Interest rate changes set to cost Sunderland City Council an extra £2million a year
Changes to a government lending scheme could cost city leaders an extra £2million a year.
The decision in 2019 to raise interest rates at the Public Works Loans Board (PWLB) by one per cent has left bosses at Sunderland City Council warning about the effect it could have on their bottom line.
And the sudden announcement of the hike and also prompted concerns about other surprises which could be in store for local governance finances.
“We’re doing remarkably well, however that one per cent increase does have a significant impact on us,” said Coun John Kelly, cabinet member for Communities and Culture.
“To be done with no notice or negotiation is atrocious and I hope it is not the start of something with this new Conservative government.”
Coun Kelly was speaking at a meeting of the city council’s ruling cabinet to agree the latest draft of spending plans for the next financial year (2020/21).
According to a report for councillors, finance chiefs took advantage of ‘low borrowing rate troughs’ to take out loans worth a total of £50million in August and September (2018).
The decision to hike rates at the PWLB, which was set up to provide loans to UK councils, was announced the following month, in October, taking the rate from 1.80 to 2.8 per cent, but this will not apply to the council’s existing loans.
If the council does not change financing plans for upcoming major projects, it is estimated the interest rates rise could increase annual costs by about £2million, although other sources of cash are being considered.