We want to be as open as possible in sharing information about our budget and commercial approach. We've therefore compiled a list of FAQs based on what people have asked us about our budget and investment decisions.

These FAQs are answered in sections:

• Our budget and commercial headlines
• Our investments
• Treasury management
• Current discussion topics 

Our budget and commercial headlines

What's our current funding position?

It’s helpful to understand our broader funding position, for us to then explain our commercial approach.

Our objectives are policy driven and:

• support the local and regional economy
• promote and support jobs
• ensure that Warrington remains a thriving place to live, work and play in
• support the government’s economic growth and national renewal agenda

Our investments also generate around £23 million (net) each year.

For further context, over the last few years, we have taken advantage of long-term borrowing in a low interest rate environment to invest in policy objectives that support our local economy. Warrington’s local economy is comparatively strong. Centre for Cities shows that Warrington continues to be a leader in terms of new businesses, employment and low jobless claimant rates. So, while we know and accept that our approach makes us an outlier in terms of our level of asset-backed borrowing, we’re pleased to be able to support Warrington’s continued growth, which supports our residents and families, alongside supporting the national economic growth mission.

In terms of funding, Council Tax – our largest portion of funding – doesn’t even cover the cost of delivering people services (services that look after and support children, families and older people). This is before we consider other day-to-day services like emptying bins, maintaining roads and parks, and “keeping the lights on”.

We are the second most poorly funded council in the region, out of 20. Only Cheshire East has a lower funding per dwelling. If we were funded at the average national per household level, we would generate an extra £67 million per year.

It is in this context that the £23 million we generate from our commercial approach, really does help to keep vital services running, as well as contributing to key policy objectives.

What is the council’s current and predicted level of borrowing?

Our current level of borrowing, which is made up of commercial assets, investments and historic debt is around £1.8 billion. All of our investments are made in line with our corporate policies.

• By commercial assets, we mean, for example, that we have invested in a business park, commercial buildings, and other buildings that we generate rental income from
• By historic debt, we mean, for example, money we have borrowed in the past to help support regeneration in the town centre that we’re paying off

Based on current plans, we expect our level of borrowing to increase to around £2 billion.

However, this is only if Housing Associations draw down their loan facilities, which will be fully secured on housing assets. Overall, we are planning to reduce our debt over the next few years by repaying debt (when secured loans mature) and selling assets, when it is economically advantageous and sensible to do so. So, while in the short term our overall level of borrowing is set to increase, we do expect this to reduce over the medium/long-term, in a measured and careful way.

More generally, we could decide to sell our assets, if we thought it was the right thing to do and the market conditions were positive. But we would lose the benefit of the money generated from the assets. It would, however, mean that our overall borrowing and therefore debt costs would reduce.

It is important to remember that many of our investments contribute to our policy objectives and help generate income that we can use to fund vital front-line services. It’s really important that we do everything we can to protect our services, which some of our most vulnerable people rely on.

What is the value of council assets relevant to level of borrowing?

We know that some people would like to see a full list of all of our investments, what their value is and how much they are generating each year. It’s really difficult to do this – valuations change constantly, and some investments are subject to commercial confidentiality.

The value of our assets would only significantly matter if we wanted to sell any of them. Of course, if we thought it was the right thing to do, we could sell an asset and make back the money we spent.

However, where our portfolio is working well – alongside primarily supporting our policy objectives – is through rental returns, which remain stable and positive. For example, one of our most significant investments, Birchwood Park, supports 6,000 local jobs, more than 200 businesses and equally generates income through rent collection rates at 99%, which is used to support our services.

We are currently working on an indicator to show our level of borrowing compared to equity, which we will share when it’s ready.

Why is Warrington’s debt compared to spending power so large?

Our core spending power – the resources available to us to fund our services – is about £182m per year. Our commercial approach means that our current level of borrowing is higher than most of our peers. We accept we are an outlier in this respect.

The majority of our borrowing is asset-backed and secured against bricks and mortar. We have previously been able to take advantage of long-term borrowing at low interest rates, and the average length of our loan portfolio is 20 years – with us sitting on more than £250m of Public Works Loan Board (PWLB) premiums (at July 2024).

This effectively means that despite our level of borrowing, our repayment costs are kept comparably low. This means that in total, after the prepayment of all debt costs, our portfolio of investments generates income of around £23 million a year that we can use to invest in our front-line services.

Any decisions about our future level of borrowing will always be in context of what we think will be of most benefit to Warrington and our residents.

Are you concerned about the level of debt?

We understand entirely why people might be concerned about our £1.8 billion level of borrowing figure. But our commercial approach is different to the position of a small number of councils who have had to issue Section 114 notices.

The majority of our debt is asset-backed and secured. Our approach continues to work, generating more than £23m a year which we use to invest in our services.

We have also previously been able to take advantage of fixed low interest rates when borrowing. This means they are locked in at low rates for the long-term.

While, like all councils, we face significant financial challenges over the next 12-18 months, this is not due to our level of borrowing. Instead, is it linked to more people needing help and support, higher costs to run our day-to-day services, and not enough base funding to meet current demand. In October 2023, the Local Government Association (LGA) forecast a national local government funding shortfall of at least £4bn.

Do you accept that there are risks in the approach that you have taken?

We accept that we are an outlier in the approach we are taking. No investment is ever without risk. But every investment we make is subject to rigorous, external third-party due diligence.

We also have a diverse portfolio, which helps to reduce risk. The bulk of our debt is secured with low-risk lenders on things like houses, logistics warehouses and other high-performing, low-risk property assets.

How much does the council make each year from its commercial assets/ approach?

This figure will fluctuate slightly each year due to economic conditions and what assets form part of our portfolio. Our portfolio generates around £23 million each year, after paying off all costs linked to our portfolio. 

Our investments

All of our investments are subject to meticulous, external third-party due diligence before they are made, and continuous performance monitoring if we do decide to invest. Our investments support our policy objectives, are led by the council’s political administration, and are in line with our constitution.

Some of our investments are also in line with our Treasury Management Strategy. Treasury investments are only for the short/ medium term, with the money used to fund these effectively from our reserves.

While we can’t go into huge amounts of detail publicly about all of our investments (due to commercial confidentiality), we’re committed to sharing what we can. We therefore list some of our key investments, as follows:

Birchwood Park

Birchwood Park is a Warrington-based science and business park that we bought in 2017. It has continued to perform really well, even through the COVID period, and is a key part of our mission to support jobs and the local economy.

Around 6,000 people work at the park, and our rent returns stand at around 99%, with income being used to support our services. It is seen as a major employment centre in the borough for high-value jobs and significant links to the nuclear, sustainable technologies and housing sectors.

Corporate loans

We oversee a successful loan portfolio, which includes loans to housing associations and local businesses. These loans are secured against the residential and commercial property of the borrower.

These loans help to promote housing and homebuilding in Warrington, as well as economic regeneration locally and across the north of England.

This approach has supported a number of high-profile businesses, and equally supports generating a return to us.

We have successfully operated the portfolio since 2009, with no defaults.

Housing

Our housing company, Incrementum Housing, helps us to build much-needed affordable homes to a high, green energy standard. It helps us to use redundant council land, using these spaces to build high-quality homes for local people and families.

We have more than 160 properties across our Foxwood and Sycamore developments. There are currently 7,300 people on the housing waiting list in Warrington. Incrementum is helping to reduce this.

Redwood Bank

We accept that Redwood Bank is one of our most-scrutinised investments.

We made an initial £30 million investment to help set the bank up in 2016. The need for the bank came out of the banking crisis in 2008 and a survey of local businesses in 2013, who expressed a need for the council to lend to local businesses. After a full options appraisal, the bank model was seen as the best option. The bank proposal was taken to cross-party committees for scrutiny and approval.

Since making this investment, the bank has continued to operate soundly despite the challenging national economic conditions.

We invested in Redwood Bank for clear policy reasons to support lending to businesses, something that the bank continues to do, and do well. The bank is helping to drive economic development across the region and is a valuable source of funding for SMEs. The bank continues to make a profit and equally supports more than 30 local jobs.

Solar farms

Aligned to our policy commitment to work towards carbon neutrality in our own operations, and to support and inspire others to do the same, we have invested in solar farms.

The farms, in York, Hull and Cirencester, are enabling us to make huge progress linked to our climate goals. We estimate to have offset our carbon footprint by 46,000 tonnes, and the farms are equally generating a financial return. We decided to invest outside of Warrington for our existing solar farms. This was because of a lack of suitable sites locally, with high property costs and poor grid connections.

Together Energy

We still await the final outcome of the administration process to be completed but will share a further update on this as soon as we’re able to.

Technology Enhanced Operations

In 2020, we invested in a bond which focused on producing and cleaning oil and gas in a cost-effective way. Extensive consultation took place before we made this investment, which had cross-party support at the time. We invested after a number of large Local Government Pensions Funds and a major Swiss Bank had done so.

This investment isn’t currently performing as well as we had hoped, and the value of our investment has reduced. However, it is important to note that this doesn’t impact day-to-day services. It was a treasury investment for three years and multi-million-pound dividends were paid on time.

The investment became an “equity investment” after Cabinet approved this in December 2023 (which is why we now share information about this investment on the list of non-treasury investments). This investment was not funded from borrowing. The rest of our portfolio is resilient enough to support this particular investment not currently working for us, but it does have the potential to increase in value in the future.

Wider commercial property portfolio

Our commercial property portfolio consists of a number of businesses and buildings. This includes assets like supermarkets based in the region, alongside other business premises in, and near, Warrington.

These investments support long term economic growth in Warrington and the wider region, produce rental income and, importantly, jobs for local people.

Treasury management

Like all other councils, we need to look after the day-to-day management of cash, and cash reserves. We refer to this as Treasury Management.

Each year, we set a number of parameters, within which the Council’s Section 151 Officer can make decisions on how best to manage this money. Some is kept in a number of well-known banks, and some money is invested in other financial institutions, such as money market funds and government gilts and bonds. We regularly report on the details of treasury transactions to meetings of our Audit Committee, and to meetings of the Full Council, to demonstrate that these investments are being dealt with appropriately.

Altana Wealth

One such cash investment that we made as part of our treasury management strategy, was in the Altana Corporate Bond Fund. This bond invested council money in a number of well-known bonds, issued by high street names, for a modest return. The bond was fully repaid during 2023, and the detail was reported to the Audit Committee in January 2024.

Current key themes linked to our commercial approach

The CIPFA review

Public finance experts, the Chartered Institute of Public Finance and Accountancy (CIPFA) on behalf of the government reviewed our capital risk  in February 2023. They produced a report that contained a number of recommendations that the council should implement

The CIPFA report was published in May 2024, which we welcomed. You can read the full CIPFA report on the GOV.UK website.

Since the report was published, we have published our action plan in response. You can read the report from page 21 of the Cabinet report, with our action plan beginning from page 62.

The Best Value Inspection

On Wednesday 8 May, the government confirmed it would be appointing an independent inspector to conduct what is known as a Best Value Inspection.

The inspection, led by an independent inspector, is to ensure that the council is complying with its Best Value Duty. This duty requires councils to make sure they are continuously improving the way their functions are exercised, with regard to economy, efficiency and effectiveness.

The inspection continues to have our full cooperation, and we will work positively, openly and at pace with the inspector. As at July 2024, we expect the inspection, and the inspector’s report, to have concluded by the end of August 2024. However, the inspector determines the pace of the inspection, in conjunction with the government.

Moody’s credit rating

Moody’s withdrew our credit rating in June 2024.

Moody's publishes credit ratings and provides a range of finance assessment services. It has previously awarded us a high credit rating, based upon our financial resilience and stability. In recent years, our rating has decreased, but this is largely due to national economic instability, which has had an impact on all councils, including ours, and is something Moody’s has previous explained publicly.

We are one of only a very small number of councils with a credit rating. To put this into context, there are 313 other English councils that don’t have credit ratings.

Like other councils across the country, we have been impacted by the national issue of delays in the signing off of our accounts. In May, the Public Sector Audit Appointments (PSAA) shared data showing more than 570 accounts require sign off. This number will grow again, significantly, to include councils’ 2023/24 accounts.

The ongoing audit backlog across the entire local government sector means that Moody’s considers there to be insufficient information to maintain the ratings. They have therefore made the decision to withdraw our credit rating.

We think it is also likely that Moody’s will eventually remove credit ratings from the other councils it has previously rated, given that the audit backlog is currently affecting the vast majority of councils. We hope to get a credit rating from another credit rating agency.

Auditing our accounts

To repeat - in May, the Public Sector Audit Appointments (PSAA) shared data showing more than 570 accounts require sign off. This number will grow again, significantly, to include councils’ 2023/24 accounts.

Our 2018/19 accounts have been fully signed off by our auditor.

There has recently been media coverage about our 2018/19 accounts and our decision to “withhold information” which led to our auditor issuing a “limitation of scope” judgement.

It is not as simple as to say that we withheld information. The reality is that we discussed in detail with our auditor the issue of limitation of scope. We agreed we would not provide information linked to solar farms which we didn’t even own in 2018/19, on the basis that our draft accounts for 2023/24 would (and indeed now do) include relevant and current information about our solar farms.

We therefore effectively agreed for the auditor to provide an opinion that was on a limited scope on the single issue of the solar farms, which is what the auditor did. 
We are in the process of appointing a new auditor. It’s important to note that we didn’t decide or request to replace our auditor. The Public Sector Audit Appointments (PSAA) have provisionally appointed a new auditor for us, and we’re now waiting for final confirmation of this process.

Governance

Our investment portfolio operates to the highest governance and risk management standards and fully complies with Local Government and financial regulations.

Our Governance system and risk appetite statement is contained in our capital strategy, which is agreed at Full Council with the budget each year.

Section 114 Notices

Like the rest of the Local Government sector, Warrington faces a major future financial challenge. This is due to insufficient funding to meet huge rises in demand for our services – particularly across social care and homelessness services.

A 2024 survey from the Local Government Information Unit (LGIU) revealed that half of councils (51%) have warned they are likely to issue a section 114 notice in the next five years, with 14 local authorities (9%) likely to issue a notice within the next financial year.

We are not a council that is seeking additional government support or at risk of issuing a section 114 notice. We have a strong reserves position compared to other authorities, but we do face challenging financial pressures over the medium term, as will all councils.