Luton council's borrowing close to a thousand million pounds as extra £116.8m agreed to fund town centre regeneration

The total borrowings of Luton Borough Council are close to a thousand million pounds, with an extra £116.8m approved for its landmark town centre project, The Stage, a meeting heard.

An outline business case has been prepared for the mixed-use development, which is set to benefit from a successful levelling up bid for £20m of government funding.

Finance portfolio holder and Labour Limbury councillor Rob Roche told a meeting of the local authority: “The executive approved The Stage project as part of the new town centre master plan.

“As this new application isn’t included in the borough council’s approved capital programme, full council agreement of the capital expenditure and the borrowing is required,” he explained.

“This will deliver 405 high quality apartments, including 20 per cent affordable, about 5,800sqm of office space, a community facility with a 400-seat auditorium and a bicycle hub.

“The interest payable from the extra borrowing should be fully covered by the interest earned from loans to the council’s subsidiary companies.

“The executive also considered the risks associated with this development over potential increases in the cost of construction, inflation and interest rates.

“It was agreed these risks would have to be monitored closely and also the adequacy of the level of contingency provided as part of the outline business case.”

Liberal Democrat Barnfield councillor David Franks warned: “The council’s total borrowings are now close to a thousand million pounds. More than half of that is unsecured loans to council owned companies.

“We’re reminded consistently the loans are secured against the assets of the companies. That’s the biggest nonsense I’ve been told in all the years I’ve been on the council. You cannot take as security assets the council already owns.

“The local authority owns those assets by virtue of its ownership of the companies. These are effectively unsecured loans.

“We want to see this project developed and succeed to achieve the regeneration of Luton town centre, but it doesn’t come without big questions which need to be answered.”

Liberal Democrat Wigmore councillor Peter Chapman said: “Our borrowing is getting to the highest it’s ever been. The monitoring has to be a key part of this, with the risk at which it puts this council.

“Many firms are pulling any thoughts of developing property over the next four or five years because of the cost, with a massive increase in interest rates.

“For a small council development company to think of getting involved in a project on this scale, we’ve only to look at the sites across Luton which aren’t being developed by private companies.”

Councillor Roche replied: “Over the unsecured loans we’re not going to agree about this at all. This isn’t a residential loan. This is done on a business example and it’s secured.”

Labour Farley councillor Mahmood Hussain admitted to being confused by the opposition concerns, asking: “If you’re not allowing extra borrowing, would this project be delivered?

“If you want something developed, there’s no other way or money coming from somewhere else.”

Councillors agreed to the extra borrowing.