Borrowing by Southwark Council stood at £874 million at the end of 2021, according to a council document published this week.
The Capital Strategy and Treasury Management Strategy report revealed that in the financial year to March 2021 the council borrowed £63 million.
A further £50 million of long-term debt followed in December. This brought the council’s net borrowing to £874m when combined with existing debt.
Current projections by the council indicate that it may require £1 billion of additional borrowing by the end of 2025. They anticipate that the impact on the UK from Coronavirus, historic levels of inflation and the economic damage caused by Brexit will continue to dent the council’s coffers long into the future.
“It has been necessary to borrow to finance the capital programme and maintain minimum cash balances,” read the document.
The council has said this extra borrowing will be spent on providing more housing, planting trees, building care and nursing homes, retrofitting council homes to make them greener, alongside work on the Aylesbury Estate and Tustin Estate.
Councils typically take on debt to fund investment in infrastructure and public facilities, whereas other revenue streams, such as council tax and business rates, support the day to day running of services.
Some implications of the debt-pile for the council’s budget were raised in the document. “Although capital expenditure is not charged directly to the revenue budget, interest payable on loans and Minimum Revenue Provision (or debt repayment in HRA) are charged to revenue, offset by any investment income receivable,” read the document.
“Due to the very long-term nature of capital expenditure and financing, the revenue budget implications of expenditure incurred in the next few years will extend up to 50 years into the future,” it added.
Most of last year’s debt increases were borrowed from the Public Works Loan Board, which is a government body that lends to local authorities.
The interest on the £50 million borrowed in December is approximately 1.5 per cent and has a maturity term of 40 years.
There was also £197 million in “short term” borrowing from other local authorities at the end of last year.
“Southwark Council has a long tradition for investing in local infrastructure and facilities that support the development of the borough for the benefit of residents and businesses,” read the council document. This investment has been sustained throughout the recent period of austerity, and has fundamentally supported the generation of new financial resources,” it added.
The amount of money local authorities have to spend has fallen by 16 per cent since 2010, according to the Institute for Government. This is largely because central government grants – a major source of council funding – have been cut by 37 per cent in real terms between 2009 – 2020.
The full document can be viewed here.