Wednesday, 21 January 2015

Council Budget (2) - Borrowing

One of the areas that Cllr Woodley and his Independent colleagues have focussed on in recent years has been the level of council borrowing. This reached a head during the council budget debate last year when they were challenged to identify the specific projects which had been wholly or partly funded by borrowing which they would not have undertaken, or to propose variations to the draft budget to remove borrowing funded projects which they would abandon.

Perhaps unsurprisingly they failed to do either although Independent Party Leader Martin Terry came up with 3 schemes which had been primarily or solely externally funded.

With this backdrop it was always going to be interesting to see the new Administration’s proposals on capital which presumably would see no new projects funded by borrowing and proposals to reduce general borrowing levels.

Well it is always difficult to reach any definitive views on the initial cabinet papers but the draft programme which they are seeking to deliver suggests that for 2015-2018/19 they propose a capital programme of £156.9M of which only £57.8M is externally funded. It envisages borrowing of £56M over the period in addition to using £37.1M of reserves.

Particularly the use of reserves from general fund is not greatly different from borrowing as it reduces the size of the safety net available for unexpected expenditure and if it is going to be used could simply repay borrowing to reducing revenue expenditure.

In fact the level of borrowing envisaged for 15/16 in the proposals we pushed forward 12 months ago was £9.3M but with the many new items the current proposals now increase borrowing for capital for the current year to £24.3M. It remains unclear what the total borrowing figure will be by the end of the year but this will no doubt become clear as the debate continues.

So we have a raft of borrowing funded capital schemes and a significant increase in the anticipated new borrowing for the current year!

The final twist on this is that at yesterday’s Business Budget Consultation Cllr Woodley made a throwaway remark that the budget would reduce borrowing by £38M resulting in a revenue saving of £2M pa. I was so surprised by this comment that following the meeting I asked a couple of other attendees whether I had heard him correctly. Their understanding accorded with mine. Clearly this needs to be clarified. I cannot believe that Cllr Woodley would seek to mislead the meeting on the true effect of his proposals but cannot see how his figures tie in with the papers. If he is in reality not only failing to cut borrowing but increasing it then it is reasonable to accept a correction of his comment yesterday and an explanation as to why his position appears to have radically changed.

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