Luton councillors in disagreement on whether £500m loans to Luton airport airport company are “secured” or not
Disagreement between opposing political parties has resumed over whether loans by Luton Borough Council to its airport company, Lution Rising, are secured or unsecured. The latest exchange came during debate on the local authority’s treasury management annual report at a full council meeting on 15th November. The opposition group leader said: “… there’s more than £500m of unsecured loans, which have been given to the airport company. I know I’m about to be told those loans are in fact secured on the assets of the company. But that’s nonsense. You can’t take as security for a loan like this assets which the council already owns. They’re effectively unsecured.” It is unclear whether the loans are secured, as they are to a separate entity, London Luton Airport Limited, trading as Luton Rising, and the council may legally be separate from that. Councillors approved the annual report on treasury management and prudential indicators for the year ending March 31st 2022.
Luton councillors in disagreement over £500m loans to airport company
Councillors agree to disagree over whether huge loans are secured or unsecured
By Euan Duncan, Local Democracy Reporter (Luton Today)
18th Nov 2022, 1:54pm
A war of words between councillors from opposing political parties has resumed over whether loans by Luton Borough Council to its airport company are secured or unsecured.
The latest exchange came during debate on the local authority’s treasury management annual report at a full council meeting.
Finance portfolio holder and Labour Limbury councillor Rob Roche warned: “I don’t want people to think we’re going to do something stupid as an unsecured loan against an asset.”
Liberal Democrat Barnfield councillor David Franks disagreed, describing the report as “a reminder how much more difficult dealing with the council’s cash flow is because of the level of debt the council is carrying”.
The opposition group leader said: “And, in particular, there’s more than £500m of unsecured loans, which have been given to the airport company.
“I know I’m about to be told those loans are in fact secured on the assets of the company. But that’s nonsense.
“You can’t take as security for a loan like this assets which the council already owns. They’re effectively unsecured.”
Councillor Roche explained: “We’ve a separate entity as a company, London Luton Airport Limited, trading as Luton Rising. The council is separate from that.
“The asset is secured by debenture in Companies House and we’ve first charge on that asset. So it’s secured against the asset. I don’t want people to think we’re stupid enough to do something like that.”
Councillor Franks added: “In the case of the loans to LLAL, the lender is the council and the council has registered an interest in assets which the council already owns through its ownership of the company.
“There are no ways in which that can be described as a secure loan.”
But councillor Roche replied: “We’ll have to agree to disagree. It’s a secured loan. There’s a debenture in Companies House secured against the airport and the loan is secured.”
The report noted “an increase in the amount of external borrowing, £89m during 2021/22, to finance council approved projects, and that the local authority didn’t breach any of its prudential limits”.
It covers several areas including:
capital activity for the financial year 2021/22;the council’s overall borrowing need or capital financing requirement;the overall treasury position identifying how the council has borrowed relating to its indebtedness, and the impact on investment balances;borrowing strategy and activity;and investment strategy and activity.
“The council has a current policy of maximising internal borrowing, and therefore minimising the need to borrow,” said the report.
“LBC has locked most of the long-term borrowing requirement on fixed rate terms already, a strategy which should mitigate exposure to further interest rate rises.
“The council must ensure it isn’t borrowing to support revenue expenditure. The authorised level is the affordable borrowing limit required by section three of the Local Government Act 2003.
“The local authority doesn’t have the power to borrow above this level. During 2021/22 the council has maintained gross borrowing within its authorised limit.”
Councillors approved the annual report on treasury management and prudential indicators for the year ending March 31st 2022.
SOURCE: Luton Borough Council (Nov 15th) meeting.
Luton airport continuing to be a financial drain (maybe £550 million+) to owners Luton Council
In the last few days, the company (owned by Luton Borough Council) that owns Luton Airport, has changed its name from London Luton Airport Ltd, to “Luton Rising”. That will be its trading name. The company that operates the airport is London Luton Airport Operations. London Luton Airport Operations has obtained agreement from Luton Rising that it can retain £45 million over three years. This will support the airport’s recovery from the pandemic. The money would have been paid by the operator to Luton Rising (ie. the council) if it had not been for the impact of Covid reducing passengers and flights. Luton council usually, pre-Covid, made a good profit from the airport, but that has now been reversed. The Council in 2019 receiving a £19.1m, and £15.8m servicing debt. In September 2020 there was a £60m loan by Luton Borough Council to its airport company and it was expected that another £23 million would be paid. Then in June 2021 Luton Council loaned a further £119m to the airport. Now this is another £45 million, over three years. The airport is not looking like a great investment for the council …
Luton scaling back airport expansion plans, delaying 2nd terminal, to save £1 billion
Luton Airport, which is owned by Luton council, is planning to scale back its expansion plans in order to save perhaps £1 billion. In 2019 the airport consulted on plans for a new terminal that would enable the annual number of passengers to be increased from 18 million to 21 million by 2039. There will now be a new consultation, later in 2021 or in 2022, for initially improvement of the existing terminal, and then eventually a second terminal, at some future date. The airport’s finances have been seriously hit by Covid. The Council benefited greatly from the airport (before Covid), in 2019 receiving a £19.1m, and £15.8m servicing debt. In 2020 the airport had huge public subsidy, and more will follow for 2021. Local campaigners will be looking very carefully at what might emerge from proposals for further passenger growth using the existing terminal. This might be by creative use of “permitted developments” which Luton Borough Council could approve on its own. If such growth could accommodate more than an additional 5 million passengers per year (taking Luton to 23Mppa) it would then become possible for the declared ambition to reach 32Mppa to be achievable without need for a DCO, as below the 10 Mppa threshold.
Luton Council’s £60m loan to Luton Airport company set for approval ‘in private’
A £60m loan by Luton Borough Council to its airport company is set for approval, in private, by the executive later this month. The first of two emergency loans – together totalling £83m – has gained the support of Luton Council’s scrutiny finance review group, at the second attempt. The second loan worth £23m to London Luton Airport Limited (LLAL) is scheduled for the 2021/22 financial year, after the council’s emergency budget in July. The Labour controlled council were forced by the Liberal Democrats to discuss the loan report in public. But officers asked for the council to take legal advice and defer the issue. It seems that 5 five Labour councillors recommended the council’s executive approve the £60m loan deal, with the 3 Liberal Democrats in opposition. The executive will formally decide upon the loan at its meeting on Monday, September 14th. The Liberal Democrats said the almost £400m in loans are secured against the assets of the company. But, the council already owns all of LLAL’s assets by virtue of its 100% ownership of the company. It follows that for all practical and accounting purposes the £400m loans are unsecured.”