Northumberland County Council borrows £130million between April and September

And this decision, which provided the ‘opportunity to lock into some longer-term certainty at lower-than-expected levels’, was further justified by last month’s unexpected interest-rate rise for the Public Works Loan Board (PWLB), according to a report to councillors.

An update on the authority’s treasury management activities for the first six months of the current financial year was presented to Wednesday’s (November 27) meeting of the council’s audit committee.

It explains that between April 1 and September 30, there was new or replacement borrowing of £130million, while £39.3million of loans matured, resulting in the council’s total external borrowing increasing from £731.5million at the start of the financial year to £822.3million at the end of the period.

The new borrowing, all with the PWLB, has an overall average interest rate of 1.76%, which has helped bring down the overall average rate on all of the authority’s outstanding loans to 2.85%.

The report notes that a recent review of the 2019-20 capital programme has identified that a large proportion of the planned spending will now not take place until later years, so no further borrowing is anticipated to be needed between now and the financial year-end.

If this remains the case, external borrowing would drop to £784million at that point, due to loans totalling £38.3million maturing in the coming months.

The reduced need to borrow and the better-than-expected interest rates mean that the council will save £900,000 against the original budget for interest to be paid in 2019-20 of £23.6million.

Meanwhile, the authority’s investments are now anticipated to do better than forecast, bringing in £1.7million of interest rather than £1.55million. This figure does not include interest on loans to the likes of Advance Northumberland and Northumbria Healthcare NHS Foundation Trust.

The report also included an update on the council’s strong treasury management performance in 2018-19, based on comparisons to other similar local authorities in a ‘benchmarking club’.

Northumberland’s average interest paid on borrowing last year was 2.97% – the third lowest out of a group of 13 local authorities. Its average interest rate received on investments was 1.39% – the fourth highest from a group of 17 councils.