Knowsley Council owes more than half of its £230m debts on private finance initiatives.
£117m of the council’s long term debts are for private finance initiatives, known as PFI, with much of the rest due to borrowing from the Public Works Loan Board.
Figures for Knowsley Council’s debts were presented in a report discussed at a governance and audit committee meeting held tonight, January 31 at Huyton municipal building.
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The report sets out the council’s treasury management strategy for the coming year and also lays out Knowsley’s current debts.
As well as £111m from the Public Works Loan Board – which was a statutory body of the UK Government that provided loans to organisations like local councils, a role that is now part of the treasury – the council also owes £6m on what is known as LOBO loans.
LOBO loans, or Lender’s Option Borrower’s Option loans, are controversial long terms loans which can prove very costly for local authorities.
The lenders have the ability to change the interest rates after certain fixed terms, leaving councils with no option but to accept the terms or pay them off at no extra cost.
According to Knowsley’s treasury management report, the council says it is likely to pay off rather than accept new terms for any of these loans which could be called in over the next financial year.
Due to the current low interest rates, however, officers say this is “unlikely” to happen.
£6.3m is also owed on ‘other loans’, which includes private sector borrowing, with £1.1m of transferred debts, giving Knowsley Council total debts of just over £230m.
The council says it currently has no short term loans, with officer Catherine Cairns saying at the meeting that Knowsley’s treasury management strategy remains “largely unchanged” from the previous year.
Speaking at the governance and audit meeting, Ms Cairns said that due to the low interests rates it is not in the council’s interest currently to borrow more money, with a strategy instead of “drawing down” from cash balances rather than “running the risk of any investment losses.”
Councillors approved the contents of the report, which will now go to full council for discussion.
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