Loan will cost city taxpayers £53m

A question by Tory councillor for Dalston and Burgh, John Collier, queried the total cost in interest since the loan was taken out in 1995. Labour says the loan was taken out at a “very good” interest rate at the time of 8.5 per cent, which had cross-party support.

Responding to the question by Mr Collier, deputy leader of the Tory-led council Gareth Ellis, said: “Think of the things we could’ve done with that money. Think about our fleet of refuse collectors, we could replace the whole thing tomorrow with a new fleet.

“We could buy 100 acres of land and pay for the solar panels for it, which could provide the equivalent of 20 MWs of electricity, which would, give or take, be enough to power the whole city. We can’t do any of those things because we don’t have £52m.”

Mr Ellis added the total cost of the loan will be £52.5m and there was nothing to show for it. He claimed the money was used for a “regeneration scheme that didn’t work”.

Responding, the deputy leader of the council’s Labour group, Les Tickner, said after the meeting: “Base rates were approximately 6.5 per cent in 1995 and borrowing rates over 9.5 per cent.

“This loan stock interest rate of 8.75 per cent was a very good deal at the time as it allowed the council to pay off earlier loans with interest rates of 10.25 per cent. Until the housing stock transfer took place in 2002, the Government picked up the majority of the cost of financing the loan via the housing revenue account.

“As a result of the stock transfer, however, the council became entirely responsible for repayments. A letter at the time from the director of finance notes there was no anticipation in 1995 that stock transfer would be undertaken.”

He added: “The result of that action by the Conservative administration that took over in 1999, was the council had to take over responsibility for all the loan payments.”

Dr Tickner said it was “political mischief” to blame Labour for the interest repayments.