Edinburgh City Council to borrow £1bn over next four years

Council bosses have set out their plans to borrow more than £1 billion to fund city spending over the next four years.

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Edinburgh City Council warned that increasing borrowing in the midst of rising interest rates will be a “difficult balancing act” that will bring with it “significant financing risk.”

A projected £2.49 billion will be spent by the council between the current financial year and March 2026.

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Just over half this sum will fund the capital’s schools, waste services, ongoing tram works and all expenditure associated with the ‘general fund’, whilst the remaining £1.138 billion will be used to maintain and expand the council’s housing stock.

A report to the finance and resources committee on Thursday said £1.199 billion would need to be borrowed over the next half-decade to fully fund city-wide spending.

However, it noted that £188 million of this has already been taken out over the last year, bringing the total borrowing down to £1.011 billion.

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Edinburgh City Council will borrow £1bn.

In contrast, the council has borrowed £497 million at an average interest rate of 2.09 per cent in the last three years.

And before that, between 2012 and 2019, Edinburgh City Council took on no new loans other than interest free payments.

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The report reads: “The council still has a substantial borrowing requirement over the next five years, which gives the council a significant financing risk.

“We warned in the 2021 to 2022 strategy that there was a substantial level of borrowing, which the council may have to undertake in a rising interest rate environment.

“While the £188 million borrowed in 2021 to 2022 has mitigated this risk, there is still a large quantum of borrowing to be secured.

“It is a difficult balancing act to incur a cost of carry on additional borrowing, which the council doesn’t need at present against a background of delayed capital expenditure and increasing interest rates.”

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Outlining the risks associated with borrowing in the current “uncertain” economic landscape, the report states the pandemic and brexit will “continue to be the major influence on the UK economy.”

The Omicron variant “increased uncertainty and risk to the economy,” it adds, noting the national inflation rate is well above the Bank of England’s target rate of two per cent at 5.4 per cent.

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