ÃÂ£230m burden of County Hall debt

Posted by Simon Honeysett on Oct 20, 08 11:39 AM in Councils

Nick Brown CONCERNS over Northumberland County Council's finances have deepened because it has ÃÂ£230m of debts after taking out ÃÂ£100m in loans.

North East Minister Nick Brown, pictured, said he would be urgently seeking advice over the situation, which comes after it emerged the council has ÃÂ£23m stuck in failed Icelandic banks.

Steven Mason, the council's finance director, said: "It is not unusual for a large county council. Obviously you are aware that we did borrow in advance of our future capital programme.

"We used the prudential borrowing code to borrow for the future capital programme when the rate of interest was favourable. If we hadn't done that we would have to pay an additional ÃÂ£4m per annum in interest charges.

"Those savings have obviously enabled us to protect services in efficiency savings."

The council's reports show it borrowed ÃÂ£78.5m during 2005-06 and a further ÃÂ£22m in 2006-07 to fund capital spending up to and including 2009-10 to take advantage of low borrowing rates.

A large proportion of the spending plans are based on funding new schools in Cramlington and Blyth as part of a switch from three to two-tier education in the county.

The move comes after Northumberland was not included in early phases of a Government-funded school rebuilding scheme.

Funding was also secured for transport programmes, including road maintenance, with loans of up to 43 years.

Mr Mason insisted the council was not "bankrupt" and expressed confidence that loans would be repaid. Provision has been made in council budgets for paying back loans, which could include borrowing more money. North East Minister Nick Brown expressed concern, adding: "I need to take professional advice on this as a matter of urgency."

Peter Jackson, Tory leader of Castle Morpeth council, said the county authority was "solvent" in the long-term when debts were balanced against assets such as property and land.

But he expressed concern that unforeseen shocks, such as the Icelandic bank crisis, could increase pressures. "It seems Northumberland County Council has been sailing very close to the wind for a number of years," said Mr Jackson.

Liberal Democrat county councillor Derek Kennedy said the debt rose under the previous Labour administration and was "coming back to haunt us" with his party having to deal with the situation as the ruling administration.

Labour MP Ronnie Campbell, who represents Blyth Valley, said: "It is a lot of money to borrow because that has got to be paid back."

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