Council warns of 'difficult choices' on finances

The council said it is facing challenges, including high inflation and interest rates.

A council faces “difficult choices” to deal with “substantial” financial challenges, councillors have warned.

Surrey Heath Borough Council has to find an additional £4m a year to cover interest payments on loans for property investments.

In 2016, the council borrowed to invest in a property portfolio, which included a shopping centre and the former House of Fraser store in Camberley, with the debt estimated to be £170m.

Liberal Democrat councillor Leanne MacIntyre, an executive member for finance, said the council faced an “unsustainable” funding gap within two to three years and increased debt.

“Though difficult choices lie ahead, the council is prepared to face them," she added.

High inflation, interest rates and demand for services, such as affordable housing, had also been raised as reasons for higher costs.

There were also concerns that the council’s income from retail properties had been reduced because footfall in Camberley had not gone back to levels seen before the pandemic.

'Financial pressures'

Ms MacIntyre said: “The council secured long-term borrowings at fixed rates through the Public Works Loan Board [Government] and other financial institutions.

“The remaining £80m was financed with short-term, variable-rate loans reflecting the Bank of England base rate over time.

"Interest rate increases in recent years have led to a considerable rise in indirect service costs linked to our debt interest.”

Council leader Shaun Macdonald added: “The reality is that most councils are facing substantial financial pressures. Rising inflation, wage demands, and increasing demand for services, along with more complex needs, have created a projected funding gap in the sector of £6.2 billion over the next two years.

The council was run by the Conservatives at the time the properties were purchased.

Jonny Cope, councillor for the party in St Paul's ward in Camberley, said Surrey Heath had not done anything unusual by borrowing to invest in this way.

“I think that councils should make their town centres better places. The reason for the acquisition in the town centre was to help regenerate Camberley. It wasn’t to make a profit.”