Damning report finally lays bare the catastrophe at Thurrock council
The people of Thurrock have had a long wait for answers.
For five years they were kept in the dark while their local council made secret business deals involving hundreds of millions of pounds of public money. The first time most of them would have learned of those investments were when they collapsed.
Then they had to wait for the official investigation. In a final slap in the face, that report was delayed until after May’s local elections.
Now that wait is over. They finally know how their relatively small council on the outskirts of London became embroiled in one of the biggest financial collapses in the history of local government in the UK.
The report, published this week, is damning; over a period of five years the council recklessly gambled with £1bn borrowed from other local authorities, repeatedly ignored warnings about the risks involved and then failed to disclose when investments had lost millions of pounds.
The findings largely mirror details revealed during a three-year investigation by the Bureau of Investigative Journalism, which played a substantial role in bringing the scandal to light.
There are now calls for a public inquiry covering wider factors— including austerity, the increasing commercialisation of local government and the abolition of the Audit Commission. It follows similar scandals in Croydon, Slough and, most recently, Woking.
But the bigger picture, and the shameful details of how this was allowed to happen, will feel comparatively inconsequential for people who live in Thurrock and rely on the services the council provides. Their primary concern will be what comes next and, in that regard, the outlook is bleak.
“The scale of the financial challenge now facing the council means it is inevitable that, in addition to making extensive efficiency savings, the council will have to undertake a significant and rapid reduction in the scope of local services,” said the Best Value Inspection report produced by commissioners from Essex County Council.
“Many services, which have been relatively well funded over the past decade may, as a consequence, be equipped to do little more than the statutory minimum for the foreseeable future.”
At the end of the last financial year in March, Thurrock’s deficit stood at almost £500m. In addition, the funding gap for this year is significantly more than council’s entire annual budget. Thurrock requires urgent help from the government. A bailout of more than £600m has been agreed in principle, the costs of which will be felt for decades. On top of extensive cuts, the report warns of “large increases in council tax” for years to come, with the first of those approved, despite protests, in March.
Even these measures may not be enough to save the council, inspectors admit. The full extent of the loss of public money, and as such the impact on the residents of Thurrock, is not yet known. Nor are the details of exactly what services will be cut. Control of almost every function of the council has been given to Essex and an expensive “managing director commissioner” appointed as chief executive. Neither move has yet to produce visible progress or clarity about the future for people who live and work in the area.
As for how things went so wrong, the inspectors apportion much of the blame to two former senior members of staff: Sean Clark, who was chief financial officer, and Lyn Carpenter, who was chief executive.
The report describes how Clark was given an “extraordinary” level of power to borrow and invest huge sums of money on the council’s behalf. Between 2016 and 2021 he borrowed £1bn from more than 150 other local authorities, through hundreds of short term loans, and poured the money into risky business ventures, all while telling his colleagues very little about what he was doing.
Clark, like everyone else in the report, is not mentioned by name. Instead, he is referred to throughout as “s151 officer”, which was the statutory role he performed at the council.
“In our view,” said the inspectors, “the actions of the former s151 officer were central to the conception and ultimate failure of the council’s investment strategy. He sponsored a strategy that neither he, nor the finance teams he led, had the skills and experience to safely deliver and failed to secure appropriate investment advice.”
Clark failed to inform councillors of many of the deals he made and repeatedly ignored warnings about the “unprecedented” risks he was taking, including in a letter from advisors Arlingclose in March 2018, as first revealed by the Bureau. The inspectors found few people knew what was actually happening with the investment strategy “and only one person knew everything (the s151 officer)”.
They were unable to find any document that set out what information Clark had considered before making the investments and no risk assessments or rationales. They were even told that on some occasions the due diligence he relied upon had been commissioned by the company the council was investing in.
The report reveals that when Clark resigned earlier this year, after seeing out his notice period on full pay, he did so before a disciplinary process into his conduct had been concluded. The question local people will ask is whether he or anyone else will ever be held personally accountable for what has happened? So far there has been no sign of a police investigation into the scandal.
The inspection team believes Clark was not entirely to blame for the council’s failings. “Put simply, the s151 officer could not have acted as he did in a well-functioning, well-led local authority,” said the report, which makes clear Thurrock was absolutely not a well-run council — in large part due to Carpenter.
The former international netball player resigned as the council’s chief executive in December. The report said much of the failures of senior staff members “were driven, in large part, by the behaviours and operating style of the former chief executive”.
Carpenter was described as having an “autocratic” leadership style which led staff to feel reluctant to have “open and honest conversations with her for fear of being blamed of publicly shamed”. If something went wrong staff worried things would “hit the fan” and Carpenter would frequently ask: “Who do we sack for this?”
One interviewee even claimed there would be “hell to pay” if there was a spelling mistake in an external letter. Carpenter would also become “visibly angry” when receiving “bad news”. Council directors recalled occasions where she would lose her temper and scream at them.
“The former chief executive’s style of management had serious consequences for the performance of the council,” the report said. It undermined checks, balances and early warning mechanisms and was a “major contributor” to the failure of senior staff and councillors to understand and oversee key initiatives like the investment strategy.
The Conservative-led cabinet, the decision-making body of the council, was also criticised, although the report said Clark had withheld key information from senior figures, such as former council leader Rob Gledhill and ex-finance portfolio holder Shane Hebb.
Current and former cabinet members told the inspectors they now recognise there was a “fundamental lack of curiosity, tenacity and follow-through in the scrutiny of council investments”. They failed to ask questions of officers, took what few answers they received on trust and were too ready to accept casual reassurances, even after investments lost millions of pounds. Councillors lacked understanding of the type of investments made and the risks involved.
In November last year Thurrock admitted its disastrous investment policy had left it with a £500m hole in its budget — the largest ever reported by a UK local authority.
The unprecedented deficit includes an estimated £275m lost as the direct result of four ruinous business deals, with the most damaging being its dealings with Liam Kavanagh. His company Toucan Energy Holdings 1, which owes Thurrock £655m, as well as tens of millions of pounds in outstanding interest payments, is in administration and buyers are being sought for more than 50 solar farms purchased largely with the council’s money. Thurrock estimates the total loss relating to the deals will be almost £200m.
A further £100m was provided to lender Just Loans Group. The company went bust in June last year with the council as its main creditor. The loss to the taxpayer is expected to be £65m.
The deficit was also increased by more than £200m in order to retrospectively fix Clark’s failure to set aside money to repay the debt the council accrued while making the investments. On top of that are the increased interest costs of having to take £800m from a public lending body to repay the councils it borrowed from to finance the deals.
The inspection report sets out the “extraordinary chain of events” that ultimately led the council to declare bankruptcy last Christmas. It said Thurrock pursued an investment strategy “unique within local government”. It began in May 2016 when Thurrock invested £24m in a bond issued by one of Kavanagh’s companies to finance the purchase of a solar farm in Swindon. Over the next 18 months Clark made further deals with tens of millions of pounds borrowed from other councils.
A “step change” in the policy occurred in October 2017 when councillors agreed to extend Clark’s power to make further deals, such as increasing the cash limit that could be placed with a single external business partner from £75m to £425m (this would rise to £750m by 2019/20).
“This was an extraordinary expansion in the delegated authority of officers,” said the report. “It was made without consideration of the experience and skills that would be needed: experience and skills that officers have since recognised did not exist within the council.”
This extra power enabled Clark to rapidly expand the council’s investment portfolio, including £268m in a further 32 solar farms purchased by Kavanagh in December 2017. The inspectors said this deal had been supported by members of the Council Spending Review (CSR), a group made up of senior councillors from Thurrock’s three main political parties.
However, as the council’s investments increased to £1bn over the following years, only one further deal was discussed with the CSR, a fact inspectors described as “astonishing”. This means Clark did not inform group leaders of any of the top ups, which would eventually total £130m, provided to Kavanagh’s businesses, money which is currently unaccounted for. Kavanagh denies wrongdoing.
The inspectors concluded Clark had made investments of over £500m without “meaningful reference” to councillors, even though he was required to provide the CSR with an overview of all investments over £10m and in excess of a year in length before an agreement was made.
Clark ignored this requirement largely because he reasoned the deals he was making were with organisations with which the council had already made investments and were therefore not ‘new’.
The end result, the report said, was that “unbeknown to anyone beyond the s151 officer and staff in the treasury management function, the council built-up substantial investments with particular organisations without any member or executive oversight.”
The inspectors also found the “internal checks and balances one would expect to see, which would have provided challenge and possibly prevented this situation from arising, were either weak or wholly absent”.
Although the investments were “arguably the most significant and high-risk activity the council was undertaking” they were rarely discussed among senior officers, never looked at by Thurrock’s internal scrutiny processes and not evaluated properly by external auditors.
“This meant that, although the s151 officer’s actions were wholly inconsistent with the principles approved by council, these actions went unchallenged by members, the chief executive and senior officers for several years,” said the report.
As for TBIJ’s investigation, the inspectors said our articles “provided a further opportunity to pause and reflect” but instead members and officers “doubled down and defended the council’s position”. At a public meeting called to discuss our first story in June 2020, “members largely ignored the information and concerns raised, and instead congratulated the council and its officers on the success of the programme”.
That meeting included a decision to “pause” further investments, only for Clark to continue to make deals involving tens of millions of pounds of public money.
The report also reveals the dismissive attitude some at the council had towards losing that money. When Chip Chip Ltd, a wood chipping business, went into administration, meaning a £14m investment had to be written off, the loss was dismissed as “a very small number” in comparison to the portfolio as a whole. This should have “triggered reflection and review”, said the report, but “despite losing borrowed public money, the council did not do so”.
“Ultimately this opportunity was missed, as many members of the council — having never been made aware of the existence of this investment — were neither told of its loss,” said the report.
Inspectors concluded that although “serious mistakes” were made by individuals the Thurrock’s problems stemmed from collective failure over many years.
The report said: “Over the last five years Thurrock council has repeatedly failed to identify, understand and properly manage the risks it has taken.
“It has failed to put in place appropriate structures and processes to ensure accountability and oversight. It has failed to identify and has, in many cases, actively dismissed clear warning signals.
“When its investments have incurred losses, members and officers have sought to hide these losses, removing the opportunity to take stock and learn from previous mistakes.”
These systemic failures had resulted in the loss of “substantial sums of public money”, said the report, and when initially faced with this fact, “members and senior officers within the council have attempted to conceal bad news and avoid public scrutiny”.
As well as the council’s investments the report also points out failings connected to several major projects, including a new town hall.
The commissioners have made numerous recommendations as to how to improve processes at the council and recover its financial position, a task they admit may not be possible. Among these suggestions is a moves to all-out elections, rather than a third of seats three in every four years, to provide greater political direction.
John Kent, leader of the Labour group on Thurrock Council, called for a public inquiry and for the Conservative councillors responsible for the investment policy to be held accountable.
“Those cabinet members — past and present — who have been responsible for this catastrophe need to find some moral fibre, do the right thing and resign immediately,” he said.
Jen Craft, Labour’s prospective candidate for Thurrock, described the report as a “difficult and infuriating read”.
“The report is clear that many services will need to be cut back to the statutory minimum,” she said.
“It warns that council tax will have to continue to rise at a time where our community are suffering from the cost of living crisis.
“The impact of this ‘pattern of failure’ and ‘dereliction of leadership’ will hit our community hard and will be felt for years to come.”
Andrew Jefferies, newly elected leader of Thurrock Council, said: “Whilst I am deeply sorry for the shocking and unacceptable failings of the past, I can pledge that under my new leadership the council will never repeat these mistakes.”
Dr Dave Smith, the council’s chief executive and managing director commissioner, said the report was a “turning point”.
“The serious and significant failings that took place here cannot be understated,” he said.
“We will not shy away from the hard truths about the way the council was operating and the changes that need to be made.”