More than £65m of Devon’s longest loans still have 34 years left

Tuesday, 29 April 2025 07:00

By Bradley Gerrard, Local democracy reporter

More than £65 million borrowed by a Devon council still has 34 years left before it needs to be paid off.

It means five loans taken out for 60 years in 1999 are still costing Devon County Council more than £3 million in annual interest payments.

Data seen by the Local Democracy Reporting Service shows that the county council has a total of nearly £458 million in borrowing from the Public Works Loan Board (PWLB), which costs it £22.8 million in interest payments per year.

Other loans take this total even higher, to nearly £508 million in borrowing with annual interest payments of more than £25.5 million.

Total borrowing by UK councils stood at £144 billion in December 2024, according to government figures.

Finances are likely to be a major topic as political parties tussle for control of the authority ahead of the county council elections on 1 May.

In the 20 years to 2009, the Liberal Democrats held power in County Hall apart from a four-year period between 2001-2005 where a Lib Dem-Conservative power-sharing agreement was struck.

The Tories won in 2009 and have held power since.

Just five of the 46 outstanding PWLB loans were taken out during the period of power-sharing, while 17 were taken out between 2005-2009 when the Lib Dems were in power.

A total of 23 loans were taken out in the mid-to late-90s when the Lib Dems also ran County Hall.

However, the Conservatives inherited reserves of around £300 million in 2009, which has fallen to just under £78 million now, excluding £16 million in its ‘general’ day-to-day fund.

The drop is largely linked to the policy of ‘internal borrowing’, which has sought to use money from reserves rather than borrow externally.

The issue of debt arose at the council’s full council meeting earlier this month (Thursday 24 April), with Councillor Richard Chesterton (Conservative, Tiverton West) asking how much was being spent each year on debt interest payments.

“It’s a staggering figure of more than £25.5 million in annual interest or £69,884 per day,” he said.

“We could have repaired lots of potholes and paid for other things with that money, so is there a mechanism to refinance or payoff loans early as at the time loans were secured, interest rates were significantly higher than has been the case between 2009 and now.”

Councillor Phil Twiss (Conservative, Feniton and Honiton), the cabinet member for finance, said this wasn’t possible.

“The unfortunate reality is that the penalties for refinancing or paying off loans are so punitive that there would be no financial advantage to the council,” he said.

“I’m afraid that taxpayers are saddled with inherited debt, and some loans don’t expire until 2059.

“It is something we have inherited and we have had stick for it, but others in the chamber must also share responsibility for it.”

Councillor Alan Connett (Liberal Democrat, Exminster and Haldon) defended the borrowing by previous Liberal Democrat administrations because he said much of it funded large capital projects, such as schools and roads.

“No Conservative has ever said which project they wouldn’t have funded,” Cllr Connett said.

“The money was borrowed as a planned investment, but the Conservative line is to pretend they have not borrowed but they have used internal borrowing.”

He added that figures he secured under the Freedom of Information Act showed the council had taken £95 million from reserves in the most recent financial year via ‘internal borrowing’.

“In the past, councils borrowed like a mortgage, and they made payments every month, and that’s fine as long as you can pay it back,” he added.

“That’s what Devon did as that was the way it was done, because with cash reserves, once they’re spent, they’re gone.”

All of the council’s existing PWLB debt was taken out either side of the global financial crisis in 2008/09, and therefore was not secured during the period of ultra-low interest rates.

The highest rate the council is paying on one of its loans is 8.7 per cent; this applies to an £8.9 million loan it took out in 1995 for 39 years.

The lowest is 3.7 per cent for an £8.9 million loan taken out in 2006 for 48 years.

The Conservative administration that took power in 2009 took out its first Public Works Loan Board loan in February this year, raising £21.5 million but with a term of just one year at 4.9 per cent.

However, £25 million of short-term borrowing was secured last year and this year from West Sussex County Council.

There’s also £25 million of so-called money market loans, taking council’s total debt to nearly £508 million, which costs it more than £25.5 million in interest payments annually.

The full candidate list for the Cullompton and Bradninch^^, Feniton and Honiton, and Exminster and Haldon wards are below:

^^Richard Chesterton is standing in the Cullompton and Bradninch division on 1 May, and not recontesting the Tiverton West seat.

Cullompton and Bradninch:

Helen Marie Bottrill (Green Party)

James Timothy Buczkowski (Liberal Democrats)

Richard James Chesterton (Conservative)

Piers Martin Kotting (Labour)

Barry Victor Myers (Reform UK)

Feniton & Honiton:

Barry Alcock (Reform UK)

Steve Casemore (Labour)

Jane Collins (Green Party)