DORSET Council has cut its borrowing by £35million in the past six months – to £197.5m.

Some of the total has reduced by paying off loans and partially as a result of this investment income has dipped.

Figures before councillors show the decline in what the council describes as ‘available capital’ – from £147.5m at the start of the financial year to £113.6m at the end of September.

A report on treasury management to the audit and governance committee (November 7th) says: “The cost of borrowing is forecast to be below budget for the year, as a result of the early repayment of two loans, and by delaying the replacement of short-term loans that have matured this year. This has, however, meant that balances available for investment have been lower than expected, which has therefore reduced the expected level of interest receivable and investment income.”

The council says it earns an average interest rate of 2.24 per cent on this money, but pays an average 3.7 per cent per year on its loans which, typically, run for 28 years.

The council report rates the current risk to the council as ‘high’ with a ‘medium’ residual risk.

A table shows the council’s underlying borrowing requirement as £327million, made up of £233m of external borrowing and £94m internal.

The council’s opening balance showed it had £170m in usable reserves for internal borrowing and £71m in working capital, leaving a surplus of around £147.5m for investment.

The position at the end of September shows the council with £197.5m in loans, a decrease of £35m from 31 March 2019. Two long-term loans of £10m each were repaid in full in April 2019. Three short-term loans for £30m in total also matured in the first half of 2019/20, and three new short-term loans totalling £15m were taken out in the period.

The report says the council currently has no major capital plans in the foreseeable future which will require further borrowing.

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Cllr Tony Ferrari, portfolio holder for finance, commercial and assets, says that Dorset Council has reserves at the very top end of its target range which can be used to deal with issues such as the currently predicted end of year shortfall of £14.7m in the revenue budget.

Said Cllr Ferrari: “This is what reserves are for, spending to deal with short term issues. These reserves allow us to provide for our communities even when the numbers of individuals needing care rises rapidly and at the same time invest to slow this pressure in future.

“The savings from the formation of Dorset Council will comfortably exceed the current level of this year’s overspend and at the same time we are proving the care we need for rising resident demand.

“This is not a council in difficulties, this is a council doing exactly what Dorset’s residents would want from us, managing the tax payers money well in a difficult environment,” he said.

Mr Ferrari also says that the council’s capital position should improve by the sale of buildings and land it no longer needs. These have not been made public, but he says the council has a disposal strategy which hopes to deliver £31.5m by 2021.