The risk over Newham Council’s £2 billion debt is “brewing”, a local government expert has warned.
Rob Whiteman, independent chair of the council’s transformation and improvement board, said the town hall is on course to spend a third of its budget on servicing its debts.
He told councillors: “You have got a lot of debt.
“There is a brewing risk there for you about the scale of leverage, the scale of debt that the council has”.
Budget papers published earlier this month revealed the council has just over £2 billion worth of debt – making it the most indebted local authority in London.
The papers even predict this will rise to £3.4 billion by the 2028/29 financial year.
Councils can only borrow to fund their capital budgets, which pay for property and infrastructure projects rather than services.
However, they have to repay their debts and interest from their revenue budgets, which cover most day-to-day spending.
Whiteman warned Newham senior councillors: “You will want to think about your capital programme and your borrowing.
“The capital programme as it stands in the medium-term financial plan would lead to borrowing costs of about 33 per cent of your budget, which is huge”.
He noted that CIPFA – the national body for public sector accountants – recommends keeping borrowing costs at 10 per cent of annual budgets.
Whiteman made his warnings at meetings of both the council’s cabinet and overview and scrutiny committees on Tuesday (17th).
Speaking at the cabinet, Labour mayor Rokhsana Fiaz said the council’s leadership was “alert” to the issue.
She said they had been “scoping out alternative and different ways of resourcing – for instance – housing delivery, in a borough where housing need is so acute”.
Fiaz said that “a not insignificant proportion” of the council’s debt is “legacy debt”, meaning it had been borrowed under previous administrations.
She added: “But there are ways that we can service that debt more effectively and better”.
Speaking at the overview and scrutiny committee, the council’s director of finance Maria Christofi said she will review capital spending plans “line by line”.
She also said the council was looking at other ways of funding its capital spending.
Whiteman’s warning came as part of a broader commentary on the state of the council almost a year after the government issued it a non-statutory best value notice – an instruction to improve – in May 2025.
He said he had seen “a lot of improvement” at the council and that it was in “a much more stable position with regards to financial planning”.
Whiteman also said the board “applaud the pockets of real excellence that we see in Newham”.
These included the council’s children’s services, which were rated “outstanding” by the Ofsted inspectorate in January.
However, Whiteman advised the council and the government not to lift the notice “at the first opportunity”. He said this was because the council needed more time to show improvement had become “embedded”.
The council’s interim chief executive Paul Martin is set to report on its progress to the government today (Friday 20th).
His report to the government says the council “has made good and tangible progress on a journey that will take some times to complete”. It adds: “It is in a stronger position to drive that further improvement”.
Martin told councillors the government would review the best value notice on the anniversary of its imposition in May.
He said he is “very optimistic that the minister’s decision will reflect progress”.
