Highways and housing among budgets reduced as ten-year capital spending cut from £1.8bn to £1.53bn, reports Simon Allin, Local Democracy Reporter

Enfield Council has announced cuts of £267m to future capital projects in a bid to curb mounting borrowing costs.

Spending on a range of big schemes is set to be slashed after interest rate hikes pushed up the cost of servicing debt.

The council’s existing ten-year capital strategy, covering the period from 2023/24 to 2032/33, features £1.8billion of investment, 44% of which was set to be funded through borrowing.

But a report presented to a meeting of the council’s cabinet on Wednesday (15th) states that this was “developed in a different economic climate” – before the Bank of England’s base rate climbed to 5.25% in August following the latest in a series of hikes designed to curb inflation.

Under the new proposed capital strategy, £1.53bn is set to be invested in the borough over the next decade, with 38% funded by borrowing.

The council report warns that failing to make changes to capital spending would lead to “significant unfunded revenue budget pressures” that could only be managed by “further depleting reserves and reducing revenue budgets”.

The council’s debt cap, which was previously set at £2bn, is also now said to be “no longer affordable”, while the changing economic climate means the authority is now only prepared to take “minimal financial risk”.

The council’s current total debt level is £1.3bn.

In the new ten-year capital strategy, financing for the council’s flagship Meridian Water regeneration scheme in Edmonton is being reduced by £29.2m. The draft proposal includes planned investment of £296.8m on Meridian Water, compared to £326m under the previously agreed strategy from the start of the year.

The council’s ‘core’ capital programme will be slashed from £306.7m to £246.5m, representing a cut of £60.2m, and spending on housing will be cut from £945m to £898.9m, saving £46.1m.

A series of other investments – worth £95.5m in total – are being moved to “pipeline”, which means they will be removed from the capital budget until they can be supported by a “financially affordable business case”. This includes £28.4m of spending on the council’s highways and street scene programme, £16.3m on the Energetik district heating network, £15m on the next phase of the Montagu Industrial Estate regeneration project, £9m on digital services and £1.8m on flood alleviation works.

The report acknowledges that “the proposed reductions […] do carry inherent risk” including “increased risk of asset deterioration from reduced capital investment in highways infrastructure”.

The planned cuts to capital projects are the latest spending reductions announced by the council as it seeks to keep on top of mounting financial pressures. Earlier this year, it revealed plans to cut council tax support by £12m and began to move homeless families outside London and the south-east to reduce spending on temporary accommodation.

Speaking during Wednesday’s meeting, cabinet member for finance Tim Leaver said the council’s intention was to keep borrowing “within a 10% to 12% range, which is a ratio against our expenditure”. He added: “We believe that the investment is prudent and affordable”.

Council leader Nesil Caliskan added: “I am confident that the new strategy will help us keep our capital investment plans ambitious for the borough but also prudent. It is those two things that we have been consistently committed to as an authority.”

Cllr Caliskan added that basing future borrowing on the new affordability measures was “the right thing to do given a constantly changing economic picture”.

The Labour administration previously said it was “confident” it could balance the council’s 2024/25 budget, despite Enfield recently being named as one of the most indebted local authorities in the country.

But the Conservatives have once again cast doubt on the claims. Commenting on the planned capital spending reductions, shadow cabinet member for finance James Hockney said: “These drastic measures have almost certainly come too late to avoid bankruptcy. As we said for years – it’s the residents of Enfield, Edmonton and Southgate that will suffer the consequences of years of Labour financial mismanagement.

“The Labour administration is now scrambling to avert bankruptcy by substantially cutting back its centrepiece ‘borrow to invest’ plan. We warned for years of the risks of the Labour administration scrapping its debt repayment plan and rushing headlong into massive additional borrowing. Now, at the last moment, they are changing course – realising that being the tenth most-indebted council in the country carries huge risks of going bankrupt.”

The draft capital strategy will be presented to full council for approval next week.

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