'£60m loan to Luton Airport company would bring the total it owes council to nearly £400m'

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A £60m loan Luton Borough Council wants to sanction to protect its airport company would take the total it owes the local authority close to £400m, it has been claimed.

The Liberal Democrat opposition group on the council say that much of this £400m is "unsecured".

They insist that the assets on which the loan is secured are effectively owned by the council already, through its ownership of London Luton Airport Limited (LLAL).

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The Lib Dems argue that proposed cuts to Luton’s children’s centres, the town’s school improvement service and the council tax reduction scheme could be avoided if the loan were to be dropped.

Luton AirportLuton Airport
Luton Airport

LALL is unable to pass on dividends to the council for the next two years because of the Covid-19 pandemic.

The figures emerged after cat and mouse manouevres at a scrutiny finance review group meeting, in which an attempt was made for the loan to be debated in private.

Item 12 at the end of the agenda was “Authorisation to release loan to LLAL", to be presented after the exclusion of the press and public.

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The message expected from finance officers was for the review group to recommend that the council’s executive could agree the loan deal.

Liberal Democrat group leader and Barnfield councillor David Franks forced a vote for the issue to be discussed in public.

This was won on the casting vote of stand-in chairman and Liberal Democrat Wigmore councillor Alan Skepelhorn.

The review group’s chairman Conservative Bramingham councillor John Young declared an interest and stepped aside, as did two Labour councillors Amy Nicholls and Tahmina Saleem.

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After a vigorous debate, the council is to seek legal advice on whether the loan proceedings should be heard in public.

Had it been heard, the Liberal Democrats would have moved that the executive committee be advised that the review group is unable to support proceeding with the £60m loan to LLAL.

The reasons behind this are:

> Concerns the airport company is loaded with debts its level of business cannot support, leading to insolvency, an inability legally to continue to trade and potential legal liabilities for the directors;

> The current concession agreement has 11 years to run and it could be three to five years for the airport to resume 2019 levels of business, so expansion plans are no longer urgent;

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> The extra loan proposed would take the total owed by the company to the council close to £400m all of which is unsecured;

> Part of the loan is to be spent on the Century Park access road for which the business case was rejected by the review group;

> The proposed cuts to children’s centres, the school improvement service and the council tax reduction scheme could be unnecessary if these loans did not proceed.

The loan was mentioned during an emergency budget full council meeting last month, when it was estimated the sum might be £83m.

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Councillor Franks had accused the council’s Labour ruling group of awarding “sacred cow status” to the airport to protect itself financially.

“There are dangers and I hope someone is keeping a close eye on it,” he warned.

Local authority cost cutting measures will lead to 365 job losses and reductions in front line services to plug a £22.2m budget gap.

The LLAL board has developed a financial stabilisation plan, which accounts for in the region of £31m, portfolio holder for finance and Labour High Town councillor Andy Malcolm had said then.

He sat in on the review group meeting, but is not part of the committee.

The vote in favour of deferment was unanimous, so a further meeting of the review group is due to be held shortly.