Cambridgeshire County Council’s debt charge ‘rising steeply’
PUBLISHED: 11:17 29 October 2019 | UPDATED: 13:05 29 October 2019
The money Cambridgeshire County Council spends on financing debt every year is rising “quite steeply” and could increase by £10m over the next five years.
Liberal Democrat councillor Nichola Harrison told a meeting on Tuesday (October 22) a council forecast on the rising cost of servicing debts was "quite alarming".
The council is beginning its budget setting process for the next financial year, and early estimates show the percentage of the council's net budget spent on debt charges increasing from 7.1 per cent this year to nine per cent in 2024/25.
The council said debt charges consist of interest payments and capital repayment.
The council spent approximately £26.5m on debt charges this year.
Preliminary figures show that could rise to £42m by 2024/25.
The council said the figures are still in draft stage, and "we anticipate that these debt charges will fall as we update the plans and phasing of investment".
And the council differentiates between "good" and "necessary" borrowing, saying the former generates additional revenue for the council.
The same council report showed target net borrowing is set to peak at around £900m in 2024/25, about double the council's early forecast for that year's net budget of £468m.
The council's net borrowing rose to £524m this May, up from £434m in May last year, and £367m the year before.
By March 2020 it is forecast to reach £732m.
These figures show council net borrowing is set to increase by 72 per cent between now and 2024/25, while its net budget is only to to increase by 24 per cent.
The council has previously said there is "major uncertainty" at the moment around council financing, meaning forecast figures are largely "indicative".
Speaking at the county council's general purposes committee, Cllr Harrison said: "In many ways it feels quite alarming to me - nine per cent - I didn't realise it would be that kind of a figure. It was quite a shock for me to see that.
"I just wondered how concerning this situation is?" she asked, before referencing further information which shows that on the current trajectory the council will go over the advised debt limit in 2024/25, and asked "what does it imply for the future?"
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The council's chief financial officer, Chris Malyon, responded: "What it implies is that more of our operational revenue capacity is being used to fund financing of the debt, which gives you less resources to spend on operational expenditure."
He added: "What we are trying to do is highlight that this council has quite a hefty indebtedness. And that's not surprising given it affects growth counties more than any other counties.
"It's not surprising but it is something we do need to be mindful of when we look at the balancing of the long-term budget and we can't - and this is not an accounting term - but we can't just go gung-ho and think we can just spend capital.
"You do need to start thinking about it quite seriously."
The leader of the council, Conservative Steve Count, highlighted the difference between necessary borrowing and borrowing "that actually improves the performance of this council". Saying the latter is around 20 per cent of current borrowing.
Mr Malyon said later in the meeting: "Good borrowing obviously does help the overall level of the budget, but you are putting quite a lot of weight on the level of return". And he added: "We are not saying debt is bad, it's just be mindful of it when you are agreeing your capital priorities."
The council says every one per cent increase in council tax generates about £3m, whereas it says its commercial property company This Land will generate about £10m this year.
A council statement said: "We live in the fastest growing county in the UK - which is a great success story and something we are very proud of, Cambridgeshire is a great county to call home.
"But with the increased population comes increased need for more schools, homes, improved roads, better infrastructure. Our 'necessary' borrowing is helping us to meet this need."