Taxpayers set to shoulder £43billion price of council debt underneath Labour’s devolution plans

Taxpayers are set to bear the burden of £43billion worth of council debt under Labour’s plans to create ‘super-councils’ via their local authority reform.

In the biggest overhaul of local government in more than 50 years, ministers want to scrap hundreds of small local authorities as part of Angela Rayner‘s ‘devolution revolution’.

But many of these smaller councils are deeply in debt and a senior government source has suggested this financial baggage would be taken on by the new larger councils, rather than being transferred to central Government.

Across England’s 21 county councils and 160 district councils there is believed to be £24 billion of debt held.

And another £19 billion worth of debt can also be found in the smaller councils set to be included in the mergers.

The management of council debt is an issue that is yet to be resolved, as the Treasury is likely to disagree with Ms Rayner on how the money should be distributed.

Another Whitehall source told The Times that most debt would end up ‘staying local’.

But in cases of ‘serious local failure related to debt’, ministers would have to step in and pass it on to taxpayers nationally to pay off.

Thurrock Council was left with more than £1billion worth of debt after investing in a solar farm tycoon who used taxpayer cash to buy luxury goods including a yacht and a private jet (file image)

Ministers want to scrap hundreds of small local authorities as part of Angela Rayner ‘s ‘devolution revolution’ 

An example of such a case can be found in Essex with Thurrock Council, which was left with more than £1billion worth of debt after investing in a solar farm tycoon who used taxpayer cash to buy luxury goods including a yacht and a private jet.

Under Ms Rayner’s plans, areas with a current two-tier system of district/borough and county councils streamlined into one authority covering around 500,000 people.

This would mean Thurrock and Southend-on-Sea councils will be abolished and merged into the separate Essex county council.

But Thurrock’s debt is almost double that of the entirety of Essex county council, meaning officials are planning for the central government to step in.

This would effectively mean the debt was written off for the new authority and instead taken on by taxpayers across the country.

In recent years, councils which have been merged have ended up with what some see as unhealthy levels of debt.

West Northamptonshire was created from the merger of three smaller councils in 2021 and now holds more than £570 million in debt.

Council chiefs are hoping this debt is transferred on to the central government’s balance sheet. If it isn’t, it will make merging councils increasingly unattractive and delay restructuring plans.

Cash-strapped Thurrock Council in Essex borrowed £655million of public money to invest in Liam Kavanagh’s (pictured) solar farm business

Thurrock hoped the huge investment in 53 solar farms (one pictured in Swindon) would generate millions in extra income

Ms Rayner’s ‘devolution revolution’ will create more directly elected mayors, who will have the powers to impose a ‘mayoral precept’ on top of council tax for large parts of England.

Labour has insisted that the plan does not amount to super-councils and will increase local democracy, as decisions taken in Westminster are devolved to regional leaders.

But the White Paper admits that one of the aims is to ‘reduce the number of politicians’ involved in decision-making, raising fears that they could in fact lessen democracy.

There are also questions over whether elections due to take place in May will happen for authorities facing the axe in 2027.

Ms Rayner has already signed off on the creation of mayors in Greater Lincolnshire and the combined authority of Hull and East Yorkshire, which are set to be elected next year.

Hampshire, Sussex, Kent, Essex and Cheshire are thought to be next to bid to have a mayor.

Unveiling the plans yesterday the Deputy Prime Minister Ms Rayner said England will go from one of the ‘most centralised’ nations to one where local leaders ‘with skin in the game’ have significant powers.

This will include an attempt to give everyone a directly elected mayor instead of the current hybrid system, where there are county and district councils which handle different duties, as well as unitary authorities.

Unveiling the plans yesterday the Deputy Prime Minister Ms Rayner said England will go from one of the ‘most centralised’ nations to one where local leaders ‘with skin in the game’ have significant powers.

The Deputy PM (pictured in Leeds) said the Government wants to ‘fill the map with devolution’

Existing combined authority mayors already levy a precept on top of council taxes in Manchester, Liverpool and Cambridgeshire.

But the Conservatives said that the document sends ‘a very clear message’ to authority leaders ‘that this Government feels that the men from Whitehall know best what their place needs, not bottom-up local leadership, but top-down templates for local government’.

Shadow local government minister David Simmonds told the Commons: ‘Instead of genuine devolution, what this White Paper sets out is a reductive approach.

‘It’s a mishmash of new tiers, new taxes, taking decision-making further distance away from residents, and if the experience of London is anything to go by, costing them a fortune at the same time.’