Low PWLB rates prompt councils to go longer on debt
0Councils used millions of pounds in loans from the Public Works Loan Board in January to convert short-term debt into longer-term borrowing.
Government figures show that local authorities took a total of £737m from the PWLB during February, up on January’s total of £694.2m.
Two of the biggest borrowers during the month – Woking Borough Council and Warrington Borough Council – told Room151 that they had used the money to push out the duration of portions of their debt.
Danny Mather, head of corporate finance at Warrington Borough Council, said that the council had taken advantage of low PWLB rates..
He said: “PWLB rates have fallen at both the short-, medium- and long-term ends and we think we are towards the bottom end of the curve.
“The easiest thing would be to borrow from the local authority market but we are living in an uncertain world and if rates started to go up then it would be more expensive to service our debt.”
The council borrowed the £25m at a rate of 1.64% over five years.
Mather said that the borrowing had originally been taken out to fund the regeneration of Warrington town centre.
In December 2017, Room151 reported that Warrington had shifted £100m of borrowing from local authorities to longer duration PWLB debt, due to worries over a rate hike.
Meanwhile, Woking borrowed £87m in two separate loans over 50 years at rates of 2.52% and 2.39% during February.
A spokesperson for Woking confirmed that £18m of the cash would be used to pay off short-term borrowing.
The rest would be spent on the council’s town centre regeneration scheme and an investment in the council’s wholly owned housing company.
Elsewhere, North Lanarkshire Council said that the £30m it borrowed over 20 years was to replace other maturing long-term loans.
Another big borrower from the PWLB during February, Transport for London, took £75m.
A spokesperson said: “This borrowing from the PWLB forms part of our planned borrowing programme for the year which will fund a wide range of TfL’s capital projects, including capacity and station upgrades on the Underground and rail networks and other schemes, as outlined in our business plan.
“This completes our incremental borrowing requirement for the year and is within our authorised limit for external debt.”
The February borrowing takes the rolling year’s total for PWLB loans to £8.2bn.
This is almost double the equivalent figure for the year to February 2018, which stood at £4.4bn.
