'Further borrowing required' by Peterborough City Council despite half a billion pound debt

Councils in the UK added £7.8 billion to their growing debt pile in the space of a year, according to the BBC's Shared Data Unit.

Analysis of data from the Ministry of Housing, Communities and Local Government (MHCLG) shows UK councils owe a combined £122.2 billion to lenders, equivalent to £1,791 per resident, as of April 2025.

In Peterborough, the city council's debt at the end of the 2023/24 financial year was £512,459,000.

This figure rose to £525,959,000 by the end of the 2024/25 financial year, equating to a total debt per person of £2,396.07.

Councillor Mohammed Jamil, deputy leader and cabinet member for finance at Peterborough City Council, said the authority remained committed to achieving long-term financial sustainability while continuing to deliver essential services to residents.

"We came into this administration in May 2024 and that debt was already in place, and since then we have worked tirelessly to manage the debt burden proactively, while being mindful of the scale of the challenge," he said.

"Consideration is also being given for the sale of certain council assets to support debt reduction, however with ongoing uncertainty regarding Dedicated School Grant nationally, further borrowing is required until that position is resolved.

"Our focus remains on protecting vital services, supporting the most vulnerable, and ensuring that every pound spent delivers value for residents."

Peterborough City Council has sold around £50 million worth of assets in the past nine years in order to repay debt.

Councils can borrow funds to invest in projects such as schools, leisure centres and theatres - they can also borrow to invest in property that will bring in an income over and above repayments on the debt.

But the recent rise nationally is being partly driven by a near tripling of short-term lending from central government, which in some cases is being used to paper over holes in some council revenue budgets rather than pay for investments and town centre improvements according to the Shared Data Unit.

Experts including Jonathan Carr-West of the Local Government Information Unit said the spiralling levels of debt at local authorities was “extremely worrying”.

He said: “That is not a sustainable system. As one local government finance officer said to me, it's essentially payday loans for local governments.

"I don't think the government would say that’s it’s long-term ambition. They would say that is what we have had to do to paper over the cracks while we introduce a new funding system for local government."

Sarah Culkin, editor of the Local Government Chronicle, said: "I think overall it comes back to this point that the funding isn't adequate to meet the demand out there and that's across a whole range of services for the most vulnerable in our society from adult social care to children's services, education for children with special educational needs and disabilities or housing and homelessness.

"All of those services are seeing big rises in demand that are pushing up councils’ costs."

In 2017, Peterborough City Council agreed to pay a loan of up to £15 million to the developer of the 160-bedroom Hilton Garden Inn hotel in Fletton Quays.

The development was significantly delayed due to a slowdown in the construction industry following Covid. Work on the building halted in March 2023 and the developer was eventually put into administration in October the same year.

The hotel remains unfinished and external auditors recently labelled the council's loan a "significant risk".