£520m county council debt will be split between new Northants unitaries

Northamptonshire’s two new unitary councils will inherit the £520 million legacy debt of the county council, which includes a number of ‘toxic’ loans.

The county council’s chief finance officer Barry Scarr says the debt, which is made up of government borrowing, market loans and the controversial Lender Option Borrower Option (LOBO) and which runs across the next 50 years, will be split across the two authorities according to how the assets they paid for are divided plus a further calculation according to equity and maturity dates.

This financial year the authority will pay off a further £24 million of debt. In August last year the council took out £110 million from the Public Works Loan Board (PWLB) to replace higher rate short term lending that it had borrowed from other local authorities. £5 million is also due to be repaid this month from a HSBC LOBO loan, which brings the LOBO borrowing down to £95 million. The bulk of the borrowing – £421 million is from the PWLB.

Finance mismanagement by the Conservative administration which has been in control of NCC for the past 15 years, is the reason for the council’s wind down and the two new unitaries being created.

Since the authority’s financial collapse in 2018 the authority has been overseen by government commissioners plus chief executive Theresa Grant.

Service cuts and efficiencies, financial repackaging and the sale of assets such as headquarters One Angel Square, have helped get the council’s finances back on a surer footing and when it closes at the end of the March it is currently predicting a £3.3 million underspend on its £445 million budget.

At the full council meeting on Thursday (Sept 18) Cllr Mick Scrimshaw asked how the debt would be divided up between the new West and North Northants unitaries.

He said: “There has been lots of talk of the legacy debt of this council on the two new unitaries.

“This report shows clearly the level of debt from borrowing is well over £500 million and will remain with the two councils for over 50 years. With over 34 of those loans not currently planned to be paid off for over 30 years.

“I would be very interested to see how those loans are split between the two authorities. Will it simply be split 50/50?Will it be done proportionally, per head of population, or will the cost of each capital project be looked at and a calculation of debt worked out per project and allocate to a geographical area?”

Barry Scarr said the disaggregation of assets from the county council to the new councils was currently underway and then the loans would be split according to the assets given to each authority.

He said it would be done so that ‘no council receives an advantage or disadvantage on allocation of those loans’.

Cllr Malcolm Longley, who is the finance portfolio holder and known for being cautious, was optimistic about the debt position inherited by the new authorities.

He said: “Probably the most important thing of all is that if you are to look at the repayment schedule over the next 30 plus years there is £84 million to be paid back. Once this year is cleared the repayments for the next 30 years are really quite small which is a golden opportunity for the unitaries.

They can do whatever they wish with that debt. They could pay off debt or live with it. They have the opportunity to go in whatever direction they choose.”

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