Thanet Council loses £3.4 million

July 09, 2013 12:12 PM

Thanet District Council has managed to lose £3.4 million as a result of the financial collapse of TransEuropa Ferries (TEF), who operated a service from the council owned port of Ramsgate to Ostend in Belgium.

In 2009 the ferry operator owed the council £330,000, which then spiralled into more than £560,000 in 2010 before a deal was struck to defer the repayment of port fees - worth more than £1 million a year. When the company eventually filed for administration in March, the council was owed £3.4 million. 

The Isle of Thanet Gazette reports that debt repayments were due to start in January after the firm believed it had found investment from an Italian company and chartered a third vessel from P&O. But the investment fell through and when the ferry business filed for administration, it blamed competition from other operators using Dover. It also emerged that P&O had not been paid, and they lost no time taking back their ship.

The district council has been accused of undeclared public subsidy, in contravention of European law. They deny this, calling the arrangement “extended credit terms” in order to protect jobs at the port and it seems similar arrangements were agreed at Ostend Port. In a statement, they said;

The council is satisfied that, unlike the giving of grants, soft loans and loan guarantees, interest rate rebates, accelerated depreciation allowances , capital injections and preferential tax or rate reliefs, the rescheduling of invoiced debt does not constitute state aid.

This did not, however, impress independent councillor, Ian Driver. "It calls into question how Thanet Council is being managed", he said. "How can it be right for a small group of elected councillors and senior officials to agree a secret deal which allowed TEF to rack up a £3.4 million debt?"

He makes a very good point as the governance and audit committee was unaware of the secret deal, the practical effect of which was to give the operator three years of unpaid port dues.

Serious questions need to be asked, as the council should have heeded the warnings going back to 2009 that the TEF was in trouble. When debts kept on increasing, they should have realised that taxpayers could lose a sizeable sum. Councils should not be in the business of picking winners and losers in the private sector. No matter how good the intentions were to try and protect local jobs, if a private company cannot stand on its own two feet, no matter how many subsidies you give them, eventually it will end in tears.

It appears this saga, which dates back to a previous council administration, is far from over.

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