Leicestershire County Council has recovered its £5m loan to cash-strapped Northamptonshire after concerns the latter would not be able to repay the money.

Leicestershire made the unsecured loan to its neighbour last January despite the financial difficulties Northamptonshire County Council was facing.

Last January, the then local government secretary Sajid Javid ordered a best value inspection of Northamptonshire CC amid concerns over its financial management and corporate governance.

The following month, the council imposed what would be the first of two emergency spending bans. The Treasury estimated the council faced a £157m cash shortfall between 2006 and 2020 before damping. 

Leicestershire County Council has recovered the funds with £35,000 in interest.

‘We take very seriously the security of our loans,’ said the deputy council leader Byron Rhodes.

‘Our track record is strong and unlike other councils, we did not have any money with Icelandic banks or other high profile bank failures. 

‘Making the most of every pound we spend remains vital and lending money enables us to maximise our income.’