WINCHESTER City Council did not take on any more debt last year, as experts warn interest hikes on borrowing could impact on council finances.

​But with council debt rising across the country as a whole, the Local Government Association says unprecedented ​funding pressures have forced many to borrow in order to protect vital services.

Winchester City Council’s outstanding loans stood at £156.7 million at the end of December, Ministry of Housing, Communities and Local Government figures show.

This was in line with the council’s outstanding debt at the same point a year earlier.

Long-term loans accounted for all the borrowing. These last for more than one year and are used to finance large projects or purchases.

Outstanding council borrowing across England stood at £100 billion at the end of December – a nine per cent rise from a year earlier.

Richard Watts, chairman of the LGA’s resources board, said a near £15 billion loss in central government funding over the last decade had stretched councils to the limit.

“Councils have faced a choice of either accepting funding reductions and cutting services – such as care for older and disabled people, protecting children, reducing homelessness, fixing roads and collecting bins – or making investments to try and protect them,” he added.

Mr Watts said councils follow strict rules to ensure they invest wisely, adding that some investments benefit the local economy.

The Public Works Loan Board was the sole source of long-term borrowing for the city council as of December.

The government-run loan board, which offers low-interest loans to councils without requiring them to prove they can afford the repayments, accounted for three-quarters of long-term borrowing by UK councils at the end of December.

In October, the Treasury hiked interest rates on loans from the PWLB, making it more expensive to borrow.

Mr Watts said the rise would make it harder for councils to deliver on key government priorities such as housing and regeneration.

A recent report by the National Audit Office estimated English councils spent £6.6 billion on buying commercial property from 2016-17 to 2018-19.

It said some councils did this with the aim of making profits, but were taking on significantly more debt.

Don Peebles, head of policy and technical at the Chartered Institute of Public Finance and Accountancy, said the potential revenue was appealing for cash-strapped councils.

He added: “Real risks accompany commercial investments, which if used, should be one part of a comprehensive and diverse approach to managing public money.”

A Ministry of Housing, Communities and Local Government spokeswoman said councils are responsible for managing their finances.

She added: “We have a set framework which councils must have regard to. We have already taken steps to tighten it up with the aim that taxpayers’ money is managed wisely so residents benefit.”