Wirral MBC’s decision to lend other councils money from its cash reserves has been criticised by local councillors, who have likened its actions to pay-day lenders Wonga.

Wirral has handed out £31m from its cash stockpile to local authorities across the northern parts of England and Scotland, according to financial figures uncovered by Wallasey councillor Leah Fraser.

Beneficiaries include Lancashire CC, which has borrowed £6m and neighbouring Halton which asked for £5m and Fife Council in Scotland which has been given £2m.

Doncaster MBC has also secured a £2m loan, Kingston-upon-Hull £3m, Northumberland CC is the biggest creditor with £6m and Stockport MBC has taken out a £5m loan.

Different interest rates have been offered to councils, with Newcastle City Council being charged the highest rate, at 1.8% on its £2m borrowing, while the counties Northumberland and Lancashire, have gained preferential borrowing status, at a far lower 0.75% rate.

Cllr Fraser said: ‘While the town hall is preaching austerity to the taxpayers of Wirral, they are trying to be the new ‘Wonga’ to other councils around the UK.

‘Wirral council has become the equivalent of a pay-day lender to other councils who are finding it difficult to make ends meet,’ she added.

‘If Wirral council is so awash with money, why don’t they invest it a bit closer to home, to benefit the people who live here?’ Cllr Fraser asked.

In response, Wirral leader, Cllr Phil Davies, said: ‘It is common practice for councils to invest some of the cash that they have to hold in reserve in order to generate generate a return.’

Cllr Davies added Wirral uses a Treasury Management Investment Strategy to guide which approved financial institutions and local authorities it lends to.

‘Lending to other local authorities is a popular way to invest cash reserves as it is low risk and can generate favourable returns, compared to what some financial institutions offer.’

In June, communities secretary Eric Pickles said it was completely unnecessary for local authorities to be holding substantial £16bn reserves - £12.4bn of which are earmarked, and £4.1bn of which are unallocated non-school financial reserves. He called on authorities to use them to protect frontline services and hold down council tax levels.