Dudley Council plans £40m more in loans
Dudley Council taxpayers are spending more than £19m per year on interest payments for loans and the figure is set to rise.
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The authority, which borrows cash to fund major projects like new schools or roads, is planning to take out another £40m in loans during the next financial year.
At a meeting of the council’s Audit and Standards Committee on January 27, councillors were reassured by the top finance officer that prudent borrowing was the right thing to do, despite the budget for the next financial year containing planned savings of £42m.
Brendan Arnold, Dudley’s interim director of finance, said: “The costs for the long term borrowing portfolio are provided for on the draft budget before the council.
“All of those costs will be within the draft budget so there shouldn’t be any concerns that those costs are not met.
“In terms of financing the capital program, £70m a year is spent on fixed assets of various kinds, prudential borrowing is a very affordable, sensible and appropriate way for the council to finance the construction of buildings, highway works, highway improvements and other structures so it is something you should expect to see.
“The reason borrowing takes place is to reduce the cost in the year the spend takes place, for example if you had a building that cost £100 and you used that £100 to build it, it would cost you £100.
“If you borrow over 20 years and the cost is probably more like £10 a year, it is a very efficient way of making investments in those long term capital assets.”
He continued to say there were indicators in place to warn if the council was at risk.
Mr Arnold was answering a point from Labour’s finance spokesperson, Cllr Shaukat Ali who said: “Whilst borrowing might seem like the right thing to do at this time, when you then start looking at interest and paying it back, I don’t know if that is the right way, particularly if it’s a long term commitment.”
Cllr Ali pointed to the £15m cost of the new Pens Meadow School currently under construction after the council voted to go-ahead with the project against the advice of its chief finance officer at the time.
Cllr Ali added: “It’s ok as long as we can afford it. Pens Meadow is an example – when we are trying to find pennies and pounds to stack up the budget and we have to find £700,000 in interest.”
