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Council is £92m in the red
9:00am Tuesday 18th December 2012 in News
SWINDON Council has racked up nearly £100m worth of external debt in less than 10 years to spend on major projects – and the associated interest payments are cutting into funding for everyday services.
Statistics show that at the end of the March 2012, the authority had external debt totalling £92m, not including the £138m the council borrowed after council tenants rejected an idea to transfer the homes to a new housing association.
About £45m of this was investment in Wichelstowe’s roads and other infrastructure, and about £15m went towards the 850-space public car park being built on the old police station site as part of Union Square.
Some borrowed funds have also gone towards building new schools and improvements to leisure and cultural facilities, such as the new splash park at Coate Water and the renovating of the plant system at the ice rink in the Link Centre.
This debt produces debt charges that sap cash from the pressured revenue budget, which pays for everyday services. Debt management in 2012/13 is expected to cost the council £8.7m.
The Adver reported last week that Swindon Council plans to slash a further 70 posts to help plug an estimated £16m gap in the budget for 2013/14, which has been caused by reduced Government funding and increased demand for services.
Council leader Rod Bluh said the level of borrowing would have to reduce as the financial situation tightened.
He said: “Half of that is Wichelstowe. New schools cost money and we have to build them and therefore we don’t sometimes have the choice because if we haven’t got readily available resources, we sometimes have to borrow.
“It’s becoming an issue because the demand for schools is going up and the money for schools is going down. It’s one of the issues we’ll have to deal with.
“Sometimes you are investing in out of date facilities like the ice rink at the Link Centre.
“They’re income-producing assets and if you don’t maintain them you don’t get the income. Basically it’s to invest in the assets of the town.”
Swindon Council holds a £12m contingency fund to deal with the £1.7m interest repayments it is racking up each year. The cash was a severance payment from Taylor Wimpey to the council, in exchange for the council letting it out of a building contract.
But the £1.7m annual interest from the debt is gradually eating through it and if the market does not improve and the land is not sold off in the next several years to pay off the debt, the council may have to dip into other funds to finance the debt.
Of the £92m external debt, £35m was borrowed on the market and £75.8m is from the Public Works Loan Board, which is normally at a lower interest rate. The council’s long-term borrowing rate is currently 3.36 per cent.
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