South Tyneside Council borrowing tops £630m

Council bosses in South Tyneside are running one of the highest debt levels in the country - a staggering £631.8m.
Town hall chiefs owe more than £600mTown hall chiefs owe more than £600m
Town hall chiefs owe more than £600m

That, according to new figures, is an increase of £25m in just one year.

The council says it’s long-term, borrowing levels are managed in ‘accordance with prudential rules’ and, through a medium term financial plan, they are ‘affordable and sustainable.’

The new transport interchange in South ShieldsThe new transport interchange in South Shields
The new transport interchange in South Shields
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Finance experts warn councils up and down the country are risking taking on too much debt.

The Chartered Institute of Public Finance and Accountancy says delivery of public services could be put at risk by unsustainable borrowing, after debt among UK local authorities rose to more than £100billion.

By the end of December, South Tyneside Borough Council’s outstanding loans stood at £631.8million, according to figures from the Ministry of Housing, Communities and Local Government.

This was a 4% increase compared to a year ago, when it stood at £606.8million.

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Long-term loans accounted for £607million of the borrowing. These last for more than one year and are used to finance large projects or purchases.

The council also took out £25million worth of shorter-term loans, which are normally used to help manage a council’s cash flow.

The Chartered Institute says many cash-strapped councils are taking out large loans to buy property, as the rent they collect can be higher than the interest they pay on the loans.

Funding for councils fell by almost half between 2010-11 and 2017-18, according to the National Audit Office.

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Don Peebles, head of policy at the Institute, said: “While councils are borrowing for a wide range of purposes, such as building houses and investing in major infrastructure, one trend which has been concerning is the growth in investment in commercial property – which exposes public finances to new risks.”

The government’s Public Works Loan Board was the main lender to South Tyneside Borough Council as of December, followed by other local authorities, then UK banks.

A council spokeswoman said: “The council’s long-term borrowing levels are managed in accordance with prudential rules and, through the setting of our medium term financial plan, we ensure that they are affordable and sustainable.

“Borrowing supports a wider package of funding to support the regeneration of our town centres, housing, riverside and seafront areas, but are also helping us to invest in the long-term future of the borough and our residents, with a focus on stimulating sustained economic growth and creating jobs.

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“Over recent years, we have made substantial savings against a backdrop of unprecedented Government funding cuts. However the Council’s priority is to continue to secure investment in the borough’s future for the benefit of local people and communities.”