Thurrock Council ditches £26m affordable homes scheme

Thurrock Council said interest rate increases would make the affordable homes project "no longer feasible"

A £26m scheme to build 82 affordable homes is to be dropped by a local authority facing a £469m budget shortfall.

Thurrock Council in Essex declared itself in financial distress last week and issued a section 114 notice.

On Friday it announced a scheme to convert former council offices in Grays into affordable homes had been ditched.

It said a rise in interest rates would increase the cost of the scheme by another £11.3m.

The Conservative-run authority said the housing project was "no longer feasible", according to the Local Democracy Reporting Service.

Councillor Luke Spillman, who is responsible for housing, said the Ukraine war had added to the problem along with an interest rate increase for the scheme from 2.8% to 5%.

"We'll be going back to the drawing board in the new year and will evaluate all alternative options and bring new proposals forward in due course," he said.

"This is an unfortunate example of the impact inflation, energy costs and the war in Ukraine are having on local authority development projects across the country."

• Council declares itself bust after failed investing

• Chief executive of £469m debt council quits

• Council set to borrow nearly £850m to repay debts

The viability of the scheme had been questioned earlier this year by the housing overview and scrutiny committee which feared profit margins were too tight.

Leader of the Labour Group, John Kent, said: "It is inevitable that large schemes, such as this, won't be able to go ahead."

He added he wanted to know from the Conservatives "which scheme will be scrapped next".

The council's financial shortfall is three times larger than its annual budget and is one of the largest ever reported by a UK local authority.

It is set to borrow nearly £850m from the government so it can pay back loans to other local authorities.

The section 114 notice means a local authority is in financial distress, cannot balance its budget and is effectively bankrupt.

Find BBC News: East of England on Facebook, Instagram and Twitter. If you have a story suggestion email [e-mail]