Somerset Council’s total debt could drop below £1 billion within the next five years if current financial trends hold steady. The council carries hundreds of millions in debt, primarily sourced through external borrowing from the Public Works Loans Board, a Treasury body. These funds support essential infrastructure such as new schools, roads, and a growing portfolio of commercial investments.
Formed in April 2023, the new Somerset Council inherited all debt from the former Somerset County Council and the four district councils it replaced. Since then, the finance team has been actively managing this debt load to stabilize spending and gradually reduce liabilities.
Despite forecasts of rising borrowing over the next five years—driven largely by a commitment to build over 500 new council homes—the overall debt is expected to decline, falling below the £1 billion mark by around 2031. This positive outlook comes as the council balances new borrowing with repayment efforts and asset sales.
READ MORE: Cheddar Reservoir Closed to Public Due to Extreme Heat
READ MORE: Sex Offender Coerced Partner Into Fatal Overdose, Coroner Rules
A detailed report on borrowing and treasury management was released ahead of an audit committee meeting in Taunton. According to the report, Somerset Council’s debt is composed of direct borrowing and the capital financing requirement, which includes funds set aside annually to service debt and pay interest.
As of April 1, the latest figure reveals debt standing at approximately £1.125 billion, equating to nearly £1,900 per resident based on the council’s population estimates. While this amount may rise slightly by the end of the 2023/24 financial year to over £1.13 billion, it is projected to decline steadily over the following years, dipping below £1 billion by April 2031.
A council spokesperson commented, “Our borrowing requirement has reduced, reflecting progress on asset sales and adjustments to the capital programme set in the 2026/27 budget. The council currently holds less debt than a year ago. Though borrowing will increase due to housing projects, we maintain a prudent approach—carefully managing capital spending and leveraging receipts from asset disposals to reduce debt where possible.”
Repayment of borrowing—including interest costs—requires a significant portion of the council’s annual revenue budget, funds which are then unavailable for frontline services like children’s services, adult social care, and road maintenance. For 2026/27, debt servicing is projected to cost just over £50 million, roughly seven percent of the council’s total revenue budget. This percentage is expected to remain stable over the next five years.
While borrowing grows, increased council tax revenue, fueled by new housing developments, along with enhanced central government grants, will help balance finances. The spokesperson added, “Our approach to managing debt service costs is dynamic, adapting to changes in borrowing and interest rates. We aim to keep new borrowing limited and maintain a balanced, sustainable budget. Importantly, we do not rely on interest rate reductions to manage costs, focusing instead on long-term risk management.”
The council also adheres to CIPFA’s Prudential Code, which advises keeping total debt below the highest forecast capital financing requirement over the next three years. Despite some unpredictability in cash flow timings, Somerset Council expects to meet this guideline in 2026/27 and throughout the medium-term financial plan.