The council’s decision to lend £22.9 million to a rugby club took into account the fact it could be relegated, the council leader has said.

Barnet Council agreed the loan with Saracens FC in 2018 to help fund a new West Stand at the club’s Allianz Park stadium in Copthall.

It was hoped the loan, which has a 30-year repayment period, would encourage people to take up sport and attract more businesses to the borough.

But with Saracens now facing relegation for repeatedly breaching a cap on players’ salaries, Labour leader Cllr Barry Rawlings (Coppetts) raised concerns that a drop in the club’s income could affect its ability to repay the loan.

Cllr Rawlings said: “When this loan was discussed at council, I warned that we needed to be wise investors rather than risky gamblers, and of the need to bear in mind we are stewards of public money and the responsibility this brings.

“The Tories ignored my warnings. Saracens are an important and welcome part of the borough, but this issue raises important questions about the ability of the Tories to effectively scrutinise financial risk and manage public money in the best interest of our residents.”

Finances at the council are already tight, as it needs to close a £70 million budget gap over the next five years.

The Labour leader also questioned whether projects linked to the building of the stand, including Middlesex University’s London Sports Institute and Health Department, would go ahead.

But council leader Cllr Dan Thomas (Conservative, Finchley Church End) reassured residents the loan had been “well scrutinised”.

Cllr Thomas said: “Contrary to Cllr Rawlings’ assertations, the Saracens loan was well scrutinised. It factored in a wide range of scenarios, including the possibility that the rugby club could be relegated.

“That is why the sums drawn down are fully covered by a guarantee from a UK-based company. The loan’s terms mean that the council has been able to stop Saracens drawing on any more for the time being, and await a new business case from them.

“While Cllr Rawlings might believe that we should not be supporting our local sports club and University, the Conservative Group believe that doing so is a key way to build a sense of community among our residents in Barnet.”

A Barnet Council spokesman added: “The council’s loan agreement with Saracens was designed to be resilient to changes in circumstances over a 30-year period, and we are therefore confident that the council’s interests are protected.

“Saracens have supported our community in a number of ways, including through the Saracens Foundation and the Saracens High School, and we look forward to continuing the council’s partnership with the club.”

Saracens FC was also approached for comment.