COUNCIL officers have been praised after taking out a £25m loan shortly before the government doubled interest rates for local authorities.

In September, a decision was taken by council officers to borrow through the Public Works Loan Board (PWLB), an Executive Agency of HM Treasury.

The loan was taken due to historic low rates and was secured prior to the government’s actions to increase PWLB interest rates by 1 per cent in October.

The purpose of the loan was to finance the costs of historic expenditure within the council’s capital programme.

Currently, the council has outstanding debt of £128.3m.

Wayne Traynor, the council’s senior account director for accountancy and financial management, told the audit and governance committee this week that if taken out today the loan would cost an additional £378,000 a year.

Mr Traynor said the loan would be £18.9m more expensive over the lifetime of the loan.

Cllr Martin Bond, cabinet member for finance, described the move as a “fantastic piece of Treasury management”, saying officers had to have known the government was planning to increase PWLP interest rates.

However, Mr Traynor said “categorically” that the council was not actually aware the government was planning to increase interest rates by 1 per cent.

The strategy of financing capital expenditure by running down cash balances was formulated predominantly to minimise credit risks associated with holding investments in these times of uncertainty and to protect the council’s budgetary position against diminishing investment returns.

This borrowing strategy is still considered fit for purpose by the council.

After PWLP interest rates fell to 1.67 per cent in August, officers seized the moment and took out a 50-year loan.

Mr Traynor said: “Never had we had that opportunity to borrow such a rate previously.

“And indeed, rates have gone up after that date that we took the borrowing out, the £25m, and continue to do so notwithstanding the additional 1 per cent that’s actually been brought in by the government in October as well.

“The strategy that members have approved for a number of years has enabled us to basically defer borrowing, not go out and borrow on the day that you actually spend money for your capital investment, but to take a balanced approach and basically secure that borrowing when the market and when the environment is at its most appropriate, which is what we did in August.

“With the benefit of hindsight, you can see how good a deal it was.”

St Helens Star: Cllr Martin Bond, cabinet member for financeCllr Martin Bond, cabinet member for finance

Cllr Bond, ward councillor for Haydock, said the council will benefit from the decision for many years to come.

“At the point in time in which that decision was made, lots and lots of authorities were heavily borrowing from the PWLP at that point,” Cllr Bond said.

“They were taking advantage of that situation.

“It’s not something that will benefit now, it will benefit for years and years and years and years going forward.

“I just think that was a fantastic decision that was made, not by politicians, but by our officers.”