Woking Borough Council is set to receive financial support from the government in paying off its £2 billion debt.

A ministry of housing, communities and local government spokesperson said in a statement that it was "not typical for a council's debt to be addressed or written off centrally" but added that the situation in Woking needed government involvement.

The government statement added: "The government accepts that there are exceptional circumstances in Woking Borough Council due to significant unsupported debt which cannot be managed locally in its entirety.

"That's why we have committed to providing initial debt repayment support for the council in 2026-27, and will ensure that any support takes value for money for national and local taxpayers into account."

The council declared itself effectively bankrupt in 2023 after borrowing to fund two large commercial schemes – Victoria Square shopping mall and a housing regeneration project in Sheerwater – failed to deliver expected returns.

Victoria Square’s skyscrapers were built as the tallest towers outside a major city in England, with the ambition that they could be seen from the top of the Shard in central London 30 miles away.

The scheme - involving a shopping centre, public plazas and a four-star Hilton hotel - was planned in 2013 as a £150 million taxpayer-funded regeneration project before costs spiralled to £700m.

Most of the council’s spending had been financed by an arm of the Treasury known as the Public Works Loan Board.

Founded in 1793 to alleviate commercial distress resulting from the trade recession which followed the French Revolutionary Wars, it provided Woking Borough Council with loans totalling £1.3bn.

The government believes that even after creating the best financial position possible with Woking's existing assets, it would be unlikely that most of the council's remaining debt could be managed locally.

News of the plan emerged in May when councillors considered a report which revealed the government had agreed to assist the council and any new unitary authorities created through the reorganisation process in Surrey with making the most of Woking's assets.

It came after Surrey County Council leader Cllr Tim Oliver raised concerns about how the debt might impact local government reorganisation plans for the region.

The government said it intended to provide the support in April 2026 and would work with the council and its commissioners to agree on an appropriate amount of debt repayment.

It added that any debt support for Woking related only to the council's “unsupported debt” resulting from “exceptional capital practices”.

Cllr Oliver said he expected Woking’s debt to be “ringfenced out” of the finances of whatever new unitary authority the town finds itself part of.

Woking’s deputy leader Cllr Dale Roberts said: "While there is much still to be agreed, this announcement provides reassurance as we continue to work closely with government and other Surrey councils to secure a sustainable financial future for Woking and the best possible outcomes for residents."

The government said it hoped to confirm "in principle" in September the size of the first amount of debt repayment money the council would receive.