Source: Debt Resistance UK
“COUNCILS SPENDING MILLIONS OF COUNCIL TAX INCOME ON INTEREST DEBT REPAYMENTS” – REPORT
Ratepayers in London boroughs are seeing an average of 23p of every pound they pay in council tax spent on servicing interest debt repayments says a shock report.
But Southwark say the figure is just 3p to 4p – and Bromley ratepayers pay nothing.
Croydon, Lewisham and – predictably – Lambeth council have yet to respond to our enquiries on what ratepayers in their boroughs are paying in servicing the repayments.
Southwark council’s cabinet member for finance Cllr Fiona Colley told News From Crystal Palace: “Southwark manage their council tax accounts and council rent accounts separately.
“Anything that ‘s related to our council housing is financially managed entirely separately from anything else.
“For the majority of the debt the council has, which is £463 million, £371 million of that is debt that was money that was borrowed to build and manage council homes.
“The cost of servicing that debt comes from council tenants.
“We get considerably more in rent than we get in council tax.
“The important thing is not one penny of council tax goes towards servicing that debt in Southwark.
“3p to 4p in every pound of council tax goes towards servicing debt and it’s about 12p of every pound of rent goes towards paying off the interest on the historic debts – monies borrowed to build estates we’ve built.
“Compared to the value of the council homes we own the level of debt we owe is not high at all.”
Asked how Southwark council have managed to keep their libraries open Cllr Colley told News From Crystal Palace: “Our approach is we need to make choices about what is most important in Southwark.
“We decided our libraries were very important to us and to our residents and we have prioritised those in our budgets.
“So far we’ve been able to keep them all open but we’ve had to reduce opening hours in some of the libraries.
“We have also had to cut other things as a result of that and been able to use libraries a bit creatively.
“In our library at Bermondsey we have a customer services officer because we had to close the customer service shop that was next door to the library.
“All councils have to be creative and we face some difficult decisions that are only getting tougher as the savings we have to make continue to bite.
“We’ve got another £60 million or more of funding cuts to cope with.”
A Bromley council spokesman told News From Crystal Palace: “Bromley is debt free and therefore does not pay interest in that sense.
“The figures in the bar chart (see image above) basically come from councils’ statement of accounts. “And in our accounts, under ‘interest payable and similar charges’, the figure is £674k but this relates to ‘similar charges’ rather than ‘interest payables’.
“The ‘similar charges’ cover a number of different items but include interest payments for leasing finance for instance, mainly relating, say, to the refuse fleet. “Also, as another ‘similar charge’ example, where we have had or held monies for schools, then we would also pass over the interest that may have accrued on that money.”
Bromley council leader Cllr Stephen Carr said in a statement: “Sound and prudent financial management must and will always be at the heart of our council. “This is the only real way that frontline services, that residents rely on, can be sustained over the long term.
“We are the only borough in London which does not have debt and although interest rates are low at the moment, it means that Bromley does not ask residents to pay council tax to service debts and pay interest payments.
“This is in contrast to other boroughs, some of whom are literally servicing debts of hundreds of millions. “In fact, neighbouring boroughs owe a staggering £2.35 billion between them.
“We are proud of our record, with council taxpayers’ monies being invested into ensuring that we can sustain our services over the long term despite the general difficult budgetary pressures facing local government and this is part of the reason we remain upbeat about the future.”
The report by Debt Resistance UK says that:
Croydon owe £574,926,000 to the Public Works Loan Board and £143,075,000 in private sector loans
Southwark owe £469,235,000 to the Public Works Loan Board
Lambeth owe £412,717,000 to the Public Works Loan Board
Lewisham owe £78,003,000 to the Public Works Loan Board and £112,373,000 in private sector loans.
Debt Resistance UK say: “LOBO loans are ‘teaser rate’ loans containing derivatives provided by banks to public authorities.
“LOBO loans are expensive risky products that local authorities are locked into. “As a result tax-payer money is being unnecessarily wasted while the private sector is making huge profits.
“Lambeth and Islington, both of which are looking to put up council tax rates by the maximum of four per cent this year, are spending 34 per cent and 46pc of their council tax revenues on interest payments respectively.
“Across all London boroughs, the average annual cost of servicing debt is equivalent to 23p in every £1 of council tax income.
“Given that many of these councils’ interest payments are the result of borrowing which was potentially irrational, illegitimate or even unlawful due to bank ‘mis-selling’ or poor value PFI contracts, shouldn’t the councils be looking to challenge some of this debt before shifting the burden onto their residents?” Debt Resistance ask.