DLUHC hands two councils best value notices over debt fears

The Department for Levelling Up, Housing and Communities (DLUHC) has issued best value notices to Runnymede Borough Council and Eastleigh Borough Council after reviews at both local authorities showed significant debts relative to core spending power.

DLUHC took the decision to issue a notice for both councils in light of the findings of CIPFA capital reviews at the respective authorities.

The reviews revealed that Runnymede has a debt 71 times its core spending power, while Eastleigh is wrestling with a debt 45 times its core spending power.

Shortages in terms of capacity and expertise in Eastleigh's asset management team, finance, and internal audit have "impacted" capacity to manage the scale and ambition of its commercial and housing developments, CIPFA said.

CIPFA also raised concerns over Runnymede's reliance on commercial income, which represents a substantial revenue source and is used to support both core and discretionary services.

The DLUHC said both councils should implement all recommendations made by CIPFA.

In the case of Eastleigh, CIPFA recommended the council set out a plan for reducing debt, review its portfolio and implement a moratorium on new debt-funded asset investment.

It also recommended that Eastleigh strengthen its internal audit and ensure appropriate capacity is in place for key areas.

At Runnymede, CIPFA recommended the council set out a plan to reduce and manage its debt, alongside recommendations to develop a 'risk appetite statement', including specific elements for its commercial and regeneration portfolio and divestment opportunities, and formalise a moratorium on commercial investment.

DLUHC expects both councils to commission an external governance review of decision-making and scrutiny processes, culture and leadership, capacity, and the delivery of services.

Commenting on the notice, the leader of Eastleigh Borough Council, Cllr Keith House, said: "We welcome more engagement with DLUHC. We look forward to explaining how local government finance actually works on the ground and how Eastleigh's prudent investments have protected essential public services.

"By innovating to generate commercial income, the council has been able to continue to fund services for residents, while delivering a real-terms cut in our Council Tax. At the same time, our commercial activities have supported the creation of jobs and investment in our communities."

Andrew Pritchard, Chief Executive of Runnymede Borough Council said: "The Best Value Notice issued reflects the next step in our ongoing and positive dialogue with DLUHC.

"Most of the Council’s borrowing was taken when interest rates were at a historic low, with a fixed rate for their duration. This borrowing enabled us to fund a mix of commercial investment, improvements to our social housing stock, and complete the regeneration of Addlestone and Egham - all of which now benefits residents.

"We will engage with DLUHC and continue our positive and productive work together."

Adam Carey