Budget 2012: Cheaper borrowing for select councils
Author: Dan Drillsma-Milgrom, LGC |
Chancellor George Osborne has unveiled plans to lower the costs of borrowing for councils that lay out in advance their long-term spending plans.
The Budget document revealed that the government will introduce a 20 basis point discount on loans from the Public Works Loan Board (PWLB) for councils that provide ?improved information and transparency on their locally determined long-term borrowing and associated capital spending plans?.
In addition, the government raised the prospect of the councils deemed to be the most efficient being given access to even lower borrowing rates.
?The government will also work with the local authority sector to consider the potential for an independent body to facilitate the provision of PWLB lending at a further reduced rate, to authorities demonstrating best quality and value for money,? the Budget read.
The revelations ? estimated to cost the Treasury some 45m over the next three years ? drew an immediately frosty response from the LGA.
??Councils generally have as good a credit rating as the Exchequer,? LGA chairman Sir Merrick Cockell (Con) said. ?The LGA will seek a meeting with the Treasury at the soonest possible date to discuss ways in which councils can straightforwardly and efficiently access borrowing facilities at rates that reflect the market’s assessment of local authority creditworthiness, not at a Treasury determined premium.?
Borrowing rates for councils from the Public Works Loan Board are currently one percentage point above gilt rates except for borrowing to pay off Housing Revenue Account debt.