The region separated from the old Shropshire County Council in 1998 and became a unitary authority.
The agreements signed at the time required the newly created council to repay its share of the debts accumulated by the two authorities when they were a single organization – something which continued after the abolition of the county council and its districts. and the formation of the current Shropshire Council in 2009..
A report by the Telford and Wrekin audit committee said the borough paid Shropshire Â£ 1.23million last year, down Â£ 36,000 from 2019-20.
CFO Ken Clarke told advisers the amount is decreasing each year, but payments theoretically continue “forever” because they help pay off loans that can only be paid off at one time with a loan. “Significant premium” attached.
An update to the 2020-21 cash management report, by group accountant Ed Rushton, said: âThe board makes an annual contribution, Â£ 1.23million in 2020-21, to the costs of the Shropshire Council on pre-disaggregation debt. Interest paid averaged 5.1 percent last year.
“The interest rate paid on this is managed by Shropshire and is considerably higher than the rate payable by Telford and Wrekin Council on its loans.”
The equivalent reports from the previous three years show that the amount increased from 1.35 million pounds to 1.31 million pounds then 1.27 million pounds. The average interest rate also fell from 5.3% in 2017-18 to its current level.
Mr Rushton’s report states that the average interest rate on Telford and Wrekin’s own borrowings fell from 2.46% to 2.52% in 2020-2021.
Committee member Kuldip Sahota asked why the interest rate on Shropshire debt was comparatively high and how long repayments would continue.
CFO Pauline Harris said: âHistorically the Shropshires have not been as active in cash management as we are, so it is their combined interest rate.
âIt really depends on them how they manage their own cash flow strategy, so unfortunately we have no say in what we end up paying on that proportion. “
Mr Clarke promised to confirm the exact details with Cllr Sahota later, but said: “I think we are paying a percentage of the outstanding amount, so in fact you never really pay it.”
“We asked for a lump sum payment, but the problem with Shropshire is that a lot of the loans have been taken with the Public Works Loans Board and if you pay them back early there will be a very large premium,” he said. he declares.
âClearly they would see no reason to pay for this, and why should they? We would have to make that payment, which would be a cost to the board.
âSo we could get by but it would be very expensive. It is more profitable to keep paying a reduced amount each year.