This is how much Preston, Chorley and South Ribble councils are borrowing and what they are spending it on

Figures from the Ministry of Housing, Communities and Local Government (MHCLG) show that the borough had outstanding loans totalling £38.6m at the end of December 2019 – more than double the debt on its books a year earlier.

Councils are restricted in how they use their borrowed cash, with the money usually reserved for capital projects such as new or refurbished facilities – and Chorley has built up a list of big projects in recent years.

The authority argues that many of the schemes funded by loans – including the extension of the Market Walk shopping centre – actually generate a return for the council by providing a new, regular source of income.

Budget papers show that Chorley expects to bring in an extra £2.7m from its capital projects before the end of the current financial year, with the figure rising to £5.2m by 2022/23. However, the cost of financing its borrowing will also rise from £1.6m to £3.4m over the same period.

All of the authority’s borrowed money comes from the government’s Public Works Loan Board (PWLB), whose interest rates increased by one percent to 2.8 percent late last year. More than 80 percent of the £77.6m in capital work planned by 2022/23 is to be funded by borrowing.

Chorley Council leader Alistair Bradley said that “the most appropriate way” of financing a new project is always considered, as well as existing schemes.

“The council has various funding sources available to it, including grant funding, contributions from developers, capital receipts [sale of assets], revenue funding and, of course, borrowing.

“When the council chooses to invest it will consider on a case-by-case basis the long-term risks as well as potential revenue streams and other benefits that can be achieved. The majority of borrowing the council has undertaken generates revenue for the council and this revenue more than meets the annual borrowing costs and in some opportunities allows for repayment of the capital debt,” Cllr Bradley said.

In neighbouring South Ribble, the district authority currently has no outstanding debt – but that position looks set to change.

At last month’s budget, members approved plans which will see the council borrow £1.3m in the upcoming financial year, with the figure growing to £35.5m by 2023/24. More than half of that total is as a result of plans to create a new leisure facility in the borough in the medium term.

The authority has not yet revealed the proposed source of the loans which it will take out, but borrowing will account for just over 60 percent of its £57.6m capital needs within the next four years.

Council leader Paul Foster said: “We always aim to seek alternative funding sources to mitigate the use of borrowing but where it’s unavoidable, we’ll seek to maximise spend to save or earn opportunities to make sure that any debt repayment is covered from service efficiency or new income streams.

“As an example, our capital programme includes an “Extra Care” [elderly persons’] facility for which external funding will be combined with the use of a developer’s contributions. It is anticipated that the scheme will generate net revenue income which will contribute to borrowing costs.”

Preston City Council is the only one of Central Lancashire’s three local authorities where debt has shown a downward trend over the last 12 months. Borrowing in the year to the end of December 2019, fell by £5m to £12.3m.

According to the authority’s budget papers, that debt attracts an interest rate of 4.8 percent due to “decisions taken in the past”. The council faces financing charges of £900,000 during the current financial year, but that will more than double to £2.1m within three years – while cumulative capital expenditure over that period is forecast to stand at £40.6m.

Borrowing is expected to meet exactly half of the authority’s capital needs during 2020/21, but less than 10 percent by 2023/24.

Preston’s cabinet member for resources and performance, Cllr Martyn Rawlinson, said. “Many smaller projects and schemes in Preston are funded using internal borrowing or council savings. Any larger city centre regeneration schemes – for example, redevelopment of the old Indoor Market Hall and car park site, would be partly funded using external borrowing.”

All councils are bound by rules on financial prudence in relation to borrowing. Richard Watts, chair of the Local Government Association’s resources board, said the regulations ensure that local authorities “invest wisely”.

HOW ARE COUNCILS SPENDING THEIR CASH?

Capital projects are amongst the most eye-catching schemes that a council can create. Some of them can be funded partially or wholly by grants or contributions from developers who have built housing in the area. However, the majority are paid for by borrowing.

Chorley

The long-awaited Market Walk shopping centre extension opened late last year, bringing outlets including an M&S Food store and bowling alley to the borough. The council-funded scheme cost £16.3m, but the authority expects that it will generate an extra £637,000 in rental income from this year.

Other recent and current capital projects include the Primrose Gardens extra care facility, the Strawberry Fields digital office park, plans to build a new GP surgery in Whittle-le-Woods and last year’s £33.6m purchase of the TVS warehouse in Buckshaw.

South Ribble

As the authority prepares to start borrowing to fund capital projects over the coming years, its biggest proposal is to create a new leisure facility in the borough. Details of where – and exactly when – the centre will be built are yet to emerge, after previous plans for a so-called “leisure campus” were put on hold after costs soared to over £25m. The budget reserved for the new project stands at £19m.

The district is also set to create its own extra care facility, like that which has recently opened in neighbouring Chorley. But two other major capital projects will not be funded by borrowing – the refurbishment and reopening of Worden Hall will be paid for out of the borough’s investment fund, while plans for new council housing in Bamber Bridge will be covered by contributions from developers.

Preston

One of Preston’s biggest capital commitments is its £8.9m city centre investment fund. The authority is currently partnering with Muse Developments and Maple Grove to create the final piece in the Markets Quarter project. A multi-screen cinema and several new restaurants are planned for the site of the former indoor market, along with a replacement multi-storey car park for the one on Ringway which was recently demolished.

Other schemes in progress include the first phase of the project to “re-imagine” the Harris Museum by reconfiguring its interior, work to replace CCTV cameras in the city and installing new alleygates. The largest capital project is the £10.8m programme to replace council vehicles which has been running since 2016 and ends next year.

FINANCING FACTS

Chorley

£38.6m – outstanding debt as at Dec 2019, up 171 percent year-on-year

South Ribble

£0 – outstanding debt as at Dec 2019, no change year-on-year

Preston

£12.3m – outstanding debt as at Dec 2019, down 29 percent year-on-year

Source: MHCLG