A NEW political row has erupted on North East Lincolnshire Council following claims that the previous administration "mortgaged the authority to the hilt".
In an outburst at a full council meeting, Labour council leader Chris Shaw said the "financial incompetence" of the Liberal Democrat-Conservative coalition had unnecessarily saddled the authority with loans that will take 65 years to pay back.
But his comments have been dismissed as "nonsense" by the leaders of the two parties, who were in charge between 2003 and 2009.
Responding to criticism from the public and opposition councillors over Labour's decision to close Scartho Baths, Councillor Shaw told the meeting: "We would love to be able to build a 50m swimming pool with diving board. But somebody has mortgaged this authority to the hilt by borrowing £40 million for a capital programme that never happened and very wisely invested it in foreign banks."
He then added: "We can only do what we can afford to do, thanks to the financial incompetence of the two parties opposite."
Speaking after the meeting, Lib Dem group leader Andrew De Freitas suggested that Councillor Shaw must be having "flashbacks" to when the last Labour administration left the council "almost bankrupt" in 2003.
And Conservative group leader Keith Brookes said Councillor Shaw "should not throw stones", adding: "When he took control of the council he inherited good sound financial balances."
The leader's outburst also surprised senior officers at the council, who have issued a brief statement confirming only that the borrowing levels quoted by Councillor Shaw were correct.
After the meeting, Councillor Shaw said that internal auditing by the ruling Labour administration had revealed that between 2007 and 2009 the council had borrowed £40 million to deliver its capital programme – but spent only half of it and invested the remainder in foreign banks, including the Icelandic institutions that collapsed in 2008.
Although the council is expected to recoup most of the £7 million it invested, it will lose out on any interest it would have accrued.
Councillor Shaw added that the loans were taken out at an interest rate of five per cent over a period of 65 years.
He said: "We are having to set a really small capital programme that can be delivered without borrowing money.
"We cannot go borrowing anymore because we are still paying back the money that they've borrowed."
However, Councillor De Freitas, who was leader of the council during that period, said: "The council did not mortgage itself to the hilt. That is a load of nonsense."
He explained that the council had borrowed the £40 million because when the coalition took over the authority it had no money in reserves.
He accepted that there had been "slippage" in the delivery of the capital programme, but said that between 2005 and 2009, the council had earned £10.6 million on its investments.
A council spokesman confirmed details of the borrowing figures, and said: "The authority remains vigilant in its financial dealings in line with our treasury management strategy and strong financial stewardship."
Image may be NSFW.
Clik here to view.