Woking Borough Council had “no business” handing over millions of pounds in unsecured loans to a private school and was “cosplaying” at being a bank, a top ranking official has said.

Greenfield School borrowed millions of pounds from the now bankrupt borough but has since approached the authority to say it did “not currently have funds” to fully repay a debt of £2.4 million due to mature on November 25.

The fee-paying school, which charges up to £17,000 a year for pupils, was given a total of £13.4 million by the council – despite Woking having “no statutory duties relating to education”.

The school said it needed the money to provide new class spaces, and the council at the time argued this would also free capacity within the state sector – as well as serve as an investment.

Much of that debt is being paid back over a 50-year period, but a smaller carry-over loan of £2.4 million is due this month. The school, however, says it has a shortfall of about £1.5 million and is not in a position to settle its debt for at least another two years.

It has left the council with two choices, seize assets held by the school, or extend the repayment window in the hope the school raises the cash by selling property it owns.

Councillor Dale Roberts, cabinet member for finance at Woking Borough Council, told the meeting on Thursday: “It’s the view of this administration that the former administration had no business in entering into this arrangement. For any number of reasons.

“Firstly a borough council has no statutory duties relating to education, this was highlighted by the Grant Thornton report that the previous administration borrowed to lend to third parties for purposes that were not related to the council’s functions or responsibilities or placemaking role.

“Secondly, again according to the Grant Thornton report, the arrangement was partly to generate income. It was a commercial loan.

“This council was not a bank. The act of lending did not make this council a bank. 

“A bank has processes, system controls, expertise, regulatory responsibilities, compliance functions, commercial capabilities.This council had none of those. It was cosplaying being a bank.

“And that is why we are where we are this evening. Faced with two less than ideal options.”

The executive has agreed to restructure the Greenfield School loan, although it stressed its preference was for the school to make its payment deadline.

The alternative option, taking control of assets held by the school, was rejected as the council is seeking to reduce its asset count, as well as the time and costs associated with managing them. 

The school is being asked to provide assurances it will be able to honour the revised terms as well as underscore its longer-term plans to pay the remainder of the loans. 

Councillor Liam Lyons, cabinet member for planning, added: “I think its one of the most bizarre decisions made by the former administration.

“Its fair to say there isn’t a councillor on the council or an officer in these civic offices who would advocate making such a decision to lend a private school eye watering sums of money. 

“Most of which is not secured, ever again.”

The full report can be read here.