A CASH-STRAPPED council based an hour away from the city planned to invest more than £50 million in Cathedral Square to plug a financial black hole.

Forest of Dean District Council in Gloucestershire revealed it had planned to invest the huge sum in the city centre shopping area in a bid to fill a £1.2 million gap in the authority's books.

The district council had prepared to borrow the money from the government - utilising cheap loans available to council's for investments - but the plan was scuppered when the government increased the interest rate on the loan.

Worcester City Council said it was not involved with the Forest of Dean District Council's plan but welcomed investment in the city.

A spokesman for the city council said: “Worcester City Council has no involvement in a potential financial arrangement between the owners of property at Cathedral Square in Worcester and a possible investor.

“However, we do welcome investment in the city and the benefits that brings to the local community and visitors.”

Forest of Dean District Council was planning to use the money from the Public Works Loan Board, a national government body, to make the investment but the department announced earlier in October that it would increase the cost of new borrowing by one per cent.

Councils often use the Public Works Loan Board as its main source of finance for long-term capital projects - such as housebuilding, refurbishments to buildings or the purchasing of property - with interest rates historically lower than those offered by private banks.

Councillors in Gloucestershire had discussed the proposals in private and voted narrowly in favour of moving ahead with the multi-million-pound investment to "wipe out" the deficit before the authority was hit with the news that the cost of borrowing would increase immediately.

A representative from Cathedral Square did not comment before the Worcester News went to print.