Council must find £4m per year for borrowing interest

Surrey Heath Borough Council has been warned it could go bust unless action is taken.

The authority must find an additional £4m a year to cover interest payments on loans for property investments.

The council has borrowing of £170 million including for its property portfolio, which includes a shopping centre and the former House of Fraser store in Camberley.

The council’s leader Shaun Macdonald described the £4m variance in the budget as “completely wacko”.

At a meeting of the audit, standards and risk committee the council's chief finance officer, Bob Watson, said Surrey Heath was currently running at a deficit.

He said a section 114 notice may need to be issued if the council spent all its reserves, or savings.

A section 114 notice means a council cannot commit to any new spending, and must come back with a new budget.

Woking Borough Council effectively declared itself bankrupt in June 2023, saying it could not balance its budget.

Al Pinkerton, MP for Surrey Heath, told BBC Radio Surrey the news about the council's finances was concerning to him, both as a resident and as an MP.

He said: "Even if 114 is avoided on a technicality, we might still be living with all of the effects or consequences of 114 in advance."

Sites in London Road and House of Fraser are worth almost £79m less than the £160m Surrey Heath bought them for seven years ago, according to the Local Democracy Reporting Service.

A spokesperson for the borough council said it was managing “some unexpected financial challenges” which had led to the projected budget gap.

They added that this had increased the budget pressure which had been highlighted when the council approved its medium term financial strategy earlier this year.

“Despite these challenges, the council remains committed to resolving the financial issues at hand, while continuing to support residents through the delivery of its services and ensuring sound financial decisions moving forward,” they said.

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