West Berkshire councillor defends a mounting assets debt
£300m loans for infrastructure and property to ‘benefit West Berks in long term’
WEST Berkshire Council is expected to rack up almost £300m of debt by 2024, but denies claims it is “overdoing it”.
Executive member for finance Ross Mackinnon (Con, Bradfield) said he was confident the council would be able to pay it all back and “overall borrowing is forecast to come down” after 2024.
The Conservative-run council takes out loans to invest in local infrastructure and it has borrowed £63m to buy shops, offices and other properties that can be rented out to generate income.
It is planning to borrow another £29.8m for infrastructure improvements in 2021/22 and
that will take its total debt to £246.2m.
Around £11.5m will be spent on repaying loans in that financial year – that is less than 10 per cent of the total budget for council services.
By 2024, the council’s debt is expected to reach £294.3m.
“We’re not using borrowed money to fund day-to-day spending,” said Mr Mackinnon, at a meeting on March 2.
“We’re using funds to buy assets that benefit West Berkshire residents in the long term.
“It’s like buying a house with a mortgage.
“Yes, you have a big chunk of debt but you can afford the repayments and you’ve got a house.
“Eventually you pay off the debt and you’ve got a house and no debt.”
Shadow portfolio for finance Jeff Brooks (Lib Dem, Thatcham West) said: “I think you’re overdoing it.
“Over the next four years, the borrowing of the council is projected to go up by £50m.”
He added: “Although we will end up with the infrastructure, the public will end up with the debt.”
Opposition leader Lee Dillon (Thatcham North East) added to the mortgage analogy: “While I do appreciate you end up with the asset at the end, we aren’t the tenant of the house.
“We have tenants who have to pay us rent in order to for us to cover our mortgage.
“It’s a bit different from a home-owner living in their own home.”
Responding to Mr Brooks, Mr Mackinnon said that the borrowing needed to be compared with the amount of the council budget spent on repaying the loan, around nine per cent forecast over the next three years.
“That is the dictionary definition of sustainable,” he said.
The council has taken out low-interest loans from the Government’s Public Works Loan Board (PWLB) and borrowed money from banks, building societies and other financial institutions.
It is confident interest rates will remain extremely low in the coming years, as the UK looks to recover from the economic impact of the Covid-19 pandemic, and it will be able to make its repayments.
Last week, the council signed off a three-year £122.9m investment programme and says more than half that money (£64.4m) will be borrowed.
It has also spent £63m on commercial property in recent years and aims to make a profit of around £1.26m (two per cent) each year, so it can reinvest that money in front-line services.
Recent figures show a net income of £700,000.
It says only one of those properties – an £8m office block in Newbury Business Park – is currently empty.
The council had planned to borrow £100m to buy commercial property, but in November 2020 the Government said councils should stop borrowing from the PWLB to invest in property purely for profit.