by OUR LOCAL GOVERNMENT EDITOR
The amount of money owed by Scottish Borders Council to the UK Debt Management Office has soared by more than a fifth over the last twelve months after the local authority borrowed £40 million in the eight weeks leading up to the end of the 2023/2024 financial year.
SBC has 46 separate tranches of debt from the Public Works Loan Board [PWLB] which the Debt Management Office [DMO] operates on behalf of HM Treasury. While the number of loans at March 31st this year is the same as at March 2023, the recent borrowing has increased the amount outstanding from £174.308 million to £213,736 million, a rise of 22.6 per cent.
Data published by the DMO showed that the Borders council borrowed £30 million on January 30th with an interest rate of 5.35% and a maturity date of January 30th 2025. Then, on March 27th a further advance of £10 million was taken at 5.39% and with a maturity date of March 27th 2025.
In response to an enquiry by Not Just Sheep & Rugby, a spokesperson for Scottish Borders Council revealed that the authority would pay interest of £1.605 million on the £30 million loan, and a further £539,000 on the money borrowed in March.
We were told: "All debt is used to support the capital programme of SBC once other funding sources have been utilised."
Prior to the approval of the 2024/25 council budget it was decided that a one-off £10 million contribution from financial reserves would be used "to sustain local services and support key projects".
According to a council statement: "This will give time to engage with communities over the next twelve months to shape future service plans which will deliver essential permanent savings".
As well as meeting the interest payments on the 46 PWLB loans, SBC also pays costs associated with so-called LOBO (Lender Option Borrower Option) loans. These were valued at £35.6 million as of March 2023, having been taken out a number of years ago when PWLB rates were relatively high.
There is also the small matter of servicing £84.4 million of liabilities associated with costly Public Private Partnership (PPP) school building schemes.
Total annual costs of loan charges linked to PWLB loans, LOBO loans and PPP financing stood at £16.1 million, equivalent to 7.6% of the overall revenue budget.
Total SBC debt stood at £294.3 million at the end of the 2022/23 financial year, well within authorised and operational boundaries, according to finance officers.
The authority's annual Treasury Management report included the following: "During 2022/23, the Council maintained an under-borrowed position. This meant that the capital borrowing need, (the Capital Financing Requirement), was not fully funded with loan debt as cash supporting the Council’s reserves, balances and cash flow was used as an interim measure.
"This strategy was prudent as investment returns were initially low and minimising counterparty risk on placing investments also needed to be considered. The policy of avoiding new borrowing by running down spare cash balances has served well over the last few years. However, this has been kept under review to avoid incurring higher borrowing costs in the future when this Authority may not be able to avoid new borrowing to finance capital expenditure and/or the refinancing of maturing debt."
The £10 million loan transaction last month between SBC and the PWLB was chickenfeed when compared to many of the sums dished out to councils elsewhere.
During March 2024 no fewer than 270 separate loans were taken, among them several loans totalling in excess of £80 million by Barnet Borough Council, in London. Insolvent Birmingham City Council was handed £200 million and will be paying off this latest debt until 2043.
Scottish authorities borrowing for their local capital programmes included Aberdeen City Council £40 million; City of Glasgow £25 million; Falkirk Council £40 million in two separate loans; North Lanarkshire Council £20 million; Midlothian Council £10 million and East Lothian Council £5 million.
But the award for the largest new debt mountain must go to Cornwall Council which signed up for £100 million on March 19th, then for £200 million and £50 million on March 28th, a grand total of £350 million. In each case the maturity date is twelve months hence.
Cornwall councillors agreed earlier this year to increase local council tax by the maximum 4.99% as well as imposing cuts to services. Some members warned the authority was "on the road to bankruptcy".
The council's last published accounts state: "At the end of 2022/23, the Council had net debt of £741.839m, an increase of £67.962m."
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