Money spent repaying debt by Cambridgeshire County Council could increase by £10 million a year

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The money Cambridgeshire County Council spends on financing debt every year is rising “quite steeply” and could increase by £10 million over the next five years.

Liberal Democrat councillor Nichola Harrison told a meeting that a council forecast on the rising cost of servicing debts was “quite alarming”.

Cllr Steve Count

Cllr Steve Count

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 £26.5 million on debt charges this year.

Preliminary figures show that could rise to £42 million 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 £900 million in 2024/25, about double the council’s early forecast for that year’s net budget of £468 million.

The council’s net borrowing rose to £524 million this May, up from £434 million in May last year, and £367 million the year before.

By March 2020 it is forecast to reach £732 million.

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 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?”

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”. He said 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.” He added: “We are not saying debt is bad, it’s just being mindful of it when you are agreeing your capital priorities.”

The council says every one per cent increase in council tax generates about £3 million, whereas it says its commercial property company This Land will generate about £10 million 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.

“At the same time, national government policy is for councils to generate the funding they need locally and has consequently been reducing the funding it gives councils like Cambridgeshire to provide essential services over the last five years.

“We also have a deliberate strategy to invest in commercial activity to plough back into frontline services. Our success in doing this means we will generate returns  which we are using to bridge the gap in the funding we have and a growing demand for services, particularly for vulnerable children and adults.”

Labour’s Cllr Joan Whitehead said she was glad to hear Cllr Count had been lobbying the Government for extra funding, but said: “I think we would be really glad if you could at last succeed.”

“Just to be clear what that failure came to this year,” Cllr Count responded, “we got £53 million in secured one-off funding, and an additional £8.4 million that we achieved through our lobbying.”

When Cllr Whitehead pushed back and said that money was given to all councils, Cllr Count said that “£61.4 million came to Cambridgeshire County Council based on the lobbying that we did, alongside primarily county council network members for one-off funding.”

He said he was pushing for “fair funding” from the Government, and added: “The [lobbying] successes to date have been the difference between this organisation running well and delivering its services and not being able to.”

Addressing its financing, the council said in a previous budgeting document from this year: “Cambridgeshire County Council is the sixth worst funded council in the UK, and if it received even the same amount of the average shire county it would be £19 million a year better off. We have already delivered £178 million of savings over the last five years and have a strong track record of value for money improvements which protect frontline services.”

The Local Democracy Reporting Service reported earlier this month that early forecasts suggest the council needs to save £74 million in the next five years.

Ben Hatton, Local Democracy Reporting Service