The online media outlet, Luton Today, has recently run an article which clearly shows how Luton Borough Council (LBC) have allowed their indecent haste to develop Luton Airport, to shackle the residents of Luton with debts that they have never asked for: https://www.lutontoday.co.uk/news/politics/council/luton-council-debt-has-increased-to-ps722million-but-it-claims-borrowing-is-essential-to-improve-the-town-5290260
LBC state that this borrowing is for long-term investment plans, not short-term financial pressures. Councillor Roche, the Labour Portfolio Holder for Finance at LBC makes several interesting quotes:-
- The Council’s debt position reflects our strategic commitment to long-term investment in Luton’s future, aligned with our Luton 2040 Vision.
- Major Regeneration Projects – such as Town Centre Redevelopment, new housing and mixed-use developments, and the acquisition of homes to support residents facing homelessness – are being funded through Capital Borrowing.
- While this borrowing contributes to the increase in total debt, these investments are essential for driving economic growth, reducing inequality, and building a more sustainable and inclusive town for generations to come. It’s important to stress that this borrowing does not undermine the Council’s financial stability or its ability to deliver essential services.
- Much of the debt is structured as “income-generating”, including debenture loans to the council’s wholly-owned companies London Luton Airport Ltd and Foxhall Homes Ltd.
- Loans provide interest payments back to the Council, which “not only cover the cost of borrowing” but also contribute “surplus” income to fund vital services.
- “While headline figures may appear high, they can be misleading without context. When income-generating loans to the airport company are excluded, our adjusted debt per person drops significantly – from £3,293.36 to £1,098.82 – placing Luton among the more financially prudent local authorities”
Let us now take a look at the loans stream LBC has provided to Luton Rising/LLAL (LR).
LBC advanced a Debenture Loan stream of £507.5 million for the DART Construction, and the DCO Expansion Application.
In 2020, it gave LR a £60 million Stabilisation Loan to keep the company viable during the Covid Pandemic. In 2021, LBC added a further £139 million to that Stabilisation Fund. During this period, LBC also allowed LR to sign over £45 million of future Concession Income, to the Airport Operating Concessionaire. We believe this gives a total of £706.5 million in loans to LR, therefore, 98% of the total debts of LBC, are held by LR!
Please remember, that the DART Project already has a write down of £240 million, as unrecoverable over the forty-year life of the system, before an upgrade is required.
Let us now go to the unaudited LBC accounts for 2024/25, and how LBC expect to recover the £706.5 million of LR loans : https://www.luton.gov.uk/Council_government_and_democracy/Lists/LutonDocuments/PDF/Corporate Finance/Accounts/Unaudited-statement-of-accounts-2024-25.pdf
On page 56, under Material Uncertainties, the following conclusions are made:-
- LLAL’s substantial capital investment has been made on the basis that it is intended to generate major returns in future. When the DCO (including CPAR) investments were approved it was on the basis that they were expected to help gain approval for major increases in passenger numbers via the development of an additional terminal, which in turn would substantially increase the potential value of the concession agreement with LLAOL when it is next tendered. Arup’s valuation of the future concession agreement is that with throughput at 18 million passengers a year, it should yield a one-off upfront payment of £1.2 billion plus the continuation of the Concession fee on the current basis.
- The Council has assumed that this upfront payment would allow LLAL to fully redeem the related borrowing from the Council and therefore that the carrying value of the Debenture Loans to LLAL does not need to be impaired. This is risk dependent and subject to the continued successful resumption of air travel in the future at the levels assumed by the Concession Agreement. There was therefore a general risk that if passenger traffic did not recover quickly to pre-pandemic levels some assets in use as at February 2025 may no longer have the useful economic lives and asset values assumed in these financial statements.
Since Stop Luton Airport Expansion started some eight years ago, we have continually asked the senior Councillors and Officers of LBC, and LR, what happens when a new Concessionaire will not pay you that £1.2 billion up front settlement?
On every occasion, we have been met with a deafening silence.
What happens is that £706.5 million will still have to be paid.
- The first six loans are due for payment in March 2028, the other 109, (yes, there are 115 separate Debenture Loans!), need to be settled in March 2031. 106 are fixed rate interest loans at 8%.
- The others have variable rates of interest. The current Operating Concession for the airport expires in August 2032.
We now have the scenario, that these debts will be due for payment, five months before a New Concession starts, unless the Current Operator agrees to terminate the agreement early!
One can easily see why LBC Auditors since 2018/19, have attached Public Information Notices, and Disclaimers of Opinion, on LBC accounts, with regard to how these capital loans have been recorded, and how the airport has been valued.
We will close this longer than usual article, with two keystone conditions of the original Concession Agreement from the 1990s:
- “All key business risks taken by the partner”
- “Maximise revenues to the Council, minimise the risks”
With the debt mountain Luton Borough Council/Luton Rising now have on Airport Projects, who decided that those two keystones became unimportant?