POWYS County Council has given a £5 million loan to a council in England to build a cyber business park near Britain’s spy base.

But despite the strange circumstances surrounding the loan to Cheltenham Borough Council the councillor in charge of Powys’ finances insists it is standard practice for local authorities to lend money to each other which he has said will also generate income for Powys council.

A Freedom of Information request by the Local Democracy Service in Gloucestershire revealed Powys council is one of several local authorities from right across the UK which Cheltenham Borough Council has borrowed nearly £40 million to buy land for a new cyber business park and housing development.

Since the loan was confirmed Cllr Aled Davies, the Conservative member in charge of Powys council's finances, has taken to social media to state the loan was for a month and has been repaid with interest, boosting Powys council's income.But giving Cheltenham the £5 million loan has been criticised by the leader of the Labour group on Powys council, Cllr Mathew Dorrance.

The Brecon St John member said:  “At a time when austerity is decimating our public services.

“When the Cabinet are underfunding our schools, shutting down youth centres, threatening libraries with closure and asking Powys residents to pay an extra 9.5 per cent in Council Tax, loaning Cheltenham Borough Council £5 million shows just how out of touch this Tory/Independent Cabinet are.

“The Council’s leadership must urgently explain how they can afford to lend Cheltenham Borough Council £5 million and why they thought it was more important than funding local services here in Powys.”

But cabinet member for finance Cllr Aled Davies, who represents Llanrhaeadr-Ym-Mochnant/Llansilin, says that loan helps generate income for Powys.

The Conservative councillor said: “Powys operates a ‘Treasury Management Policy’, under a CIPFA  (Chartered Institute of Public Finance) code of practice, to manage the authority’s finances.

“It ensures the council has sufficient liquidity to meet its cash flow and achieves the optimum performance of funds. Providing a short-term loan to generate income is part of the council’s normal treasury management work.”

Plaid Cymru group leader Cllr Elwyn Vaughan (Glantwymyn) added: “Having enquired about the matter it seems it’s a standard procedure between local authorities, an inter agency transaction used to facilitate cash flow or to receive interest income.”

Powys was named along with Derby City Council which paid £4 million, Ynys Môn County Council – £5million, South Lanarkshire – £10million and Middlesbrough Borough Council  £15m.

Cheltenham Council announced it bought 45-hectares of land near cyber intelligence centre GCHQ for £37.5 million in August with taxpayers’ money, but refused to release further details of which local authorities the money came from until now.

The land will see a new cyber business park and up to 3,000 homes built on the western edge of Cheltenham.