Concerns raised over 'breathtaking £780million in debt' at South Tyneside Council

At a recent meeting of the full council, an annual report was presented on the council’s Treasury Management for the 2020/21 financial year.

The report looked at how the council’s cash flow, investments and borrowing activities are managed, including borrowing to support the capital programme.

It also noted the council’s main source of borrowing is the Public Works Loan Board, which offers low-cost loans to local authorities.

According to the report prepared for councillors, South Tyneside Council had a capital financing requirement from borrowing of £688.8million at the end of 2020/21.

The local authority also has other credit liabilities of around £91.3million, of which £89.5million is linked to private finance initiatives including the former South Shields School, street lighting, Boldon School, Jarrow School and a waste facility.

The figures sparked concerns from councillor Glenn Thompson, leader of the South Tyneside Independents Group, over the potential future impacts.

At the council meeting on September 6, the councillor also questioned borough bosses on recent borrowings being repaid during 2020/21 and the potential impact of rising rates for 50-year loans.

“I have to say these debt numbers are absolutely breathtaking – £780million in debt,” Cllr Thompson told the meeting.

“My question is can you confirm how much of the £688million that we have in loan debt has been taken out on loan periods of 50 years.

“The rate for 50-year loans as I understand it is now rising, how much of a financial impact will this recent rate rise have in respect to further debt repayments.

“In light of the figures in this report, specifically the debt repayments this year of an incredible £44.5million […] how much of this debt was built under the previous Labour Government and how much of this debt was built under the current Government.”

He added: “We now find ourselves competing for the highest UK debt level with cities like Nottingham, Sheffield and Greater Manchester, authorities that have two, three, four times our population.

“I think it’s time we had some clarity on this situation and how we found ourselves under this crippling debt.”

Labour councillor Joanne Bell, cabinet member for resources and innovation, said treasury management activity for the year was delivered within budget “despite the economic uncertainty created by Brexit and Covid-19.”

She added a “large proportion of the council’s capital expenditure has been financed by borrowing” and that the borrowing at the year end was £625.8million against a borrowing requirement of £688.8million.

Councillors heard the difference of £63million was financed temporarily from the council’s cash balances.

Cllr Bell stressed interest rates were low when loans were taken and the council was “keeping an eye on what is actually happening with the increase in the rates”.

“I think we have got to bear in mind that our capital programme for the borough is very intense,” Cllr Bell added.

“We have got a massive programme ahead of us and therefore it is prudent to actually go into the borrowing market because of the rates, that have been so low, in order to continue our vision for the borough.”

Cllr Bell said she would seek to provide information to answer Cllr Thompson’s other questions, including the question about the proportion of 50-year loans, after the meeting.

Labour councillor Joan Atkinson, deputy leader of the council, added a large proportion of the £44.5million repaid in 2020/21 was linked to support for businesses during Covid-19.

“The report tells you £24.5million of that was related to short-term loans taken at the end of 2019/20 to help manage cash flow and payments to local businesses under the government’s Covid-19 support scheme,” she said.

“As you will recall, we had to help our businesses and support them and I think that was very prudent to do so because otherwise if we hadn’t taken those loans out, Government money was not coming in fast enough for us to do so.”

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