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Now, that’s what I call optimism!

“Council borrowed £1bn from taxpayers to bet on British sunshine”, report Gareth Davies and Charles Boutaud of the Bureau of Investigative Journalism.

Among Thurrock’s rundown council estates and neglected public parks, typical of many towns after a decade of austerity, there is nothing to suggest that over the past three years the local council has borrowed and then invested hundreds of millions of pounds of other councils’ money.

Under the direction of a senior council officer Thurrock borrowed from about 150 local authorities across the UK with little public scrutiny. These loans were not for direct funding of council services, or investing in infrastructure – instead they financed solar farms more than a hundred miles away.

Now, let us not reflexively roll our eyes upon hearing the words “solar farms”. While there has been some reason for the widespread perception that investment in sunbeams has about the same record of success as investment in moonbeams, the technology of solar power genuinely has improved in recent years.

Sean Clark, Thurrock’s director of finance, oversaw the investment of £604m in the solar industry, investments he says were prompted entirely by intermediaries approaching him with money-making opportunities. In an extraordinary interview with The Bureau, Clark wondered whether he had gone too far. At last count Thurrock owed other councils an unprecedented £1bn.

OK, now you can roll your eyes.

John Kent, the former Labour leader of Thurrock council, called on the current administration to come clean. He said: “People absolutely need to be aware that the council has borrowed £1bn – that’s billion with a b.” He claimed that the council had declined to give elected members or the public adequate details of precisely how it invested the money.

As you might have deduced from that, Thurrock Council is currently controlled by the Conservatives.

Come to sunny Thurrock, where the Tories splurge on borrowed money and it is left to Labour to be the voice of prudence! Or come to sunny Britain, which is the same except for the bit about Labour.

24 comments to Now, that’s what I call optimism!

  • Stonyground

    We even have the lefty trademark misuse of words investment and austerity.

  • John

    The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which

  • Ferox

    The entities which loaned them that money should get their fingers burned. This will fix the problem in future episodes.

  • CaptDMO

    Please tell us that this great investment into “…the future of our children..” wasn’t made in Chinese
    hardware.

  • Patrick

    But what about the full economic story? They borrowed a billion. So they have a liability. But they invested a billion. So they have an asset. What is the asset worth now? Are they insolvent or do they now sit on a fat gain? They have to service their loans – so what is the monthly cash out? However they also now own their share of the cashflow from electricity sold by the solar farms. What is that? Are they making a monthly profit or a loss?

    Borrowing to ‘invest’ is crazy if that is current spending. This is clearly an actual investment. We have no information to tell us if it is a good one or not.

    What is your point?

  • Rich Rostrom

    Patrick is right: this is an actual investment, not current spending, and in theory may have value equal or greater to the invested funds. We lack information about the actual status of this particular investment.

    But we do have information about the probable current value of the investment: numerous examples of similar “green” investments that lost most or all of their value, and relatively few examples of profitable “green” investments.

    Furthermore, we see that this enormous investment was made by a body of a sort which typically lacks the expertise to evaluate and manage such activities. The investment (with its associated risks) was never disclosed to the citizens of Thurrock, for whom the council was acting. Both of these conditions are commonly associated with heavy losses.

    Some questions not answered arise.

    First, since when have local authorities had the power to borrow from and lend to each other? This is the first I have ever heard of such transactions.

    Second, why did the other local authorities lend money to Thurrock to be invested, rather than invest for themselves? That was a very odd proceeding. Did Thurrock offer or pledge generous fixed returns? It appears that Thurrock assumed all the risk.

    Third, what were the political alignments of the bodies which lent to Thurrock? Were they also Tories? All 150? If so, this scandal “metastasizes” through the Conservative Party.

    I say “scandal” because, even if this investment doesn’t crash and burn, the whole proceeding was grossly improper.

    Finally, did any Thurrock councillors or staff receive any personal benefits from the promoters of this scheme? Dinners, vacations, event tickets? Opportunities to invest on highly favored terms in this or other schemes? If so, that means criminal liability.

  • Gene

    For us ignorant Americans, what is the rough U.S. equivalent of a “Council” in Britain? Are these similar to city or county governments, or are they some other sort of creature?

  • djc

    gene:
    probably more than you want or need to know:
    Local government structure

    Thurrock Council is a unitary authority in the east of England, bordering with Greater London to the west and the River Thames to the south.

  • Paul Marks

    “after a decade of austerity”

    In what country was government spending cut? It was certainly NOT the United Kingdom. Some government spending was cut (local government grants from central government), but government spending was not cut overall.

    As for borrowing lots of money in the hopes of government “Green” subsidies.

    Well yes- after all the reason our bills are so high for gas and electricity is the “Green” taxes pushed by the “Conservative” government.

    I live alone and use very little gas and electricity – I paid about 350 Pounds a couple of months ago, and now they want hundreds of Pounds more.

    Thanks a lot “Conservative” government – although Labour would be exactly the same. The “Green Levy” on gas and electricity is justified by the “Green” subsidies for things such as solar power. Hence the poor (such as me) are taxed into the ground – as well as being denied the chance to work by the “Lockdown” (thank you again government).

    Borrowing a BILLION Pounds in the hopes of getting on the “Green” subsidy gravy train – yes of course.

    That or Real Estate deals.

    The “bottom line” is that the various spending responsibilities that Central Government puts on local government (councils) can not be paid for by Council Tax (the local property tax would have to be into outer space to pay for them all). It is a game that the British governments have been playing since Disraeli put 40 spending responsibilities on local councils in 1875.

    “Give the people XYZ” how do we pay for all this? “Shut up – it is your duty to help the people”.

    Just about the only form of government spending that has been cut is Central government grants to local government – so local councils get desperate (and sometimes insane).

    It would be fine to get rid of the grants if the spending responsibilities were got rid of as well.

    But they are not got rid of – hence the desperate schemes.

  • Schrodinger's Dog

    Gene,

    The short answer is that a Council in the UK is approximately equivalent to a city government in the US.

  • Paul Marks

    I can remember when local councils were not really allowed to borrow money – it was very much restricted.

    But that was “freed up”.

    People who believe that local government should be “free to borrow to invest” most likely think that New York and Chicago are well run. By the way the cities of Texas (mostly Democrat) are in debt up to the eyeballs as well.

    Investment is spending your own money – taking the profit if your investment pays off, and personally taking the loss if your investment proves to be unwise (or unlucky).

    It really is a terrible mistake to use the word “investment” when talking about central or local government.

    The Constitution of Alabama has it right – local government should not be “free” to borrow,, because local government officers and local politicians are not PERSONALLY LIABLE for the debts.

    The same is true of central government – for example if the Chancellor was PERSONALLY LIABLE for all this money he is borrowing, he would not borrow it.

    The “lockdown” would never have been ordered if the Prime Minister (First Lord of the Treasury) and the Chancellor were PERSONALLY LIABLE for the borrowing.

  • Phil B

    Calm down everyone!

    It is only taxpayers money in one form or another and there is plenty more where that came from … Isn’t there. Isn’t there???

  • Rob

    Among Thurrock’s rundown council estates and neglected public parks, typical of many towns after a decade of austerity

    I love their implication that Thurrock was different before “a decade of austerity” (or a decade of slightly lower increases in government spending than during the previous one, to be more accurate). It suggests the writers were not completely familiar with Thurrock when they wrote the article.

  • Rob

    And as for austerity, I wonder how long it will take people to connect “not enough money for the council to spend on vital services” and “council spending a billion pounds on a solar farm”, and arrive at an answer which doesn’t include the word ‘austerity’.

  • Rob (May 23, 2020 at 6:39 am and May 23, 2020 at 6:36 am) is right on both counts.

    Clark wondered whether he had gone too far

    I am tempted to think he is aiming for a plea of diminished responsibility. But as has been pointed out above, it was not borrowing for current expenditure; Thurrock owns a formal asset for this money. I suggest these Thurrockian Conservatives start behaving ‘conservatively’ as Labour understand the word: unload this stock (as promptly as will not depress its value, but promptly enough that it is still floating on the green bubble) onto some suckers (i.e. other suckers, perhaps seeking out left-wing ones for preference) until Thurrock has at least repaid all the other conservative councils they owe.

    They could then consider acting conservatively in a deeper sense of the word. The word ‘green’ and the words ‘fraud’, ‘failure’ and ‘overpriced’ are not inevitably associated, only statistically correlated. Similarly, the word ‘council’ and the phrase ‘exceptional investment expertise’ are not inevitably disjoint, just often so. I have a hard time seeing Mr Clark as able to spot the investment opportunities others passed by.

  • bobby b

    Side note: Several southern USA cities and municipalities got themselves into deep trouble over the past few years “investing” their taxpayers’ money in huge solar facilities, with an eye towards selling their output to neighbors. They’ve mostly gone broke, thanks to increased fossil fuel availability.

    I remember searching Google for the names of these communities last year, and finding them. Doing the same search now – using the same terms I logically would have used then – I cannot find those stories.

    Perhaps my Google-fu has waned. Or . . .

  • Nullius in Verba

    Councils are faced with voter demands to spend more on better services than their income can support, so some have taken to suplementing their income with investments. Local government is seen as a safe borrower, since it is widely expected that if they ever went bust central government would have to bail them out, so risks to investors are lowered.

    So far as I can see, currently everything is running along smoothly and they get a good return from the investment which tops up their coffers and allows them to provide better services than they otherwise could afford. At present, the investments pay back. The issue is risk.

    It’s essentially the same phenomenon as the sub-prime mortgage market, before the crash. The banks were required by the government to loan to high-risk poor black communities because otherwise they would get accused of racism. The banks objected on the grounds of risk, so to get round this the US government backed the loans through Freddie Mac and Fanny Mae. With the US government treasury backing it, the risk vanished and lots of investments providing very high interest rates became available. Finance officers responsible for investing funds were naturally under pressure to get the best rate they could, assumed that the risk had been priced in already, and so lapped up all these high-return investments, putting pressure on the mortgage lenders to seek even more opportunities to lend even more. Dumping piles of new money into the housing market, demand rose to exceed supply, prices rose, and so all those investments rose in value. While it was running, it worked exactly as intended – it returned the high interest rates promised.

    The basic problem is that voters don’t vote for austerity. They vote for high spending and easy money, and are totally oblivious to the costs and risks. So that’s exactly what they get.

  • Nullius in Verba (May 23, 2020 at 10:35 am), politically, the risk (e.g. that green subsidies without which these investments might well tank) and the risk (if a local authority went bust, would central government bail them out) are undesirably related in this case: a conservative government that ever had the wit to help the UK and itself by dumping these subsidies would have to factor in “What to do about Thurrock?” into its calculations. (Hence my wish that Thurrock behave ‘conservatively’ as Labour defines it, so conservatives have more chance of behaving conservatively as I might define it.)

    investments he says were prompted entirely by intermediaries approaching him with money-making opportunities.

    Is it at all possible, I wonder, that these intermediaries had noticed this reinforcing effect?

    voters don’t vote for austerity

    I think it’s a bit more complicated than that.

    – Voters certainly didn’t vote for austerity when they voted in Mr “It’s the economy, stupid” Bill Clinton, but how much did the 1991 “how to lie with statistics” report that ‘proved’ racism in mortgage lending have to do with his 1992 victory? Promising to remedy this alleged wrong was a big deal in the PC/MSM/elite but that’s not the same as with voters.

    – The enforcement of this earlier, slightly less explicit form of “It’s racist to add two and two” – at least if you demand the answer be four – gradually got started in 1994/1995 (and guys like Thomas Sowell already knew it was imbecile back then) but how much did that have to do with Clinton winning again in 1996? How much ordinary public awareness of it was there back then (some no doubt – lucky early mortgage gainers doubtless liked it)?

    – It was well advanced by 2000, but that did not keep the Democrats in the white house. Bush the younger got nothing from not daring to touch it – just his presidency ending in the (roughly-half-a-mortgage-cycle-later) crash that it prompted. The elite and the MSM would have screamed ‘racism’ if Bush had dared to demand arithmetic sanity, but would he really have lost in 2004 because of that?

    Ordinary voters don’t think like the elite. I think it says a lot about the PC and their power over the elite, not about what was politically possible in terms of voters generally, that this was ever brought in and never corrected.

  • Nullius in Verba

    “Is it at all possible, I wonder, that these intermediaries had noticed this reinforcing effect?”

    It’s possible, but I don’t think you need to get that sophisticated. I expect they would simply take note of people who seemed more willing to invest.

    “I think it’s a bit more complicated than that.”

    🙂 It’s always more complicated!

    But I’d have said the voters’ dislike of austerity has nothing to do with concerns over racism or political correctness, or the concerns of the elite and MSM. All they see is that the council-run services are crap, and they want better. They don’t want to listen to excuses about not being able to afford it. They don’t want taxes to go through the roof, driving business out. They don’t want them taking huge crash-prone risks with taxpayers money or going deep into debt, either, but neither are they inclined to ask searching questions about where they get the money. They just want good public services at a reasonable and risk-free price. And they’ll vote in anyone who promises them.

    “The enforcement of this earlier, slightly less explicit form of “It’s racist to add two and two” – at least if you demand the answer be four”

    Racism never adds two and two and gets four. Racism adds up quantities it has not measured and does not know, but assumes to be ‘two’ or ‘four’ or whatever because the people being counted have a particular skin colour, and it ‘knows’ that everyone of that skin colour is exactly the same.

  • Itellyounothing

    And for bonus points supposed anti racists then make the same algebraic Cock up.

  • staghounds

    150 local councils buy betting tickets on solar subsidies.

    Parliament will decide on whether there are subsidies.

    This is like taking money to the track when every jockey is your brother or sister.

  • Paul Marks

    Nullius – I suspect you lack experience of local government.

    None of this has anything to do with the demands of ordinary voters for XYZ – politics does NOT work that way.

    In local government most spending is mandated by Central Government – by a series of Acts of Parliament going back to that of Disraeli in 1875 (which mandated about 40 things that local governments had to do – whether they wanted to or not).

    Both in local and NATIONAL government new “responsibilities” are not generally suggested by the voters.

    To be blunt (and no offence meant to you Nullius) the voters have BUGGER ALL TO WITH THE GROWTH OF GOVERNMENT.

    Intellectuals such as Jeremy Bentham or J.S. Mill come up with new things for government to do – and convince governments to do them via a process of “education” and “influence” – it is only AFTER the new government spending thing is done that the people get used to it.

    The voters do not think up new things for government to do – that is NOT the way government works (it has never worked like that) – the “intellectuals” think this stuff up, and then push it for what they believe is the greatest good of the greatest number.

    I remember that Douglas Carswell came up (on his own) with this correct conclusion (that the growth of government, local or central, has nothing to do with the voters and everything to do with the “intellectuals”) – I did not have the heart to tell him that this has been known for centuries.

    It is the same with regulations – including the Freedom of Speech smashing “Diversity and Inclusion” Frankfurt School of Marxism Agenda – the voters did NOT ask for any of this (not originally – it does not come from them).

  • Paul Marks

    That people such as Jeremy Bentham and J.S. (“everyone agrees” that local government should do XYZ – with “everyone” meaning himself and his associates) Mill were NOT about reducing the size of government or defending private property has been know from the start (at least to people to people who bothered to read their works), but that is a matter of liberty – how this bunch did not really believe in it (not politically – and not philosophically either), but DEMOCRACY is another matter.

    I think it was Maurice Cowling who really explained in detail how these “supporters of democracy” did not really support it.

    Most certainly they supported people having the vote – but they believed that POLICY should not be decided by the voters, they believed policy should be decided by an “educated elite” – THEMSELVES.

    The form of democracy but not the SUBSTANCE of demcracy- that is what these people were about (and still are).

    “Under God The People Rule” (the State Motto of South Dakota) is exactly what J.S. Mill and co did NOT want – and not just because they did not believe in God.

    The Westminster Review crowd did NOT spend money putting the works of (say) Ralph Cudworth in every library in the kingdom – they spent money putting the works of THOMAS HOBBES in every library in the Kingdom.

    THOMAS HOBBES – they never believed in liberty, not philosophically and not politically. They believed in the tradition of Sir Francis Bacon (“!The New Atlantis” his servant Thomas Hobbes and all the other supporters of statism by an “educated” elite – such as Jeremy Bentham with his proposed 13 Departments of State controlling most aspects of life. J.S. Mill even admired Saint-Simon the creator a Collectivist socialist “new religion” – but he did not think that people were “ready” for him to openly support it.

    They, the intellectuals, spoke in coded language – not “the nationalisation of land” – oh dear me no, “free trade in land” (which, hey presto, turns oout to mean rather more than getting rid of entails….).

    Generally speaking (NOT always – but normally) policies come from above – from the “educated” Collectivists.

    Policy, GENERALLY, does not come from the people.

  • Paul Marks

    A small group of landowners are hard to manipulate – they might actually want to rule themselves (rather than be “guided”). After all an individual landowner might actually have a personal impact on policy – so they have a reason to get involved and try and make their personal opinions felt.

    But millions of people with one vote each? So each individual person knows that he or she has little influence….. now that is far easier for the “intellectuals” to manipulate (and they always knew that).

    Sometimes, YES, the people manage to make their own wishes plain (rejecting the “guidance” of the collectivist “experts”) – but such cases are, sadly, rare.

    As for this council.

    Does anyone think that the people of that borough voted Conservative because they wanted MORE spending?

    News flash – people vote Conservative because they tend NOT to want more spending.

    Does the average Conservative voter want a Billion Pounds spent on “Green” projects by their local council – no they do not.

    But what Conservative VOTERS (ordinary people) want, only SOMETIMES counts.

    Often the “experts” win. Indeed often their desires are THE LAW and councils have to follow THE LAW.

    It is NOT a matter of knocking on the doors of ordinary people and saying “hello – I am your local Conservative candidate, I intend to follow the Agenda of the Frankfurt School of Marxism, Diversity and all”. That is NOT what happens.

    Such policies do NOT come from the people.

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