Eastleigh pays down £300m of borrowing from other councils
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Eastleigh Borough Council has repaid £300m of short-term borrowing from other local authorities, using Public Works Loan Board cash.
The council has repaid the cash, which makes up around three quarters of its total borrowing, to the local authorities which lent to it.
It took a £90m loan fixed for 50 years, along with seven £30m loans due to mature between seven and 10 years, to coincide with receipts from housing projects undertaken by the council.
Andy Smith, deputy chief financial officer at the council, said: “We have historically been a short-term borrower.
“By fixing a large amount of short-term borrowing, we have removed the risk from potential rates rises.
“We thought that the benefit was large enough to justify that decision in this instance.”
The council said that the decision is expected to save it a “considerable amount of money” if long-term interest rates rise as predicted.
Eastleigh joins a growing number of councils moving from short-term to long term borrowing due to uncertainty over interest rates.
Last month, Room151 reported that Brexit uncertainty had helped fuel almost £2bn of borrowing from the Public Works Loan Board during March – the highest monthly total for seven years.
Councils took advantage of plummeting interest rates on offer to convert short-term debt into longer-term borrowing.
The latest month’s PWLB borrowing figures – for April – showed a drop in the amount of borrowing by local authorities to £810.4m.
Among other significant borrowing during the month, West Sussex County Council took £50m over 50 years.
A spokesperson said: “Towards the end of the financial year, the PWLB rates fell to historically low levels, so the decision was taken in early April to take advantage of these lower rates by borrowing £50m on a 50 year maturity loan basis, to contribute towards our future borrowing requirement.”
In February, the authority approved a capital programme requiring almost £350m of borrowing up to 2023/24.
The programme includes schemes to generate income and promote economic growth.
London Borough of Harrow borrowed £100m but had not responded to Room151’s request for information by the time of publication.
The 50-year new loan maturity rate ranged between 2.43% and 2.61% during April, compared to a range between 2.36% and 2.70% in March.
