Council borrowing so high, government intervention may be needed

EDDC is borrowing to fund the building of its new HQ and to fund its “Growth Point” and is also considering going into the housing construction market.

“Local authorities could face further intervention by central government if new changes to investment and treasury codes fail to dampen council borrowing levels, according to a senior Whitehall official. …

[A conference speaker said] … “said: “When last year local authorities borrowed an additional £3.8bn, that was a £3.8bn increase in net debt. “That was £3.8bn less that the chancellor had available to distribute as funding across the board at the last budget. “So, local authority borrowing does have a real world impact in the overall quantum of funding that is available to government.”

In addition, he said that concerns have been raised that councils investing in particular asset classes can drive prices up, creating a bubble.

New principles on proportionality included in the code were triggered by some smaller authorities taking on huge sums of debt relative to their size, Caller [the speaker] added.

“We had concerns that those authorities who were doing that were effectively assuming that government stood behind their risk. “That is not the statutory position, and it is not a position we want to encourage. “What the legislation says is that effectively it is council tax payers that have to make good any deficit in those assumptions, not central government. We want people to remember that.” …

http://www.room151.co.uk/treasury/councils-could-face-additional-intervention-if-borrowing-rates-continue/

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s