LABOUR-controlled Warrington Borough Council is pressing ahead with a £37.5m “fully-secured” loan to Knutsford-based affordable housing provider, Auxesia Homes, despite mounting criticism from opposition Tories.
At the Council’s Cabinet meeting last night the Labour Cabinet agreed to press ahead with the proposal to grant £37.5m of loans to the for-profit registered housing provider Auxesia Homes Limited, with deputy leader Cllr Cathy Mitchell justifying the loan, saying affordable housing was in short supply in the area and if the loan wasn’t paid back, the council would take ownership of the properties.
She said funds would only be released as properties were released and the council wasn’t “writing a blank cheque!”
With uncertainty surrounding the Council’s investment in Together Energy the Conservative group had called for an end to the current high-risk investment program.
Cllr. Ken Critchley, Tory finance spokesperson said, “This is not a trivial sum that is potentially being loaned to Auxesia Homes Ltd. To put these loan facilities into context, they are equivalent to over 25% of the Councils total Usable Reserves.
“This is a Council that has already borrowed in excess of £1.6Bn. This is an astronomically high amount of debt for a Council with only £135M of Usable Reserves. This debt is at an eye-watering multiple of approximately 12 times the Council’s Usable Reserves. Any increase in this level of gearing is hugely concerning. Of further concern is that the loan facilities that the Cabinet agreed have not been subject to scrutiny by the wider Members of the Council. Many Members may have a very different idea about what constitutes a prudent investment. At the Part One session of the Cabinet meeting itself, not a single question was asked by the Cabinet members regarding these proposed loan facilities.
“Such lack of scrutiny only increases the risk of groupthink and optimism bias.
“We, the non-Cabinet Members of the Council, have had no sight or input into the due diligence undertaken in relation to Auxesia homes Ltd or its shareholders.
“The last filed statutory accounts of Auxesia Homes Ltd reported Loans and Overdrafts outstanding of £3.5M. The facilities that have now been granted by Warrington Borough Council are 10 times those reported by the company as at 30th of September 2020.
“As well as the basic financial enquiries that should have been made by the Cabinet, here are two basic questions that we believe should’ve been asked before these facilities were approved.
“What guarantees does the Council have that these loans, provided by public money to a for-profit company, will be used to address the social housing needs of the residents of Warrington?
“What guarantees does the council have that these loans, provided by public money to a for-profit company, will be used to provide housing for the reported intended beneficiaries of NHS workers and the Armed Forces?
“It’s all very well to talk about targets but unless there are binding commitments such talk is meaningless.”
Cllr Kath Buckley Conservative group leader added, “In reflecting upon the investment programme that has led to the Together Energy debacle, the Labour leadership of Warrington Borough Council had a golden opportunity to halt the granting of these loan facilities.
“Instead they have pressed on with this new investment despite the potential for £52 million of losses, if Together Energy fails, hanging like the sword of Damocles above the Labour Leadership.
“This was the moment to be prudent. Sadly, in our opinion, the Labour leadership of Warrington Borough Council has not chosen this path.”
But Cllr. Mitchell defended the decision saying: “This is an investment in affordable housing, which is in very short supply in the area. It’s fully secured against existing property — which means if our loan isn’t paid back in full, we take ownership of those houses, much like a mortgage.”
“Auxesia Home is registered with the social housing regulator, and puts Armed Forces veterans, NHS workers and other emergency-services staff at the front of the queue for its affordable properties. We have been successfully making these kinds of loans to housing providers for more than a decade, and continue to build high-quality affordable housing ourselves through Council-owned companies, most recently at the old Sycamore Lane and Fox Wood schools.”
“This investment has been subject to a thorough due-diligence process, carried out by independent experts. It’s not a blank cheque, either — the developer must apply to gradually release funds as and when projects or purchases happen.”
“We know there are some people who reflexively object to every investment the Council makes. However, after a decade of austerity, and with Warrington coming in as the sixth-lowest-funded local authority in England, we have no choice but to develop other sources of income. The alternative is further cuts at every level, as returns on our investments help to run day-to-day services.”
“If the Tory opposition wouldn’t make a fully-secured investment in affordable local housing, exactly what kind of investment would they make?”
“And if they would rather we didn’t invest at all, which Council services would they have us cut first?”
Extreme concern over council plans to loan £37.5m to affordable homes developer
4 Comments
Yet another example of the irresponsible actions of WBC. Given the potentially imminent demise of Together Energy this surely has to be the wrong time for this latest loan.
We know at least £80/85 millions worth of investments are not bringing in a bean while incurring servicing and repayment liabilities. But that is only a snapshot of the situation. They keep telling us their ‘prudent’ investments are contributing £20 million annually to the council coffers, but are reluctant to show us the whole investment picture of income vs expenditure. The annual accounts for the last four or so years have yet to be signed off, apparently because of this administration’s method of assessing the worth of some investments. One can only surmise therefore, this latest investment has been made in an attempt to address a shortfall across their other ‘innovative and much admired’ investments.
This is almost as bad as their past Twinning Policy? We needed a Foreign Secretary in those days!
So who is gonna be the Chancellor? Surely nobody presently in the Council is qualified? If the Council were a company they’d have gone bust! I guess the reason they don’t get a bigger share from Government is down to their financial idiocy?
I was looking for ways to improve my credit. I ran across FIXMYCREDITat WRITEMEd0t c0m. After hearing their story I purchased their Ebook and the information has helped me tremendously and also saved me more $ from other credit companies. It’s great knowing that we have people like that helping people learn to repair our own credit at a low cost and get the same or better results.