Schools, care homes and sports clubs sold off to pay spiralling council debt

Government to help cash-strapped council repay debt

Town Hall debt levels staggering, MPs warn

Croydon charities face sale of buildings

'Everything came down to finance'

'Meant to inspire a generation'

'Debt is not inherently bad'

Schools, care homes, a boxing gym and even an Olympic legacy equestrian centre are among hundreds of buildings being sold as struggling councils seek to reduce a debt pile totalling £122bn.

Chief executive of the Local Government Information Unit (LGIU), Dr Jonathan Carr-West, said "public value" would continue to be eroded until the government came up with a long-term solution to council debt.

The government said it was aware the funding system for councils was "broken" and was pushing ahead with reforms to address the problem.

Councils across the UK can borrow money from banks or from the government to fund improvements in their areas - from building new schools to maintaining roads and providing sheltered housing.

They can also borrow to make investments intended to generate income.

Since 2010, they have bought shopping centres, office parks and solar farms as well as funding large housing developments with borrowed funds.

Most of that was done through an arm of the Treasury known as the Public Works Loans Board (PWLB) and until 2022 interest rates on that borrowing remained relatively low.

Last year, the Public Accounts Committee warned debt levels had become "unsustainable" despite curbs placed on borrowing for purely commercial aims in 2021.

But the

Usually,

But increasing numbers of councils in financial trouble are now being given powers to do so

Known as "capitalisation directions" they also allow councils to take out short-term loans to pay for day-to-day services - but add millions to the debt pile in the process.

This year, 30 councils were given those powers, last year it was 19.

Councils sold £2.9bn of public assets over the past two years other than social homes sold through the Right to Buy scheme. Those with the highest debts were twice as likely to have been among the highest sellers.

For Dr Carr-West, the system is unsustainable.

"As one local government finance officer said to me, 'it's essentially payday loans for local government," he said.

"We are now seeing the selling off of assets and once they're gone, they're gone. So what was public value is now passing into private hands and that won't come back."

Not all council-owned buildings are directly used

But Dr Carr-West said those "assets" still represent a public loss when sold as they can be vital when councils come to regenerate town centres and the cheaper rents and longer leases that local

In Croydon, south London, the council ploughed money into a large housing company, a shopping centre and a hotel, among a host of other investments. When the Covid pandemic hit, it lost millions and could not repay its debts.

Its £210m firesale of public property over the last four years would only cover about 15% of its current £1.5bn debt, which continued to grow last year. The

Among a "disposal" list were nurseries, community centres and tennis clubs.

New Addington Leisure and Community Centre - home to the estate's boxing club - closed in February.

The club has 300 members and works with men and youths who would otherwise be involved in crime, according to head coach Bill Graham.

Although a group of volunteers raised £25,000 to keep going in a nearby school, its future remains uncertain.

"We help reduce crime, we help children not go to grab knives," Mr Graham said.

"In the end, everything came down to finance - they said we need to sell our assets because of the situation we are in and that's it."

Greenwich Equestrian Centre was meant to introduce thousands of children in the south east London borough to the "joy of horse riding" in the wake of the 2012 Olympics, according to its then council leader.

The £1.6m facility, opened

But in November the council decided to sell it despite a community bid to take over its running, now backed

The Royal Borough of Greenwich Council saw its debts rise

But businesswoman Tao Baker, who has submitted plans to transfer the centre over to community ownership, believes a sale would be "short-sighted".

It would "barely make a dent" to the debt pile, she says, while the loss of the centre would be felt for years to come.

At its peak the centre had an 18-month waiting list for free horse riding sessions and Ms Baker believes it could easily be sustainable with the right guidance.

But she says the council leadership is refusing to meet with her.

"I think the reason why the community really wants to save this is not just that it's one-of-a-kind sporting facility and the only Olympic facility in Greenwich but it's the way the council went about it.

"They knew there was a community petition to save the facility but they never disclosed that they were going to do this."

Ms Baker says she has asked for numerous meetings with the council leadership over the past year, which have not been successful. The council said it welcomed offers from "any who can demonstrate a strong financial business case".

A council spokesman said it welcomed any viable proposals to take over the "defunct" equestrian centre.

He added: "Like the rest of London, we desperately need shovels in the ground and roofs over people's heads and we're proud to have had the highest number of new affordable homes started of any borough in the capital last year."

In the mid-2010s the coalition government encouraged town hall chiefs to broaden income streams

They did that

"Debt is not inherently bad," according to Sarah Calkin, editor of the Local Government Chronicle. "It depends what it's for."

She said councils now "in trouble" tended to have taken out short-term private bank loans when interest rates were low - only to be stung with large rate rises further down the road.

Warrington Council's £1.6bn debt means it is one of the most indebted in the country for the size of its population. It used Treasury loans to buy a retail park in Manchester, haulage distribution centres and a large shoe factory among other properties

The council said it had no choice but to invest in order to fill the gap in income it had received from central government under the revenue support grant.

Though that grant has increased in the years since the pandemic, core spending power for local

Warrington's leaders claimed to be making between £20m and £23m a year from those investments - which meant it could avoid making large cuts to services.

But government-appointed inspectors found the council had a "high exposure" to increased interest rates and was rapidly eating into its savings. Its out-of-town investments showed little or no public benefit to Warrington's population.

Crucially, the collapse of Together Energy in 2022, a company it had a 50% share of, led to losses of just under £9m.

In July, the government sent in ministerial envoys to get the council's finances back on track.

The town's former MP Andy Carter warned the council its strategy was risky on several occasions.

"We're seeing decisions taken that I don't believe would be taken in a commercial sense - a business wouldn't be risking shareholder funds," he said.

Mr Carr-West said spiralling levels of borrowing were ultimately a result of years of council underfunding.

"One third of councils are telling us that if nothing changes in terms of how they're funded, they are going to go bust within five years," he said.

"That's down from 50% of councils telling us that in 2024. So we have made some progress."

Dr Carr-West said there were increasing calls for the government, which is owed about 75% of the council debt through the PWLB, to write off large swathes of that debt.

Croydon Council said the support it received in loans and asset sales was "not sustainable" as they were "simply adding to [their] borrowing costs".

A spokesperson said: "We cannot become financially sustainable and meet our Best Value Duty until a solution from government, such as a debt write off, is agreed."

No such announcements about a debt write-off have been made.

In June, Prime Minister Sir Kier Starmer announced an overhaul of council central grant funding, promising to simplify the complicated funding formula used to distribute funds.

Labour says its plan will redistribute grants to focus on the most deprived areas as well. It has also started work on restructuring two-tier council areas, those with both county and district councils, to become unitary

A Ministry of Housing, Communities and Local Government spokesman said: "While councils are responsible for managing their own budgets, we know that the current funding system is broken which is why we are taking decisive action so local leaders can deliver the public services their communities rely on.

"We have announced over £3.4bn of new grant funding for local services on top of the £69bn already made available this year to boost council finances, and we will go further to reform the funding system, including at new unitary councils, to ensure it is fit for the future."

Additional reporting