A SOMERSET council is going to borrow £75million by 2021 – and not a penny will go towards regenerating three of its major towns.

South Somerset District Council will be borrowing the money in increments over the next three years to fund major capital projects across the district – including new affordable housing and sports and leisure facilities.

But none of the money it intends to borrow will go towards the regeneration of Yeovil, Chard or Wincanton town centres, which the council has made one of its top priorities.

Instead, the money for these high-profile schemes will come from other sources – including income from the authority’s commercial investments to date.

The borrowing levels were confirmed at a meeting of the council’s audit committee in Yeovil on Thursday morning (January 24).

By March 2019, the council intends to borrow up to £30m, which will rise to £50m by March 2020 and £75m by March 2021.

The council is legally allowed to further increase the amount it borrows up to a maximum limit of £124m.

A spokesperson said: “The council is currently ‘debt free’ (i.e. no external borrowing), but is anticipating external borrowing of up to £30m as at March 31, 2019.

“The capital financing requirement is increasing due to planned spending within the capital programme, and [the council] will therefore be required to borrow a minimum of £75m over the forecast period.”

Councillor Derek Yeomans, who chairs the committee, said great care needed to be taken with such huge sums of public money.

He said: “This has to be carefully monitored. It is a big investment, and we have had this little glitch in the VAT with one of our commercial projects.

“We know HMRC is not the greatest organisation for giving advice.”

The council was landed with a £1.35M VAT bill in December as it tried to import components for a battery storage facility, in which it had invested £9.84m.

The bill occurred after the council claimed it was given incorrect advice by HMRC – namely that VAT did not need to be paid on the shipment.

A council spokesman said: “We have a large capital programme of planned investment of £97m over the next three to four years.

“This comprises investment in key services – such as affordable housing, sports and leisure facilities, play grounds and equipment, disabled facilities grants to pay for adaptations in people’s homes, and supporting business incubation through investment in the Yeovil Innovation Centre – as well as schemes that will transform and improve services, and investment properties that will generate vital income to contribute towards the cost of maintaining and protecting services for our communities.

“We will use a mixture of sources to fund this investment such as our own capital reserves, grant funding, developer contributions and borrowing. We are currently forecasting we will need to borrow £75m to help fund the above investment.

“We apply a prudent and commercial approach when considering the funding options for capital projects. Where borrowing is used to pay for assets up front, wherever possible the costs of this borrowing will be covered through income and efficiencies generated through these assets.

“In other words the assets will, as a minimum, pay for themselves and in the case of investment properties, pay for the borrowing costs and provide an income to the council on top of this.

“We are also planning to raise funding to invest in regeneration. This may be funded in a variety of ways, such as those shown above or private investment. This will be firmed up as the regeneration schemes are developed and business cases prepared for the projects that will deliver the regeneration ambitions.”

The council subsequently clarified that the projects for which the £75m was being borrowed did not currently include the three town centre regeneration schemes which are under way.

A spokesperson added: “They are not included, but there’s always the potential that circumstances may change in the future.”

The proposed level of borrowing will go before the full council for final approval in February.