New borrowing could push Devon’s debt beyond £500m

Extra borrowing that Devon could need if it fails to secure emergency funding for education would push its debt beyond half-a-billion pounds.

The county council may need to secure an extra £50 million in loans for its spending plans in 2024/25 if it doesn’t receive cash from a scheme called the Safety Valve, which provides grants for local authorities with large education funding blackholes.
Devon’s special education needs and disabilities (SEND) cumulative deficit is expected to hit around £165 million by the end of March.
Although the council has submitted its application to Safety Valve, it hasn’t had confirmation about the funding it might receive.
Recently council officials have expressed hope it could be in the region of £70 million to £100 million.
Members of the council’s corporate infrastructure and regulatory services scrutiny committee heard that financial forecasts suggested £50 million in borrowing would be needed for the financial year starting in April if the council was unsuccessful in its Safety Valve bid.
“While we are hopeful of an agreement with the Department for Education to help resolve the SEND deficit, it would be presumptuous to take the funding into account before a decision has been made,” Mark Gayler, from Devon’s finance team, told the committee.
“So we think we will need £50 million of new external debt.”
He added that due to the recent repayment of £47 million of external debt and the SEND deficit, that the council’s cash balances could drop to around £60 million by the end of March.
That would make it inadvisable to fund new borrowing from reserves, Mr Gayler added, although any it could get is likely to be at a lower interest rate than loans it had just repaid.
If the council did borrow the extra £50 million, it would push its external debt levels to £511 million.