WITH Warrington Borough Council facing a further £3m a year in interest costs on loans and a deficit of around £2 billion, opposition Tories have called on the Labour controlled council to “urgently reduce the enormous debt burden,” which they say is equivalent to £10,000 for every man, woman and child in Warrington.
But while the Tories are fearing an interest cost “tsunami” on council loans, Deputy Leader of the council Cllr. Cathy Mitchell, says the council’s borrowing is secured in “bricks and mortar” blaming the high interest rates on the Tories “abysmal” record in Government and a failed austerity policy.
At a Full Council meeting last April, Conservative councillors tabled a question to the Labour Cabinet Member responsible for Corporate Finance, Cllr Mitchell, concerning the impact of refinancing £110 million of government loans. These loans are due to be repaid in this financial year 2023/24.
In her written response, Cllr Mitchell has now revealed the scale of the increase in interest costs which Warrington is facing.
Over the last seven years Warrington Borough Council has taken its borrowings to something approaching £2 billion. Cllr Ken Critchley who is the Conservative opposition spokesperson for Corporate Finance described this as “An astronomical level of debt” and added “Somehow, the inept, Labour leadership seems to have believed that interest rates could never increase again; now they have been caught out.”
The reply to the question from the Conservative group states that the refinancing will add £3 million a year to the interest bill for Warrington Borough Council due to the increased rates of interest. The debt being refinanced is roughly 5% of the total.
Councillor Critchley said: “The responsibility for this additional £3 million of costs each year sits squarely on the shoulders of those who gambled that interest rates will remain low forever. We are concerned that WBC services are now going to be cut because the leadership has gambled with public money as though playing a game of monopoly, putting at stake the financial security of Warrington.
“The implications of this answer are simply frightening. If this £3 million increase in interest costs is repeated for each additional £100 million of borrowing that requires refinancing, then Warrington is staring at an interest cost tsunami of around another £60 million. This is a Council that already cannot balance its budget without using its meagre reserves.”
“The sooner the Labour leadership stop congratulating themselves for their financial wizardry and look in the mirror to see who is responsible for the financial black hole that Warrington is now staring at, the better for all of us. “
“The Labour leadership needs to stop pretending that everything is the garden is rosy and start to divest of the poorly performing high-risk low-return investments.”
“Since becoming the official opposition, we have constantly challenged the reckless levels of debt that this council and the Labour leadership have run up over the last seven years. The level of debt is now at almost £10,000 of debt for every man, woman, and child in Warrington.
“To now see the scale of the interest cost burden that is heading Warrington‘s way is both frightening and sobering.
“It’s high time the labour leadership stop pretending that every investment was a good investment and start to urgently reduce the enormous debt burden that they have saddled on the residents of Warrington.
“Through their hubris and arrogance they have placed all the services of the council at risk as they face an ever-increasing interest cost burden and are forced to refinance this enormous debt pile.
Cllr. Critchley added: “The property portfolio in particular continues to perform poorly, with barely a 1% net return and now falling property values. I am calling upon the Labour leadership to look urgently into divesting of the whole of the £700 million property portfolio to bring the astronomical debt levels down, and carefully examine its other investments. It should begin a systematic review and draw up an exit strategy.
“Of course, the Labour leadership will have to face the folly of their investment decisions. This is the right thing to do so that the residents of Warrington are saved from drowning under the interest costs tsunami that the refinancing of this £2 billion debt pile will bring.”
In response Cllr Mitchell said: “The £3m cost is the extra cost it will now cost to finance new schemes, not previous schemes that have been financed on a repayment basis over longer periods, usually at fixed rates. These costs are the extra costs on schemes such as ZEBRA which are not yet complete, which any borrowing to complete schemes will now have to be at the higher rates. “Fortunately the Council’s robust business plans make an allowance for increase in interest rates, to ensure any schemes are still viable. You only have to look at the wider problems caused by the ineptitude of the government’s managing of the economy and in particular the disastrous “mini budget”.
Cllr. Mitchell added: “It is quite clear where the blame for high inflation and high interest rates currently lies. I can see why the local Conservatives would want to deflect from their party’s abysmal record in government, though, and in particular their failed austerity policy which has directed funding away from front line public services to waste billions pounds of public money on dubious schemes. The council’s borrowing, in contrast, is secured on bricks and mortar, the value of which goes up and down, just like your home does.”
