The government should be petitioned to reverse its decision to increase interest rates for an organisation which loans local councils money.
That’s the call being made by Labour councillors in Northampton, who have noted ‘with dismay’ the increase in interest for loans from the Public Works Loan Board. Earlier this month it was announced that the interest rate would increase from 1.8 per cent to 2.8 per cent.
The rise has sent shockwaves through local government finance across the country. Northampton Borough Council has used its access to the PWLB for some major projects in the town, including lending the University of Northampton a sum of £46million to develop the new Waterside Campus.
However, critics have said that the low interest rates have also allowed local authorities to play the property market.
In a letter to local councils, the treasury said that ‘some local authorities have substantially increased their use of the PWLB in recent months, as the cost of borrowing has fallen to record lows’.
But a spokesperson for the Local Government Association (LGA) said: “It presents a real risk that capital schemes, including vital council house building projects, will cease to be affordable and may have to be cancelled as a result.”
And Labour councillors in Northampton want the borough council to try and persuade the government to reverse its stance alongside the LGA.
A motion submitted by Councillor Les Marriott, and seconded by Labour leader Danielle Stone, will be debated at next Monday’s (November 4) full council meeting.
It states: “This council notes with dismay the recent one per cent increase in interest for loans from the Public Works Loan Board. This comes at a time when all councils, including NBC, were looking to increase their building of social housing in order to address the housing crisis.
“The one per cent increases the risks attached to regeneration and development and creates the need for revision of existing plans and business cases. We note this has led to, for example, a delay in borrowing for the Berkley House rebuild.
“We therefore call on the council to join with the LGA to make representation to the government to have this decision reversed.”