COUNCILS in the North East are being asked to lend tens of millions of pounds to the region’s biggest airport.
Seven local authorities are being requested to make loans expected to total more than £100m to Newcastle International Airport as it seeks to refinance a near-£300m debt.
Most of the region’s authorities have refused to give an overall figure of how much they are being asked for.
But Northumberland County Council, which has a 15% share in the part of the airport owned by the combined local authorities, has said that it has been asked for £17m.
A joint statement issued on behalf of the seven councils said the loans would be “revenue neutral” and highlighted the economic benefits the airport brings to the region.
But one councillor in Northumberland has called on the authority to have an “in-depth” look at the need for the loan.
The airport confirmed in May that it had begun the process of refinancing a £298m net debt. The seven councils – Northumberland, South Tyneside, North Tyneside, Newcastle, Sunderland, Durham and Gateshead – form LA7, which owns 51% of shares in the airport.
At a full meeting of the Northumberland council, members approved a report asking them to increase their capital programme for 2012/13 “by a maximum of £17m” to facilitate the loan.
Gateshead Council’s cabinet will consider its loan today. South Tyneside said it has yet to decide on its figure. North Tyneside, Durham and Newcastle all referred us to South Tyneside, which is the lead authority in LA7. Sunderland failed to respond.
South Tyneside issued a statement on behalf of LA7 which said: “The local authorities are building provisions into their budgets to enable them to invest based on the estimated minimum amount that banks could lend.
“The local authorities are each considering investing amounts based on their individual shareholding.
“Negotiations are at a commercially sensitive stage and so we are unable to say anything else other than the planned investment will be at least revenue neutral based upon interest and dividends receivable from the airport business in future years.
“Since 2001, the seven local authority shareholders have received over £300m in sale proceeds, dividends, loan capital and interest. This money has been spent on regenerating the North East region, including for improvements to key transport links, as well as helping to fund schemes such as new state-of-the-art schools and leisure facilities.”
Coun Iain Malcolm, leader of South Tyneside Council, said: “This is the right thing to do for the airport, for the communities we represent and for the North East economy. The airport is of enormous importance to our region, as a gateway and a jobs generator. The financial markets have changed but the airport remains strong, and we expect it to get bigger and stronger.
“Investment by the local authorities in the airport is a sensible and prudent step, and will help to achieve our objectives for the local economy, specifically in relation to jobs, transport, and the environment.”
A spokesperson for Northumberland said: “The airport is in the process of refinancing existing bank loans. As part of this process the county council is considering providing part of the required loan in the form of loan notes. The loan notes are repayable and interest would be chargeable.
“The actual decision will not be made until October in conjunction with the other local authorities involved in LA7.”
The airport would not say how much the councils were being asked for although it confirmed they would not be covering the entire £298m debt.
A spokesman said: “The airport company has an excellent relationship with its local authority shareholders. We look forward to working with them to grow and develop the airport.
“The powerful economic data that was published last week shows very clearly show very clearly how this will benefit the North East as a whole.”
Last night, Northumberland councillor Steven Bridgett said: “I would like the council’s scrutiny committee to take a very long look at this and a very detailed look into this and why we are in this current situation. I would also like the audit committee of the county council to take an in-depth look at this.”
In 2006, it was announced the councils were to be paid dividends by the airport following a restructuring of its finances, depending on the size of their shareholding.
The biggest council shareholder, Sunderland, was to receive around £14.4m followed by Newcastle £13.7m, Northumberland £12m, Durham County £11.2m, Gateshead £10.4m, North Tyneside £9.6m and South Tyneside £8m.