Kensington and Chelsea Council has raised its borrowing limits by almost £400m, which will be spent if required, as the response to the Grenfell Tower tragedy continues to gather pace.
The council took a first tranche of £100m of borrowing from the Public Works Loan Board in November, which will go towards helping survivors find new homes and rebuild their lives.
The move came after the council agreed a plan which will see a further £135m of borrowing go towards rehousing, along with another £100m to pay for replacement social housing.
A report to councillors by Chris Buss, director of finance at the authority, said: “The Grenfell fire has placed unprecedented demands upon the council’s capital programme and in particular the need to fund additional permanent properties for former Grenfell tower residents in order that the council’s commitment to rehouse these residents can be met.”
It said that the council will, “if it is to both meet the requirements of the Grenfell recovery programme and the need to invest in owned assets, need to both borrow and seek other sources of income”.
In October, the borough agreed a £396m rise in borrowing limit by 2019/20 to a new total of £650m
The council has turned to borrowing money because the majority of the council’s £274m reserves have already been allocated and usuable reserves are estimated to be around £25m by March 2019, with further reductions planned
In addition, £72m of schemes from the previous capital budget, adopted before the fire, have been deferred to help reduce the costs of interest payments on the borrowing.
Almost three quarters of these savings will come from money previously allocated to buy out leaseholders on a planned regeneration project and dropping plans to move a library and youth centre to new premises.
The new capital programme of £400m will be paid for using £119m of reserves, the £235m rehousing borrowing, plus £20m from planning fees, £12.35m from a parking-related fund, plus £22m of unspent money from last year’s capital budget.
This agreed capital programme is set to rise by a further £160m, funded by borrowing, including the £100m of borrowing for replacement social housing.
In addition to funding the capital programme, reserves will also be used to pay for £60m of Grenfell-related revenue spending and £15m on other revenue costs.
The council’s plan supersedes a £75m package for post-Grenfell recovery agreed by the council in August.
The authority’s £100m borrowing from PWLB in November was made up of four separate loans, each of 25m, with repayment periods of 20, 25, 30 and 35 years at rates between 2.64% and 2.78%.
The council is understood to be in discussions with central government on the treatment of the additional borrowing it is undertaking.
In November’s Budget, chancellor Philip Hammond said the government would provide £28m for mental health services, regeneration support for the surrounding areas and to provide a new community space for Grenfell United community group.
Photo (cropped): ChiralJon, Flickr
