Somerset Council debt could fall below £1bn

By Laura Linham 1st Jul 2026

Local News by Laura Linham 2 hours ago

Somerset Council's overall debt could fall below £1bn within five years if current forecasts are borne out.

The council currently holds more than £1.12bn in total debt, including actual borrowing and the wider capital financing requirement used to measure how much the authority needs to fund capital spending. The latest figure, as of 1 April, stood at £1,124,812,000.

That works out at roughly £1,900 for every man, woman and child in Somerset, based on the council's own population figures.

The debt includes borrowing inherited when Somerset Council was created in April 2023, replacing Somerset County Council and the four former district councils of Mendip, Sedgemoor, Somerset West and Taunton, and South Somerset.

Much of the borrowing is through the Public Works Loans Board, part of the Treasury. Councils use this kind of borrowing to fund long-term projects such as schools, roads, housing and other capital schemes.

A report on the council's borrowing and treasury management was published ahead of Somerset Council's audit committee meeting in Taunton on Wednesday, 28 May. It shows the total debt is expected to rise slightly by the end of the current financial year, reaching more than £1.13bn, before falling in each of the following four years.

On current forecasts, the figure is expected to drop to just over £1bn by April 2031, with officers saying it could fall below £1bn by the mid-2030s if the trend continues.

A Somerset Council spokesperson said: "The council's overall borrowing requirement has reduced. This reflects the progress on asset sales and changes to the capital programme as part of setting the 2026/27 budget.

"As a result, the council currently holds less debt than it did on April 1, 2023.

"While future forecasts do show borrowing increasing over time, these figures include borrowing for the housing revenue account, which is a key driver of projected increases in later years.

"We continue to take a prudent and active approach to managing our debt. This includes reducing borrowing where possible, closely reviewing capital spending, and making use of receipts from asset disposals."

The council's future borrowing is expected to rise in part because of its commitment to deliver more than 500 additional council homes across Somerset. Borrowing for council housing is accounted for through the housing revenue account.

The council must also set aside money each year from its revenue budget to cover debt costs, including interest. That money is then not available for day-to-day services such as children's services, adult social care or highway repairs.

In the 2026/27 budget, the amount set aside for debt repayment is projected to be just over £50m. That is just under seven per cent of the council's overall revenue budget.

The figure is expected to remain broadly steady over the next five years. It is forecast to rise slightly to just over seven per cent in 2027/28 before falling again in later years.

The council said the proportion of the budget used to service debt can vary depending on borrowing levels and interest rates. It said it was focused on managing those costs through its financial strategy, including limiting new borrowing where possible and maintaining a balanced and sustainable budget.

A spokesperson added: "We are not reliant on interest rate cuts to manage its borrowing costs. Our treasury management approach is designed to manage risk over the long term, including fluctuations in interest rates.

"CIPFA's Prudential Code recommends that our total debt should be lower than its highest forecast capital financing requirement over the next three years.

"Although timings of actual cash outflows are not totally predictable, we expect to comply with this recommendation in 2026/27 and over the term of the medium-term financial plan."

The council has been working to bring its finances under control since becoming a unitary authority. Its wider transformation programme has involved service changes, asset sales and reviews of capital spending.

For residents, the figures matter because debt repayments sit alongside the council's other major pressures, including adult social care, children's services, SEND, highways and housing. The council says it is managing its borrowing prudently, but the scale of the debt shows how closely long-term capital decisions are tied to the services people use every day.

Original reporting: LDRS/Daniel Mumby