South Hams District Council has hit back at claims that West Devon Borough Council is £32m in debt as public consultation over a proposed merger of the two authorities continues.

The claim was made during the SHDC full council meeting in July, where members voted to press ahead with the consultation.

But SHDC stressed this is not the case, and said debt is being confused with liabilities.

A spokesman said: "It is not correct to say that WDBC has £32 million of debt. The debt that West Devon currently has is £2.1 million, which is shown on the council’s balance sheet, which has been audited.

"This is external borrowing - a loan - that was taken out with the Public Works Loan Board for their headquarters at Kilworthy Park. The repayments for this loan are already budgeted for within WDBC’s finances and are repaid on an annual basis.

"Pensions accounting in local authority accounts is a complex area and every council will show a pensions liability on their balance sheet.

"This is a ‘notional and theoretical’ accounting pension liability and it is not a real cash liability or a cash debt that a council has to pay off all at once. The pension liability for WDBC is shown on the balance sheet as £26m. The liability of SHDC is £53 million.

"The pension liability is a theoretical liability that calculates an estimate of the value of all future pensions payable to employees, if they were to all fall due for payment at the Balance Sheet date, e.g. 31 March 2017. Obviously this would not happen in practice, as pensions are only paid once an employee becomes eligible to take their pension.

"Both the employee and the employer pay contributions into the pension fund on an annual basis to pay for the cost of future pensions. These annual payments finance the pension liability.

"Debt is being confused with liabilities."

For more information on the proposal to create one council visit: www.onecouncil.org.uk .