FINANCE bosses at Scottish Borders Council have defended plunging the region deeper into debt during the run up to Christmas.

A loan for £10 million to refinance existing debts, which was secured on December 7, will cost the local authority more than £250,000 in interest payments each year.

And claims are being made by opposition councillors at Newtown that the region is now almost maxed out on its credit.

The local authority already pays more than £11 million in interest each year on loans totalling almost £200 million.

And after securing the further £10 million from the Public Works Loan Board, with an interest rate of 2.74 percent over 30 years, it faces fresh interest payments of around £270,000 each year just to honour the new debt.

SNP councillor Stuart Bell believes this latest borrowing will prevent money being made available for other projects.

He told us: "I have been repeatedly saying that Scottish Borders Council is nearly maxed-out on capital.

"There are strict fiscal limitations on the amount of money that a local authority can borrow and Scottish Borders Council is not unusual in being close to that upper limit.

"This has a direct impact on ‘the opportunity cost of capital’, as every £1 million or £10 million that is spent on for example road building or buying land is money that is not available to spend on other projects like schools or care homes for the elderly."

Councillor Bell is also concerned the additional interest payments will eat further into already tight budgets.

He added: "The latest borrowing from the Public Works Loan Board is at a low rare of interest, but as well as limiting the council’s spend on alternative capital opportunities, the budget will be burdened with paying £274,000 each year.

"That will impact on day-to-day services.”

Scottish Borders Council has been secretive about borrowing for projects like the Great Tapestry of Scotland visitor centre and, most recently, Lowood Estate near Tweedbank.

This week the UK Debt Management Office published details of the £10 million transaction between the local authority and the Public Works Loans Board - just a fortnight before the £9.6 million Lowood land deal was approved.

The money is being used to refinance two loans taken out in 1997, which still have 30 years to run.

And council chiefs believe the lower interest rate - 2.74 percent as opposed to the previous 4.8 percent - will prove cost effective for tax payers in the long run.

A spokesman told us: "The transaction will save Scottish Borders Council £1.341m overall, when comparing the net present value of the cash flows on the previous loans with the new arrangements.

“Our liabilities associated with capital borrowing totalled £194.4 million at March 31, 2018.

"This sum represents outstanding principal sum associated with the past capital investment decisions of the council and its predecessor authorities.

“The debt, which is financed predominantly via long term borrowing from the Government sponsored Public Works Loans Board, is broadly in line with the average debt level for Scottish local authorities.

"Most of this borrowing, undertaken to invest in the creation and enhancement of assets such as schools, bridges and roads and flood protection works, has been financed via long-term loans at favourable interest rates with varying maturity profiles."

Scottish Borders Council has set a loans charges budget of £20.5 million for repayments over each of the next five years.

And bosses are confident that they can afford to continue borrowing.

The spokesman added: "Scottish Borders Council debt is significantly below both the operational boundary and our authorised debt limit, demonstrating the prudence of our approach.

“The costs of repaying interest and principal on capital debt are met by the loans charges budget.

“At significantly less than 10 percent of the council's total gross revenue budget, these debts are affordable for the council now and in the future.”