Chris Mahony 02 August 2022

Capital borrowing falls by a fifth in two years, data reveals

Capital borrowing falls by a fifth in two years, data reveals image
Image: Koto Amatsukami/Shutterstock.com.

Councils’ prudential borrowing for capital expenditure has fallen 22% in two years, official data confirmed.

The latest local government finance statistical release from the Department for Levelling Up, Housing & Communities (DLUHC) revealed local authorities borrowed £9.3bn last year to fund capital projects – compared with £10.5bn the previous year and a record £12bn in 2019/20.

Capital grants have supplanted prudential borrowing as the principal source of capital financing – reflecting growing concern at the number of councils hitting financial problems after borrowing for commercial investment.

Shortly before the ministerial exodus at the DLUHC, ministers signalled they would clamp down on borrowing for so-called risky investment. The levelling up bill set out plans to tighten controls, measures the department is now working with stakeholders to finesse.

CIPFA’s Treasury and Pensions Advisor, Nicholas Harvey, said the problematic experiences of some councils is likely to have been only one of a number of factors behind the prudential borrowing decline.

‘The PWLB [Public Works Loans Board] did raise its interest rate by 1% in 2019. In the late 2010s, there was also a round of government grants for local infrastructure improvements and some of these projects would have been in the build phase in 2020. That’s possibly another factor.’

The two big-ticket spending areas – highways and transport and housing – are set to swap places this year following an 18% rise in the latter during 2021/22 and an 8% fall in the former. Housing capital expenditure is forecast to enjoy a 19% increase this year – reaching £8.5bn – while capital spending on highways and transport will again fall, down 14% to £6.3bn.

Since November 2020 councils have been barred from borrowing from the PWLB to fund investment in commercial properties primarily intended to generate a financial return.

Mr Harvey suggested the housing surge may reflect a reaction to government priorities and incentives and the increasing number of local housing companies established in recent years.

This article originally appeared in The MJ (£).

SIGN UP
For your free daily news bulletin
Highways jobs

Activites Assistants (CASUAL)

Durham County Council
£24,404 (12.65 p.a. hour) - £25,183 (£13.05 p.a. hour)
This is an exciting opportunity for Casual Activities Assistants to join our Leisure and Sport Service.   Leisure Centres are
Recuriter: Durham County Council

Pension Administration Officer

Durham County Council
£24,404 to £25,183 p.a. (Grade 3) Pay award pending
A vacancy has arisen within Pension Services for an Administration Officer to provide admin and data support to the pensions team and members of the L Durham
Recuriter: Durham County Council

County Attendance Officer

Oxfordshire County Council
£37035 - £39513
We are seeking to recruit to the role of County Attendance Officer on a permanent basis to work predominately across the North or the South of the county. The team works across the whole of Oxfordshire so flexibility to work in other areas is also require County Hall, Oxford
Recuriter: Oxfordshire County Council

Software Engineer Starter

West Northamptonshire Council
£26914
We're looking for an exceptional human to join our digital team to learn the skills and put them into practice, designing, developing and maintaining websites, mobile apps & AI. You'll join us on our journey as we create better end-to-end services for our Northampton
Recuriter: West Northamptonshire Council

Executive Director - Growth, Enterprise and Environment

Redcar & Cleveland Borough Council
£139,111.00 (pay award pending)
This is a chance to make a significant difference to the lives of families across our borough – and to seriously improve your quality of life. Redcar and Cleveland House, Kirkleatham Street, Redcar, TS10 1RT
Recuriter: Redcar & Cleveland Borough Council
Linkedin Banner