Hartlepool Borough Council takes out more than £80million in loans
Hartlepool Borough Council has taken out more than £80million in loans - a rise of more than 50% in the last five years.
The Chartered Institute of Public Finance and Accountancy says delivery of public services could be put at risk by unsustainable borrowing, after debt among UK local authorities rose to more than £100billion.
By the end of December, Hartlepool Borough Council’s outstanding loans stood at £82.8million, according to figures from the Ministry of Housing, Communities and Local Government.
This was a decrease of 3% compared to a year ago, but 52% higher than at the end of 2013-14.
The council says all borrowing is carefully considered and loans are long term with low interest repayments.
The Government’s Public Works Loan Board was the main lender to Hartlepool Borough Council as of December, followed by UK banks.
A Hartlepool Borough Council spokesperson said: “All decisions to borrow are based on detailed and robust business cases for capital schemes.
“As part of our governance arrangements, these business cases are presented to Finance and Policy Committee, where they are subject to thorough scrutiny before they are approved or rejected.
“These arrangements ensure all decisions to borrow any amount of money are very carefully considered.
“Loans are always repaid within the agreed timeframes, and it is also important to note that instead of accessing temporary funding, the council takes out long-term loans at historically low interest rates which minimises annual repayment costs.”
The loan board offers low-interest loans to councils, without requiring them to prove they can afford the repayments.
There is no limit to the amount councils can borrow from it.
All the outstanding loans were long-term advances, which last for more than one year and are used to finance large projects or purchases.
The Chartered Institute says many cash-strapped councils are taking out large loans to buy property, as the rent they collect can be higher than the interest they pay on the loans.
Funding for councils fell by almost half between 2010-11 and 2017-18, according to the National Audit Office.
“With government funding in decline, it is unsurprising councils are having to adapt and find alternatives,” said Don Peebles, head of policy at the Chartered Institute.
“While councils are borrowing for a wide range of purposes, such as building houses and investing in major infrastructure, one trend which has been concerning is the growth in investment in commercial property – which exposes public finances to new risks.”
He added that councils could be in breach of the Institute’s guidance – which they have to take into account when developing investment plans – by borrowing too much, or borrowing in advance of their needs.
The Local Government Association, which represents councils in England, said budget cuts had forced councils to find new ways of making money.
A spokesman said councils had followed the rules “to ensure they invest wisely and manage the risk”.
A spokeswoman for the Ministry of Housing, Communities & Local Government said: “Councils are responsible for managing their own finances and making the right decisions for the communities they serve – including making appropriate investments.
“Guidance on council investments was updated in April 2018 with new codes that strike the right balance between allowing councils to continue to be innovative while ensuring that taxpayers’ money is properly protected.”