The minister sends a team of experts to the debt-in-law Council after government inspectors warned that borrowing and investment strategies for that risk was being used to avoid “transformative” savings.
Local government minister Jim McMahon said Thursday that “envoys” would be dispatched for up to five years as labor-led local governments “does not comply with its best value obligations.”
His intervention comes after an inspector said in a report that Warrington (with debt of £1.9 billion and budget black holes of nearly £50 million) was unsure that he was “aware of the severity of the issues he is facing.”
The Council of Northwest England believes that since 2017 it can borrow money to invest in banks, funds and commercial real estate portfolios.
Local government debt burdens have grown to be one of the largest local governments. Auditor Grant Thornton quit last summer and supplied two value to the money warning, but had to undermine his multi-million pound investment.
The “highest value” test ordered by the minister last year found on Thursday that the central government has been making “high-risk” investments to avoid “transformative” savings since 2010.
The highly critical report recommended that committee members be dispatched, and noted that local governments resisted repeated external warnings to change courses and that it is unclear whether the council will be able to repay the debt on a continuous basis.
“The council’s response to previous external reviews and its limited capabilities do not give us confidence. We can recognize the severity of the problems facing only Congress and make necessary changes,” the report said, criticizing the adoption of a “commercial approach without a commercial strategy.”
In a written statement to Congress, McMahon said that Warrington failed in his obligation to provide the best value to taxpayers, but stopped appointing external commissioners and opting for envoys instead.
He said they would support the council itself to improve it, rather than take over operations like it happened in Liverpool and Birmingham.
Warrington began a collaborative approach to speculative investment eight years ago.
At last year’s meeting, one council official described Robinson as “Lionel Messi,” a fund manager.
Former Derivative Trader Lee Robinson ©YouTube
Warrington later withdrew from one fund run by Robinson’s investment company, Altana Wells, after media coverage and criticism from conservative councillors that he invested in junk valuation debt.
The council also put £30 million in Redwood Challenger Bank. There, Robinson is a non-enforceable director and fellow investor. The value of that investment was later written down to £4.3 million.
Grant Thornton, who claimed that he lacked the derivatives expertise needed to audit Redwood’s investments, is “increasingly uncomfortable” with Warrington’s “escalating borrowing and investment,” the inspector said.
The company’s exit means Warrington is in a “unique position” with no external auditors, which they pointed out, further exposing its authority. The Council has not approved accounts since 2018-19.
The inspectors found that councillors did not have the necessary expertise to scrutinise their investments, but they had made them “happy” “to protect the council from other difficult decisions.”
In a statement, Warrington Council said it was awaiting the arrival of the envoy. “This is a collaborative decision and will help to provide the necessary changes,” he added.
Although Warrington has not declared an effective bankruptcy to date, the issue reflects the issues of other councils that have taken a speculative investment approach in recent years.
Thurlock Council, also an investor at Redwood Bank, in Essex, went bankrupt in 2022 after a series of failed solar farm investments.
The UK Accounting Watchdog said separately on Thursday it banned Sean Robert Clark, former chief financial officer of the Chartered Association of Certified Accountants, for five years, and issued strict responsibilities.
The Financial Reporting Council said Clark acknowledged that he lacked his obligation to manage Thurrock’s operations and investments for five years, which saw the council collapse into bankruptcy after earning £1.3 billion in debt and facing a loss of £275 million from the investment.
