Hidden By Queen's Speech Announcements 1% Increase In Public Works Loans Board Charges

16th October 2019

What you might say has this got to with me. Well in a round about way it affects us all as many public bodies including councils and health boards borrow from the PWLB at low cost.

The Treasury increased the interest rate for the Public Works Loan Board (PWLB) by one percentage point — meaning the typical rate for a loan is now 2.8% instead of 1.8% — in a move seemingly designed to discourage councils from borrowing to fund "risky" multi-million property investments. However even if your council has not entered into property investing by borrowing and spending on capital assets in this way it will affect us all one way or another.

Your council may borrow to build houses or schools and if the rate is now increased the interest payments come out of revenue and that affects spending on things like schools and roads..

The PWLB is the main source of finance for infrastructure programmes such as building schools and maintaining roads. While the interest rate hike affects new rather than existing loans, councils will have to assess the impact on future projects that are being discussed with communities.

Andrew Burns, associate director at the Chartered Institute of Public Finance and Accountancy (CIPFA) said "The negative unintended consequence is potentially it might delay or stop regeneration schemes in parts of the country that really need them. The government has thrown quite a lot of money at struggling towns and speaks positively about the devolution agenda. This appears to be cutting across that in the opposite direction."

In Scotland the government also has announced some spending for struggling towns of which in Caithness, Thurso and Wick is to benefit along with some other Highland towns. While the Highland council welcomed this new spending to help on town centres it will not welcome this announcement that PWLB borrowing will cost substantially more and it may need to curb or reduce some programmes of capital expenditure.