Borders Council's record £60 million borrowing spree

by OUR LOCAL GOVERNMENT EDITOR

Scottish Borders Council smashed all of its previous monthly borrowing records in November when it asked the Treasury Debt Management Office for advances totalling £60 million, bringing the authority's debts for the calendar year to an eye-watering £136 million.

Figures published today by the Public Works Loan Board [PWLB] reveal that the Borders local authority took the cash in three separate "instalments" of £20 million on November 18th, November 26th and November 27th. The loans will add hundreds of thousands of pounds to the considerable sum in interest payments already being met from council funds via taxpayers.

The November 18th agreement came with a 5.17% interest rate with a maturity date for that loan given as May 21st 2026.

The £20 million borrowed eight days later on November 26th carries an interest rate of 5.08%, and a maturity date of November 26th 2029.

Then, the following day (November 27th) the third £20 million advance of the month was transacted, again at 5.08% and with maturity due on November 27th 2029.

As previously reported, cash from the growing portfolio of loans held by the council will be used to partly bankroll the authority's £454 million of capital investment which is planned over the next ten years. The various PWLB advances handed to SBC in the first ten months of 2024 totalled £76 million.

A report from John Boyd, the auditor appointed by the public spending watchdog to inspect SBC's books, noted: "The extensive capital plan is primarily focused on economic regeneration and the learning estate. £187 million is on the school estate including the new high schools for Galashiels, Peebles and Hawick estimated at £145 million, with the majority of this invested over the next three financial years."

That report concluded that SBC's total external debt, which includes the council’s long-term liabilities, is within the authorised limit and operational boundary set in the Treasury Management Strategy 2023/24. The current borrowing position complies with the Prudential Code, and the Council continues to consider the affordability of future borrowing.

It has been estimated that SBC will borrow £170 million over the coming three years.

Only last week, a new report produced by the Controller of Audit to Scotland's Accounts Commission claimed SBC has consistently laid out a clear vision and strategic priorities that respond to its geographic and demographic challenges. 

"The Commission is impressed by the council’s strong approach to financial management and recognises its financial strategy risk register as an area of good practice that should be shared. There is a strong track record of delivering planned savings, a significant proportion of which are recurring. Going forward, recognising the financial challenges faced, the focus should be on making savings on a recurring basis."

The report noted there had been a significant increase in the level of General Fund reserves held by the council. They increased from £49.6 million in 2022/23 to £60.1 million in 2023/24, a net increase of £10.5 million, predominately from service concession arrangements.

The council recognised the revenue implications of borrowing and ensured borrowing was in line with prudential indicators detailed in the Chartered Institute of Public Finance and Accountancy (CIPFA) Prudential Code for Capital Finance in Local Authorities 2021. 

According to the Controller of Audit: "In 2023/24, the council noted the higher interest rates in the UK and sought advice from its treasury management specialists. As a result, the council undertook short-term borrowing and used existing cash balances for capital investment. The council has reported that they were able to maintain service performance levels with some improvements in education indicators and recycling. 

"Challenges exist in indicators relating to looked after children and complaints handling and completing freedom of information (FOI) requests within the statutory deadline which have both declined in year. The council is making changes to its FOI process to address the statutory deadlines not being met, and there is a focus for improvement for looked after children being progressed via the Children and Young People Planning Partnership."