Central Bedfordshire Council looks at borrowing but remains ‘in a strong financial position’
Short-term borrowing is back on the cards for Central Bedfordshire Council as it aims to keep on top of its finances.
Capital receipts and use of some of its reserves have cushioned the need to borrow money recently for the local authority, which aims to keep council tax increases to a minimum.
The council remains “in a strong financial position,” according to its director of resources Charles Warboys.
“We have added during the year to our general and earmarked reserves, which will help protect us against future risks,” he told an audit committee meeting.
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“That’s identified risks and even any generally unidentified risks which emerge, we do have some coverage against those,” he said.
“It doesn’t mean it’s easy or that we are complacent in any way, but we are in a much stronger position than many authorities are.
“There are significant uncertainties, of course, in the future,” he warned.
“The two that we highlight are the fairer funding review, which is the government review of the basis of how local authorities are funded.
“There is a switch towards a more needs-based approach. At the moment, a lot of funding is allocated on a very historic set of data.
“The plan is to move it towards more current data which is more reflective of the real needs.
“Although we do have some pockets of severe deprivation, as a whole, we are a relatively prosperous area. If the funding is switched to a way that will calculate a needs base we may possibly lose out compared to other local authorities.
“It depends on what the overall pot of funding is,” he added.
“We might get a smaller proportion, but we can dream that it might be a bigger pot. Maybe that’s unlikely.
“Likewise they’re looking at the business rates retention scheme. The original plan was to move swiftly to 100 per cent retention of business rates.
“But that never meant each local authority would keep 100 per cent of its own business rates. There was always envisaged to be a redistribution mechanism.
“In more recent times, government attention has been focused on other issues.
“They have watered that down now to 75 per cent retention, but again the details are still quite short on exactly how that’s going to work.
Mr Warboys told the committee that the traditional source of funding, revenue support grant, is “now being factored out entirely as far as we are concerned”.
He said: “This council does have a very ambitious capital expenditure programme. It does have some difficult financing implications.
“We have benefited from capital receipts, but we are not expecting those capital receipts to continue at that level. There will be some.
“Therefore we will be back into borrowing. Our strategy has been to borrow short-term and take advantage of low interest rates.
“We are borrowing at point eight, point nine per cent. They have no risk. They have absolute certainty about they will be paying for say the next 30 years.
“We are at risk if interest rates suddenly shot up, we would be exposed.”
Mr Warboys said interest rate rises will eventually happen, but no financial commentators are suggesting they will go up dramatically.
The council’s financial controller Stephanie Pocock said: “Our medium term financial plan projects an increase in the need to borrow.
“We haven’t seen the capital receipts this year that we saw in 2017/18, so we are looking at projected borrowing going forwards.
“The final area is the pension scheme deficit. We’ve seen a £9m increase in what is the council’s largest liability.”
Independent Potton councillor Adam Zerny said: “We have a pretty significant hole in the pension fund.
“Only 55 per cent of the monies, which are required to be there, are there. Is that correct?” he asked.
“If I went to my bank and they said only 55 per cent of your money is there, I think I would be reacting slightly more coolly than we are about this.
“Can we be provided with some reassurance that this is not a major issue?”
Mr Warboys replied: “Yes, you certainly can. This is not a major issue. I state that very clearly.
“What this is saying is that if all the liabilities crystalised immediately there wouldn’t be enough funding there. That is right.
“But clearly that is not going to happen, so over a period of time the council is addressing that.
“We make an annual top-up towards the pension scheme and that is calculated by the independent actuaries to recover the balance over a period of around 20 years.
“It is not an immediate problem and should not concern us unduly.
“It is a slightly artificial calculation, but it is one we are obliged to report on.”