Aberdeen brings its debt up to £400m with two PWLB loans

23 Aug 19

Aberdeen City Council has taken out two loans from the Public Works Loan Board, bringing its total debt to the body to over £400m.

The Scottish authority said the loans – taken out earlier this year for £20m each - were “standard practice” and intended to replace long-term debt, which had matured in the previous two years. 

The first was taken out over 48 years at a rate of 2.24%, while the other was for a period of 50 years at 2.11%.

“These loans are effectively replacing long-term debt which had matured during the previous two financial years (£33.5m) - this is standard practice across every local authority in the UK,” said an Aberdeen City Council spokesperson.

“The loans were not borrowed for a specific purpose, and form part of the council’s standard treasury management practices.”  

While the council now had £400.4m of PWLB debt, its assets were worth £2.8bn, she said.

Three years ago, Aberdeen became the first Scottish authority to issue bonds, raising £370m to fund a development programme for the city.

Because of the level of funds generated by the issue, it undertook no long-term borrowing in 2018-19, and PWLB loans which matured that year were not replaced.

However, when the bond funds had been fully utilised, the council announced its intention over the summer to undertake further long-term borrowing “should market conditions be favourable”.   

Aberdeen had also deliberately run down its short-term borrowing in the wake of the bonds issue, but was now looking to build up its external temporary borrowing to a “manageable level”, with around £44m obtained in loans from other local authorities in the final two months of the last financial year.

Figures from the PWLB’s annual report released over the summer show that UK authorities’ reliance on the board’s loans has rocketed in recent years against the backdrop of cuts in central government funding.

According to the report, the value of loans spiralled from £5.2bn last year to £9.1bn this year, an increase of 75% in the last year, and a three-fold increase over the last seven years.   

The number of loans also grew by 68% from 780 new loans in 2017-18 to 1,308 in 2018-19, it said.

Real-terms funding for local authorities in England has fallen by 49.1% since 2010-11, according to the National Audit Office.

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