New rules agreed for loans from Northumberland County Council to Arch

Coun Richard Wearmouth, Arch chairman.
Coun Richard Wearmouth, Arch chairman.

A new procedure for loans from Northumberland County Council to its development company has been described as a ‘milestone for this council’.

Loans from the local authority are expected to total £275million by the end of this financial year and, with Arch set to be replaced by a new company, Advance Northumberland, new regulations are to be put in place.

A revised decision-making and governance procedure for future loans was approved by the council’s cabinet at its meeting on Tuesday.

The new process to be put in place includes the creation of an external loans board and has been described as a series of ‘high bars and clear criteria for the management of Arch, or Advance Northumberland as it will become’.

A number of core principles will apply under the new set-up, including the council not being willing to offer a loan facility over 100 per cent of the asset value to cover various fees or charges.

Plus, not all loans will be interest-only moving forward, while interest rates may be floating rather than fixed where the rate risk is judged to be high.

At Tuesday’s meeting, Coun Nick Oliver, the cabinet member for corporate services, said that there was previously a ‘lack of any sort of proper process and it manifested in some of the things that have been discovered and well-documented elsewhere’.

One of the examples given where the various risks were not considered properly was the controversial purchase of Manor Walks shopping centre and the adjacent Westmorland retail park, in Cramlington, for £114million in 2016.

This was described as ‘a very dark time for the council’ by Coun Glen Sanderson, who added ‘it must never happen again’.

Coun Richard Wearmouth, the Arch chairman, described the new procedures as ‘a watershed moment’ and said that ‘pick-and-mix loan rates to justify whatever the company wanted to do have ended’.

In response to previous criticism, the Labour and former council leader, Grant Davey, said that the current council leader, Peter Jackson, was always involved in the process in his role as an Arch board member and ‘at no stage did he ever raise a single concern about methods or delivery within either the company or the council’.

Ben O'Connell, Local Democracy Reporting Service