Savings of up to £1.7 million per year are predicted to be made to help protect services for the public following a decision by Bath & North East Somerset Council to change the way in which its debt is managed.
The Council will use its cash flow, currently earning very low rates of interest, to temporarily repay a significant element of debt with higher interest costs – this approach is predicted to create substantial financial savings.
Councillor David Bellotti (Lib-Dem, Lyncombe), Cabinet Member for Community Resources, said, “In essence, this approach is very similar to a homeowner who uses their savings to maintain an off-set mortgage. Bath & North East Somerset Council is taking this decision now because there is greater certainty in the financial industry that interest rates will remain low over the medium-term.
“The forthcoming Government Spending Review is certain to require additional savings from town halls across the country. It is important that the Council looks at all options to help limit the impact of Government funding reductions on our highly valued frontline services to the public. Rescheduling our debt is one of those options that we will be taking.”
The plan will reduce borrowing in the short-term, but that figure will increase again as cash flow requires and when borrowing is needed in future years for new projects.
The Council has taken independent advice from treasury management experts Arlingclose, who also predict that taking this action will mean less exposure to interest rate changes in the future.
