Moody’s, the credit rating agency, has withdrawn its monitoring of Warrington Council due to its inability to secure an auditor who would sign off on its accounts. This is despite growing concerns about the funding crisis for local governments.
Warrington Borough Council said in a statement that Moody’s Investors Service no longer provided it with a rating. This is a critical metric used to determine a borrower’s ability to repay a loan.
The local authority is one of the many struggling to cope with the effects of years of funding cutbacks by the Conservative government. It has £1.8bn in debts, and it has been scrutinized over a “high-risk” investment strategy that was pursued to raise money.
The council announced on Monday that it was unable to give assurances to Moody’s that its accounts were approved by external auditors. The council blamed “challenges that apply to the entire local government sector in terms of securing auditors with sufficient capability and capacity”.
The council has asked another rating agency to rate £150m in bonds due for maturity in 2055. It says that it is still compliant with these bonds’ terms.
Warrington, like many UK councils has invested cash in commercial schemes to generate returns. The council invested in Together Energy which went into administration in 2022 and provided a £200m credit facility to Matthew Moulding the billionaire owner the Hut Group.
The heavily indebted Council refused to give crucial information to Grant Thornton’s auditing firm, limiting its ability to examine the books.
In the same month, the Government appointed an Inspector who was to conduct an independent investigation in order to determine if the authority met its duty to provide the best value, and to improve how it operates.
Steven Broomhead , the chief executive officer of the council, insisted in June earlier that the £1.8bn in debt was in fact an investment.
He said: “A great deal of what we have done in Warrington is what I call civil entrepreneurism.” We have operated in a very commercial way.
“We have been so commercially successful that the government has noticed us and is now inspecting our work to see if it’s worth it.
“We didn’t borrow money to invest in order to get a return. We have been borrowing money to regenerate. “What the hell’s wrong with that?”
In recent years, a number of councils reported financial problems that led to the cutting of essential local services.
Andy Haldane is the former chief economist of Bank of England and chair of government’s advisory council for levelling up. He cited austerity measures implemented by successive Tory governments earlier this year as the “root” cause.
In England, a growing number of councils are warning that they may face bankruptcy. The ministers have taken evasive measures by adding an additional PS600m for funding plans next year. However, MPs from all political parties and council leaders say that local authorities still lack £4bn in a “out-of-control” financial crisis.
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