FUTURE borrowing undertaken by Barnsley Council must be done with strict diligence due to levels of debt and ‘severe’ budget pressures - after it was revealed the local authority may need to take out a £90m loan in the next two years.
The council’s medium-term financial strategy reveals current circumstances - including recession, anticipated low levels of economic growth in the future, debt levels, inflation and increasing interest rates - are having a ‘front-loaded’ impact on its expenditure and income levels.
This, according to finance director Neil Copley, resulted in ‘severe budget pressures’ in the current financial year and beyond and subsequently saw £19m in reserves being set aside.
A report compiled by Mr Copley - which is due to be discussed at Thursday’s full council meeting - said: “The council may need to take out £90m of fixed-rate borrowing over the period to 2025/26, which may result in a temporary increase in cash balances.
“As members will be aware, the council holds relatively high levels of debt as compared to its statistical neighbours.
“This is a result of previous policy decisions, including the building of a new secondary school estate and more recently the Glass Works town centre development.
“I have advised in recent budgets against further significant borrowing until such time as the Glass Works scheme was complete and, from a financial perspective, de-risked.”
The Chronicle previously reported that £139.3m was borrowed for the Glass Works venture which has attracted big names including TK Maxx, River Island, Nando’s, TGI Fridays, The Botanist, Cineworld and Superbowl UK to the new-look leisure hub.
However, ‘additional cost pressures’ have seen the overall capital cost of the regeneration increase to more than £210m - double its original estimation when first revealed in 2017.
“With the scheme now largely complete I now consider it prudent to consider, subject to robust business cases, due diligence and funding guarantees, to invest in the council’s housing stock and economic regeneration schemes funded by the South Yorkshire Mayoral Combined Authority Renewal Fund,” Mr Copley added.
“The current macro-economic circumstances are having a huge impact on the council’s expenditure and income levels resulting in severe budget pressures in the current financial year and beyond.
“Within the context of increasing economic uncertainty and interest rate volatility, the proposed strategy is to maintain an appropriate proportion of fixed-rate borrowing in order to limit the exposure to interest rates, and maintain an appropriate level of internal borrowing to reduce the council’s financing costs.
“Borrowing will be affordable, sustainable and prudent and consideration will be
given to the management of interest rate risk and refinancing risk.
“Moreover, future borrowing transactions will be considered carefully before they are undertaken to ensure that value for money can be demonstrated and that the council can ensure the security of such funds.
“Borrowing in advance of need will only be undertaken when there is a clear business case for doing so.”
