THE Manx public owes nearly £171 million to the Isle of Man Bank in local authority loans.
The figure – branded ‘alarmingly high’ by one MHK – was revealed on the eve of the Budget and in the wake of the news that interest on all of those loans has increased by 0.25 per cent as a result of a clause in a deal between Treasury and the bank. The clause states that if the island’s credit rating is downgraded – as happened in November when Standard and Poor’s downgraded the Isle of Man from AAA to AA+ – then the bank can increase the interest rate on the loans.
The actual figure owed in local authority housing loans is £170,737,446.20.
Each authority has taken out a series of loans at different times of varying sizes, over varying terms.
The biggest fixed rate loan taken out was by Douglas Council in December 2005 of £42,077,623. There is £31,376,961 left to pay on that loan, which was originally taken out over 30 years at an interest rate of 4.73 per cent, but is now being charged at 4.98 per cent. In total it has more than £61m outstanding in loans.
Another large loan of £11,231,804 was taken out by Onchan Commissioners in June 2007 over a 25-year period at a fixed rate of 5.85 per cent. There is £10,209,217.88 left to pay. In total, Onchan has more than £14m in outstanding loans.
The total amount outstanding in loans for Ramsey Commissioners comes to more than £36m.
Port Erin owes £6,945,203.73 in loans and with the extra 0.25 per cent in interest applied the commissioners say they owe another £28,696. They have blamed this for 1.4p of this coming year’s 5p in the pound rate rise.
Port Erin commissioner Phil Crellin said that, while the loans totalling £170m are in the names of the island’s local authorities, the debt for many of them is effectively borne by the government.
‘It would be fair to say that a lot of that money is borrowed for housing which is then paid by central government (the Department of Social Care) back to the local authorities on deficit,’ he said.
He said the local authority, as the housing authority, borrows the money on behalf of the DSC and all the capital payments are collected up at the end of the year, rents are taken off etc, and the government pays the authority.
‘It is not fair to say all that debt is born by the local authorities, it is born by central government.’
Onchan MHK Zac Hall, a member of Liberal Vannin, tabled a question for written answer in the House of Keys on Tuesday asking Mr Teare to give the details on the borrowings by the island’s local authorities.
In the original answer later released to the media, a table giving a break down of the figures for each local authority was referred to, but was not included.
That was later released following a request by the Manx Independent and revealed the £171m figure for local authority loans.
Mr Hall said he had concerns over how interest on a fixed rate loan could be amended. He asked why fixed rate did not mean fixed rate in this context.
‘That is really alarming,’ said Mr Hall, who added he would be investigating the situation further.
He also queried the size of the liability.
‘Those (loans) appear to be alarmingly high. When you add them all up it’s a phenomenal amount of money, not just on local government but on central government. I think the numbers are quite staggering to be honest.’
Mr Hall said: ‘The effect (of the credit rating downgrade) on the people of the Isle of Man, well you couldn’t say there’s no effect there because there’s the evidence.’
This week, the Treasury has been tied up with preparing for the Budget on Tuesday, including briefings to members of Tynwald in advance of the announcement.
Treasury sources, off the record, seem unconcerned about the size of the loans.
Government reserves stand at more than £1bn.
With a population of 80,000, the size of local authority housing loans roughly translates as £2,000 for every person in the Isle of Man.
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