Councillor Derek Kennedy of Hexham West. Liberal Democrat

Agenda item 12a.

I would like to register my opinion on the council decision to increase its debt by £78.5 million.

Governance

I find it difficult to conclude that a decision of such magnitude has been taken without the need for council to convene.

Good governance requires openness and transparency and therefore I would expect a full public debate to decide whether to take on such a substantial debt.

The papers state that “it was not practical to convene a quorate meeting” to take advantage of the interest rates on offer.

I believe this does not stand up to scrutiny.  Interest rates have remained static at 4.5% for 6 months now and are unlikely to move in the short term.  So why such a need for a rushed decision? 

On 4 January 2006, Full council was called to debate whether the Leader should have a pay rise of £5,000 and yet when it comes to decide £78.5 million this is done behind closed doors, with no public scrutiny, no debate and no time to consider the impact.

This paper is here to tell us and the public what has already been decided and not to enter into debate.  I liken the way this has been carried as to what you would expect in a banana republic, not a democratically elected council.

The Deal

The council currently has debt of £140 million and has added £78.5 million resulting in debt of £218million.  A huge sum.

The interest we are going to pay on the £218million is £12.6million per year.

For context £12.6million is greater than the Road repair budget which is £10.5million.

The taking of the £78.5million debt is to gain interest.  It is a calculated gamble on the money markets.  The council gaining £2.6million over 4 years.  However there are a number of risks attached.

UK interest rates are 4.5%.  If this rate goes down then the gamble will have lost.  I believe this council is gambling with council tax payer’s money when it should not be.  The debt is over 50 years and a lot happens in 50 years.

The Director of Finance has informed that the borrowing of £78.5million over 50 years will result in the Council tax payer paying back £220 million. 

1^st February 2006