Hartlepool Council hold £32 million pounds in their reserves and it has been suggested we could use some of this to pay off Council borrowings or even support services without increasing Council Taxes for at least the next few years.
However, according to the Finance Department the reserves enable Hartlepool Council to make an investment income of approximately £270,000 a year. So if we used reserves to repay debt owed by the council then we would lose this income. However, as we would not be paying interest on borrowings we surely would be better off in the long term?
Not so says the Fiance Department. Interest payable on loans was only 4.21% last year and earnings on cash investments were 5.07% (which isn't THAT good! and 5.07% of £32 million is actually about £1.6million so working backwards from £270,000 income at 5.07% only about £5.5 million of the £32million is actually invested? Where is the other £26million?).
If Hartlepool Council can borrow at 4.21% and get an investment income of 5.07% then I suggest Hartlepool Council go out and borrow a billion pounds. We can then cut the Council Tax to zero and live off the investment income.