Last September the Guardian reported that ‘Woking borough council had announced a sweeping package of cuts to local services, after the local authority in effect declared itself bankrupt in June, revealing a £1.2bn deficit racked up from a risky investment spree overseen by its former Conservative administration’.
In Wokingham, the Liberal Democrats ran a successful campaign to stop the excessive borrowing and speculative investment by our Conservative Administration. Who knows where we might be now if that campaign had failed?
As part of its prudent financial management, Wokingham lends money to other local authorities. The council lent £10 million to Woking at 4.75% interest, a return of over £356,000 to be repaid on 8th March 2024.
The Council Tax baseline report that was considered by this Council in January, showed that there are approximately 74,000 households within our Borough. So, the loan interest equates to a windfall gain of just under £5 per household.
Did the loan and the interest come back as promised and can you please include in your answer how the additional £356,000 will be used to help our residents?
Minutes:
Last September the Guardian reported that ‘Woking Borough Council had announced a sweeping package of cuts to local services, after the local authority in effect declared itself bankrupt in June, revealing a £1.2bn deficit racked up from a risky investment spree overseen by its former Conservative administration’.
In Wokingham, the Liberal Democrats ran a successful campaign to stop the excessive borrowing and speculative investment by our Conservative Administration. Who knows where we might be now if that campaign had failed. As part of its prudent financial management, Wokingham lends money to other local authorities. The Council lent £10 million to Woking at 4.75% interest, a return of over £356,000 to be repaid on 8th March 2024.
The Council Tax baseline report that was considered by this Council in January, showed that there are approximately 74,000 households within our Borough. So, the loan interest equates to a windfall gain of just under £5 per household.
Did the loan and the interest come back as promised, and can you please include in your answer how the additional £356,000 will be used to help our residents?
Answer
The loan was indeed repaid to us on time and all of the due interest was received. All of this interest received, is accounted for in the General Fund budget position and the great thing about these interest payments is that it is revenue.
Revenue is spent on running the day to day services that everyone uses. These day to day services include things such as running libraries, getting children to school, fixing potholes and providing care for the elderly and disabled, which are just some examples.
Many of these loans are made from ringfenced Capital. One example might be the money that a developer gives us to build a road. In that instance, the money comes in slowly as the houses are sold and we cannot spend the money until we have enough of it to start building that road. We also cannot spend the money on anything else, but we can loan it to another local authority in the short-term. It is important we look for the best way to invest that money short-term, including considering loans to other local authorities which offer a better return. This is important as it is also one of the mechanisms to protect against inflation pressures.
Supplementary Question:
I understand that there was an article in the local paper about the Council actually losing money on this loan. Is this true?
Supplementary Answer:
I am afraid it is not. I believe the article is in relation to a forward deal to borrow which was agreed in November 2022, based on the Council’s high projected spending needs. We secured the loan at an interest of 4.2% on this borrowing, and, therefore, hedged against escalating interest rates, which did indeed occur. As a result of our rigorous endeavours to reduce and delay the capital expenditure, and to reduce our level of borrowing need, this money was able to be lent out at a short term at a rate of 4.75% in June 2023. It has been subsequently lent out again at 5.5% which you will see is somewhat higher than the 4.2% that we borrowed it at. I stress that this would not have been available if we had not continued at our previously expected rate of capital spending that has been set out by the previous, former administration.
So, no, it is completely untrue that the Council lost money, and the combined work of expenditure management and the sound investment decision making, and we actually made £41,000 of revenue on this deal. This is all part of our relentless treasury management efforts to reduce costs and to maximise income wherever we can, and I thank the team for all the work that goes into this complex and significant ongoing activity of borrowing and lending.