THE council has loaned out a staggering £89 million to other local authorities since last year.

Yet the borough council is set to receive just £460,000 back in interest from the 20 councils it lent the money to.

This is because the interest rates attached to the loans were all below one per cent.

Councillor Pauline Jorgensen, deputy leader of Wokingham Borough Council (WBC), explained the low interest rates.

She said: “We have a prudent reserves level to invest in short and medium term investments.

“All investments are considered on the basis of security, liquidity and yield, in that order, but we can only invest in institutions with an equivalent or better credit rating such as other local authorities which carry the same rating as central government.

“Central government’s own deposit facility would be paying even lower rates of interest.

“We must also limit the duration of our lending – the current maximum is under 365 days – which reduces the level of return.

“Investing for longer would give a higher return.

“When calculating interest, the rate refers to a full year, so any calculation that refers to a part-year will be less.

“Similarly, we only account for the part of the loan that is in the current financial year.

“This means returns later in that year will be accounted for in the next financial year.”

The loans cover the period of November 2017 to September 2018 and were disclosed in the council’s mid-term treasury report discussed at last week’s Wokingham Borough Council audit committee meeting.

The council sent £5m to neighbouring authority Reading Borough Council with an interest rate of 0.6 per cent.

Thurrock Borough Council also received £5m and they were subject to the highest interest rate from the council at 0.9 per cent.

However Barnsley Borough Council and Doncaster Metropolitan Council had the lowest interest rates at just 0.39 per cent.

Most of the councils WBC loaned funds to are northern authorities, including Blackpool Borough Council, Lancashire County Council and Salford County Council.

Leader of the opposition and Liberal Democrats councillor Lindsay Ferris added: “The Council lends out (on a short term loan basis) may be 6 months, or longer, but typically less than a year to other councils.

“The interest paid by the authorities is typically 0.5% because it is a short term loan.

“If it was longer then the Council could get more.

“I believe this type of arrangement has being occurring for many years.

“At times WBC will borrow monies itself on short term loan basis.

“It is a way of local councils supporting one another.”