years.
Clark, who earned £130,000 a year, was suspended on full pay from his role in September after the government sent in commissioners to take over the running of the council’s finances amid ministerial concerns over the “the exceptional level of financial risk and debt incurred”.
According to the BIJ, Clark was personally warned in March 2018 by the council’s financial advisers Arlingclose of its urgent concerns regarding the council’s “extreme” appetite for risk. Arlingclose said in a letter it felt this was a level of risk “well beyond” all of its other clients, even those who had adopted relatively aggressive strategies.
“The scale, risks and speed of implementation of the council’s activities which are based around a significant ‘borrow to invest’ strategy is of particular concern to us,” the letter said. It highlighted risk areas including £370m invested in unrated bonds, high levels of debt and “huge exposure” to local authority funding.
The letter continued: “The council’s activities could be viewed as going well beyond what is prudent even though, we appreciate, the pressure to adopt more commercial practices within the significant financial and political issues exists within local government and at Thurrock in particular.”
Clark subsequently terminated the council’s relationship with Arlingclose.
Separately, an internal report into Clark’s conduct, leaked to the BIJ, alleges he failed to act upon Arlingclose’s concerns, or properly advise other senior figures, including senior councillors, of the risks associated with the investment strategy.
The report referred to a “systematically lax” culture of due diligence on investments under Clark. “Evidence indicates that the quality of governance in place for a £1bn investment programme was inadequate and the scale of the delegated authority was too great.”
Clark did not respond to requests from the Guardian for comment. Thurrock council said it did not comment publicly on internal employment matters.
