Council defends borrowing strategy after recording Hampshire's highest overall debt level

Weeks after being labelled ‘Hampshire’s most indebted council’, Portsmouth has defended its borrowing, arguing its £718m debt is backed by “strong security”.

Portsmouth City Council’s cabinet recently discussed its treasury management activities for the 2025/26 financial year.

The council took on no new borrowing during the year, instead using reserves and cash flow to avoid taking out loans and high borrowing costs – a process known as internal borrowing.

As of March 2026, the council’s gross debt, the total amount it owed, stood at £718m, while gross investments totalled £230m, leaving net debt of £488m.

The council’s underlying need to borrow, known as the capital financing requirement, was £1.01bn, with around £292m being met through internal borrowing.

As of March 31, the council had £230m invested. Investment returns fell from 5.16 per cent in 2024/25 to 4.41 per cent in 2025/26.

Chris Ward, the council’s director of finance and resources, said all debt and borrowing remained within approved limits.

He said the decision to use internal borrowing was a “deliberate strategy whilst long term borrowing rates are high”.

Mr Ward added that interest rates were unlikely to fall because of inflation, which was good news for investments but bad news from a borrowing perspective.

The cost of servicing the council’s general fund debt was £21.5m, while servicing Housing Revenue Account debt cost £9.1m.

Cllr Darren Sanders referred to criticism of the council’s debt levels from the TaxPayers’ Alliance.

Research by the TaxPayers’ Alliance, reported by the Local Democracy Reporting Service on July 7, found Portsmouth had the highest overall debt figure of any council in Hampshire.

At the time, the council said the value of its assets exceeded the value of its liabilities, including debt, by £1.9bn.

The council’s investment strategy prioritises security first, liquidity second and yield third.

Mr Ward pointed to the council’s property portfolio, Lakeside offices, Dansbury Business Park, the purchase of homes to reduce temporary accommodation costs and Housing Revenue Account stock acquisitions as investments with “strong security” behind them.

“These are all of the reasons why the council’s debt levels are as they are but they are all fundamentally backed by strong income streams, either commercial income streams or income streams from housing rents.”

The report will now go before a full council meeting and is available to read on the council’s website.

Debt is the total money borrowed over multiple years to fund big projects or investments, which still must be repaid. It should not be confused with deficit, a one-year budget gap when annual spending exceeds income.