Another £10 million added to Borders debt pile

by OUR LOCAL GOVERNMENT EDITOR 

An unprecedented borrowing spree by Scottish Borders Council continued last month with yet another £10 million loan secured from UK Treasury funds, bringing the 2024 total to £56 million and adding significantly to the authority's indebtedness.

New data published by the Public Works Loans Board [PWLB] shows the Conservative/Independent-controlled council set up the £10 million facility on June 28th, agreeing to pay interest of 5.27 per cent, and with a maturity date in June 2025.

When SBC borrowed £10 million from the PWLB in March at 5.39 per cent with maturity a year later it was confirmed the interest paid would total £539,000. On that basis, it would seem a further half a million pounds will be needed to service the latest cash advance.

And all of that comes on top of the £1.6 million in interest which will accrue from £30 million borrowed in January at 5.35 per cent. In addition, the council arranged a further loan of £6 million at 5.4 per cent in April.

As we reported last month, the commentary which accompanies SBC's draft annual accounts for 2023/24, maintains that the Borders authority remains 'under-borrowed'.

Director of Finance Suzanne Douglas stated: " The Council continued to maintain its’ under-borrowed position only borrowing £40 million in the final quarter of the year to support capital spend compared to £70 million originally anticipated. This means that the capital financing need was not fully funded by external loan debt and instead internal cash supporting the Council’s reserves, balances and cash flow has continued to be used as a temporary tactical measure. This strategy remains both prudent and cost effective."

The accounts show the authority's outstanding external debt as at 31 March 2024 was £251 million. The average rate of interest paid on a portfolio of more than 40 separate loans was 4.53% while the amount owed to the [PWLB] increased by more than 15% from £184 million in March 2023 to £212.4 million a year later. That total will have increased by a further £16 million since the end of the last financial year.

The PWLB money is used to pay for major works. As Ms Douglas explains the £90 million Capital spend in 2023/24 represents the highest amount the Council has delivered demonstrating significant investment in key projects across the Borders.

SBC, in a cross-party budget statement issued in February, revealed that as part of the 2024/25 budget there would be a freeze on Council Tax. However, it was planned to invest £121.6 million in major capital projects, including new schools and care facilities, as part of a 10-year capital plan worth over £450 million.

This year's capital programme is set to cost £30 million more than last year's record spend on project delivery. It may therefore be necessary to set up further loans before the financial year is out.

According to Ms Douglas's commentary: " "The Capital Financial Plan aims to ensure that capital borrowing is within prudential borrowing limits and remains sustainable in the longer term. In this regard it is important to recognise that capital investment decisions taken now have longer term borrowing and revenue implications which have the potential to place an undue burden on future taxpayers."