An interest rate ‘gamble’ by the council’s finance chief has ended up costing taxpayers a staggering £2.5 million.
Tim Hannam, who is corporate director of finance and risk management, used his discretionary powers to borrow £95 million without consulting councillors.
The money is earmarked for the new MK Waste Recovery Park, due to be opened in 11 months’ time at Old Wolverton.
Mr Hannam made the decision to borrow it more than two years early, in July 2014, because he believed national interest rates would rise.
But his speculation turned out to be a king-size waste of cash after the increase simply did not happen.
It means the £95 million has been sitting largely untouched in the council’s bank account.
And every month the council has been forced to make a repayment at a fixed interest rate.
Labour councillor Kevin Wilson said: “I have calculated that this early borrowing has cost the council around £2.5 million in interest.
“That is a huge sum of money to pay out in a year when this council has to cut £20 million from its budget.”
Former council leader Mr Wilson forced Mr Hannam to reveal the cost of the interest rate blunder during last week’s audit committee.
While he does not blame the finance director for his decision, he is questioning the wisdom of high-ranking officers being allowed to borrow money without consultation.
“I find it peculiar that councillors did not have to be informed,” he said.
“If the interest rates had risen, it would have been a brilliant decision. In hindsight it backfired and was a bad one.”
A council spokesman said early borrowing was “standard practice” among many local authorities.
He said: “We took the decision last year to borrow the bulk of the money, £95m, to fund our new, state of the art MK Waste Recovery Park.
“At the time we secured a fixed interest rate of 3.8 per cent, which, for a 25-year loan, is very competitive. Over that length of time interest rates could well vary significantly – and all indicators are that they will rise – so we had to balance the risk.”
The Waste Recovery Park will include an anaerobic treatment plant to cut the amount of waste sent to landfill by 95 per cent.
The council says the facility will save millions of pounds by bringing together the technologies to treat ‘black sack’ waste collected from homes all over the city.
It will be completed in January and, following rigorous testing, will be fully operational next September.