Council loans generate more interest than “sitting in a bank”

A much criticised £5m loan to an English authority has been paid back in full and generated “more interest that it would have done sitting in a bank”, councillors have been told.
In October it was reported that Cheltenham Borough Council had borrowed nearly £40 million to purchase land for a new cyber business park and housing development.
Among the creditors were Anglesey Council who loaned the authority £5m, sparking critcism.
Other creditors included Derby City Council l (£4m), Powys County Council (£5m), South Lanarkshire (two instalments of £5m) and Middlesbrough Borough Council (three instalments of £5m.)
But Anglesey’s lead finance officer launched a staunch defence of the authority’s investments policy.
According to Marc Jones, one outraged member of the public had labelled the decision a “scandalous” and another “as shameful” in email correspondence to the council.
Addressing a meeting of Anglesey Council’s Audit Committee in Llangefni on Tuesday, Mr Jones said: “We are not investing taxpayers’ money in this scheme, it was simply something that regularly happens among local authorities that lend money to one another.
“We received more interest on the money than if it was sat in one of our bank accounts and Cheltenham paid less interest than if they’d have borrowed it from a bank, it was a short-term loan.
“Councils are low risk for us, we know we’re going to get the money back.
“On that loan of £5m over a period of 65 days, we received £5,800 in interest.
“If it had been sitting in a bank we would have received over £2,000 less – money we can now reinvest in council services.
“I believe it’s only fair that we make that point publicly.”
Since April 2019, the authority has lent £20m to other local authorities, all of which has been repaid.

By Gareth Williams – Local Democracy Reporter