Redbridge Council more than £200m in debt, figures show

Redbridge Town Hall

Redbridge Town Hall - Credit: Archant

Redbridge Council has borrowed more than £200million, as experts warn local authorities are risking taking on too much debt.

But deputy leader Councillor Kam Rai (Lab, Goodmayes) insists most of the local authority’s borrowing has been put towards “bricks and mortar” investments which are helping to house vulnerable residents and generate income.

By the end of December, the council’s outstanding loans stood at £207.8m, according to figures from the Ministry of Housing, Communities and Local Government (MHCLG).

This was 22per cent higher than at the end of 2013-14 but a 2pc decrease on last year.

All the outstanding loans were long term advances, which last for more than one year and are used to finance large projects or purchases.

“With government funding in decline, it is unsurprising councils are having to adapt and find alternatives,” said Don Peebles, head of policy at the Chartered Institute of Public Finance and Accountancy.

The Chartered Institute says delivery of public services could be put at risk by unsustainable borrowing, after debt among UK local authorities rose to more than £100billion.

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Many cash-strapped councils are taking out large loans to buy property, it says, as the rent they collect can be higher than the interest they pay on the loans.

Funding for councils fell by almost half between 2010-11 and 2017-18, according to the National Audit Office.

“While councils are borrowing for a wide range of purposes, such as building houses and investing in major infrastructure, one trend which has been concerning is the growth in investment in commercial property - which exposes public finances to new risks,” Mr Peebles said.

He added that councils could be in breach of the Institute’s guidance – which they have to take into account when developing investment plans – by borrowing too much, or borrowing in advance of their needs.

Responding to the figures, Cllr Kam Rai said: “The council was faced with significant financial challenges with major reductions in funding, together with increased demand for services.

“As a result, there was increasing pressure on all authorities to strategically manage and operate property assets including the need to identify and source alternative income streams.

“Most of our planned borrowing is asset backed, and invested in bricks and mortar which means we will be able to house our most vulnerable residents in good secure accommodation and help reduce costs as we will not have to pay a premium to the private landlords.

“Any revenue income generated is ploughed back into the services local people value, such as adult social care, culture and leisure and children’s services.”

But Cllr Linda Huggett, leader of the Conservative opposition, said: “No right minded thinking council should agree extra borrowing of a quarter of a billion pounds in the current uncertain economic climate.

“Labour council’s proposed borrowing spend is both obscene and reckless.

“If there is a downturn in the market conditions this could place Redbridge Council in financial jeopardy and lead to the risk of bankruptcy.”