Wokingham Borough Council has confirmed there is no danger that a £10 million loan to a nearby council will not be repaid.
During last week’s meeting of the council’s executive, member of the public Philip Meadowcroft questioned whether the council can guarantee a loan it made to Woking Borough Council, will be repaid when it becomes due next year.
He said: “Rather than relying on undefined ‘commitments’ from Woking, can the executive member for finance reply by exhibiting valid, straightforward and legally enforceable paperwork evidencing that there are no circumstances whatsoever which will prevent Woking from meeting its financial obligation to pay £10,356,000 back to Wokingham on March 8 next year?”
Wokingham Borough Council made a £10 million to Woking Borough Council on June 8, one day after it had effectively declared bankruptcy.
Imogen Shepherd-DuBey, the Wokingham Borough Councillor responsible for finance, said she knows the loan will be repaid in March next year – with £356,000 in interest.
She said this is because it is backed by government.
Councillor Shepherd-DuBey said laws ensure Woking will repay its loan.
She added that when councils effectively declare bankruptcy – by issuing what’s known as a Section 114 notice – government officials step in to take control of their finances.
She said: “Part of the Section 114 circumstance is that all contracts and financial commitments continue to be honoured.
“In the case of Wokingham making the loan to Woking, there is indeed a legally binding contract, in place before the loan was made.”
She added: “There has never been a situation where a council in a Section 114 state has defaulted on its payments, and other councils are one of the safest places for us to invest.
“A council defaulting on its payments would only happen if our government was unable to cover the costs, and I think we would have much bigger problems if that was to happen.”
Mr Meadowcroft was unhappy with the answer and said it was ‘inadequate,’ and claimed councillor Shepherd-DuBey hadn’t provided evidence.
He said: “There’s no proof, as far as I can see, that the Woking loan repayment is guaranteed – either by legally enforceable paperwork or a treasury guarantee.”
But councillor Shepherd-DuBey again insisted the loan will be repaid – using government money if necessary.
She said: “This regularly happens. It’s been happening for 20 plus years that councils are lending money to each other in this way and there has never been a problem with any council doing this.
“It doesn’t matter to us whether a council is in a Section 114 state or not because it’s all underwritten by the Treasury.”
