£27m....that's how much Derbyshire County Council's debt costs our taxpayers in interest alone
INTEREST charges of more than £27 million are to be paid by Derbyshire County Council on its debts this year – £2 million more than it is trying to save by axing jobs and cutting services.
The authority is reducing care services, selling assets, cutting its workforce and considering off-loading youth centres, as it strives to save £25 million to offset major cuts to its 2012-13 budget.
But now a Derby Telegraph investigation has revealed that the authority is losing even more than that – a total of £27.4 million – on interest charges alone.
Latest figures reveal the authority's long-term borrowing stands at £389 million. Of that, the council will repay £22.7 million of its debt this financial year.
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The Tory-led authority said it was normal for an organisation of its size to have substantial debt but unions said that if it did not have to pay the interest then it might not be in its current cash crisis.
Derby City Council needs to save £20 million in 2012-13 and is also cutting services and jobs.
But its debt charges are slightly lower and it will pay £13.9 million in interest on its £329 million borrowing in 2012-13.
Alarmingly, the figures for the past five years show both authorities have been spending more on interest charges than paying off the actual debt.
Jeanette Lloyd, secretary of Unison's Derbyshire branch, said she thought county council workers who had lost their jobs – and people affected by service cuts – would be "appalled" to learn the interest payments are higher than the savings the authority is making.
She said: "Is it fair that the taxpayers have to bear the brunt of these charges?"
And Robert Oxley, campaign manager at the Taxpayers' Alliance, said the charges were an example of why councils need to cut down on their spending.
"They can't afford to borrow on the back of taxpayers because this will result in unsustainable borrowing costs, meaning there is less money available for vital services," he said.
"Derbyshire's councils have to live within their means.
"They can't pretend picking the pockets of taxpayers is the answer to their problems."
The figures show that the city council has reduced its debt by £52 million over the past four years and seen its interest charges fall.
But while the county council has managed to reduce its debt by about £35 million over the same period, its interest payments have increased.
Councillor John Harrison, cabinet member for finance at the county council, said the interest payment had gone up because of new guidance from Government on what should be included in the figures.
He said that since 2010-11, figures have included the interest the council pays on its Private Finance Initiative schemes, such as the 1,600 extra care apartments for the elderly it is building across Derbyshire.
Mr Harrison defended the county council's debt levels and associated interest payments.
He said: "The level of debt reflects the size of the capital infrastructure the council is responsible for.
"Our total external borrowing is at less than 25% of the total asset base. That is the sort of ratio most homeowners would be incredibly happy with, especially when combined with the majority of the borrowing being with a lender like the Government.
"The levels of interest payable are entirely consistent with the level of external debt."
Mr Harrison said it was difficult to say what interest rates the council was paying.
He said: "The council doesn't pay just one rate on its debt. We have a large number of loans of different sizes, interest rates and maturity dates and we consider all options on a regular basis to achieve the best deal.
"We take out new borrowing when we feel it is advantageous and that it fits with our treasury management policy.
"The recent report to cabinet shows our average rate of interest across all our loans was lower than average."
Mr Harrison added the "vast majority" of the debt was owed to the Government and that the council's policy was to repay debt, on average, over 25 years.
Councillor Sarah Russell, cabinet member for business, finance and democracy at the city council, also defended debt levels.
She said: "We have borrowed money to finance the acquisition of various capital assets such as schools, sports centres and libraries.
"Investment in the council's capital programme boosts the city's economy and creates new jobs and growth. This enables us to deliver key projects which will make Derby an attractive prospect for inward investment as well as providing first-class modern facilities for residents and visitors.
"Our average external interest rate for 2011-12 was 4.65%. The debt charges stemming from our debt are considered alongside all other costs within the council's budget and are considered appropriate for an authority our size."