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Warrington Council representatives said that they have had to take out loans to cover public expenditure following grant cuts from central Government. However, the local opposition leader said the Council had “massively over-geared” their financial position.

Other local authorities have run into worse trouble by following a similar pattern of money-management.

Croydon Council and Northamptonshire Council were forced to make stringent cuts after announcing de facto bankruptcy in 2020 and 2018 respectively.

Warrington Council began lending in 2013, in hopes that their investments would yield a profit that could then be funnelled back into public works.

Since then, according to the Financial Times, the Council’s portfolio has expanded to finance the development of the town centre, business parks and local amenities.

However, the Council has come under fire for its 2019 investment of £18million in a 50 percent stake in Scottish energy firm Together Energy.

The company went bust last month, along with other small energy suppliers as the global cost of natural gas soared, reportedly leaving the Council with an exposure of £52million.

The Council told the FT that it does not expect to lose anywhere near that number following administration proceedings.

Steve Broomhead, chief executive of Warrington Council, declined to comment on the proceedings to the paper.

Warrington Council also attracted attention last year when it provided a £151million loan to a company indirectly controlled by Matt Moulding, the founder of ecommerce group THG.

THG saw a drop in share price amid investor concern over strategy and governance, the FT said.

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Mr Broomhead said that the investment in the company “had led to the creation of hundreds of local jobs” and had already paid back “northwards of £50million”.

He added: “People want our heads on a stick because they think we have been gambling.”

Cathy Mitchell, deputy leader of Warrington Council, said the local authority’s portfolio of investments would deliver a net return of over £20million this financial year.

She added that the investments had helped safeguard key council services that would have otherwise been slashed.

However, the handling of public finances by the local authority has drawn criticism from the local Conservative group, which are now the main opposition party.

Kenneth Critchley, the Conservative spokesperson for finance in Warrington, is calling for an independent inquiry into the Together Energy investment “before any new investments can be authorised by the Labour cabinet”.

He added: “A Council with £135million of usable reserves and they have borrowed £1.6bn: in our opinion, that is massively over-geared.”

The Council claimed to the FT that it was the sixth-worse funded local authority in England, as the Westminster formula for distributing funding prioritises deprived areas – while council tax revenue is low in Warrington.

Last year, the Department for Levelling up, Housing and Communities tightened regulations, in an attempt to prevent local authorities from borrowing for profit.

A spokesperson for the department said: “Councils are responsible for their own investment strategies, but these must comply with the prudential framework, which sets out codes of good practice on council finances and does not permit councils to borrow to invest for yield.”

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