In many financial documents and reports, the level of debt held by the city council is detailed as being £527m, as at the end of March 2025.
We know this figure sounds very high, and we can’t deny that it is, but there are good reasons as to why the council has increased its level of debt significantly over the past decade.
Current situation
The council’s current level of debt is £527m as at the end of March 2025. The interest and principal (repayments) that we pay on this borrowing (via the revenue budget) is £38m annually.
It is a priority for the council to seek to manage and, when possible, reduce this figure with any new borrowing being heavily scrutinised.
Each year we are reducing this historic debt by, on average, £20m. New borrowing is restricted and in 2024/25 we borrowed just £3m to fund the council’s Capital Programme.
Why do councils need to borrow money?
Councils will always need to borrow money to pay for large construction projects such as new roads or schools.
To pay for schemes such as these, councils can borrow internally or externally. Internal borrowing is using internal resources, such as reserves.
Traditionally, local authorities have held significant levels of cash which has sustained internal borrowing. In recent years, our reserves have dwindled, further impacted by the deficit in the Dedicated Schools Grant (DSG). The DSG is revenue funding we receive from Government to cover the costs of schools, early years settings, and education for high-need pupils.
In addition, demands have risen significantly in some areas, such as the number of children needing a school place and the local authority has a legal duty to provide such places. To do so, it has needed to build new schools and extend others.
Why is our debt balance so high?
During the past 13 years, our debt balances have increased from £143m to £527m. This has coincided with the council’s dwindling levels of resources and demand rising in areas such as school place planning, with significant increases in the number of children requiring a school place.
Since 2012, the council has borrowed money to support the following:
- £120m to build new schools and to extend others to manage exceptionally high demand for school places. This is in additional to Government grants of £218m, meaning the total spend on school improvements is £338m.
- £100m for new roads and to upgrade others. The parkway system, for example, was built 50 years ago and has therefore needed investment in recent years to ensure it remains in good condition, including the bridges which have all needed bearings replaced. We’ve also rolled out LED street lighting, which has reduced energy consumption and costs.
- £76m to design and build the Energy from Waste Plant at Fengate. This facility brings in a high level of income for the council, thereby supporting the borrowing costs. It also saves the council money in landfill charges.
- £53m to purchase Sand Martin House. This again saves the council money as the borrowing costs are less than the rent we would have paid. View the Cabinet Agenda from 2023 on the Democracy Peterborough website.
How else can we pay for large projects, other than borrowing?
Since 2012, the council has delivered capital investments worth £1.1billion, which included investment into new schools, infrastructure, housing, regeneration and digital technology.
This has been funded in a number of different ways:
- £577m from borrowing
- £497m from grants and contributions, mainly from Government
- £59m from leases, capital receipts from selling assets and loan repayments
How will we reduce the level of borrowing?
We have significantly reduced new borrowing unless it is absolutely essential. We are working even harder to attract external grants and contributions and selling assets that are no longer providing best value for taxpayers.
In addition, we are reducing the debt through repayments. On average, the historic debt is reducing by around £20m each year.