Oxford moves to boost borrowing cap

Oxford City Council’s Section 151 officer, Nigel Kennedy has asked that the government reconsider the HRA debt cap as part of the region’s City Deal.

The authority is one of those bidding for a City Deal in phase two and has put together a bid involving housing, transport and university hubs. The housing element focuses on a number of regeneration projects and will require £121m in financing.

“With City Deals you are expected to put something into it yourself,” explains Kennedy. “We’re putting some aspects of resources and balances into our bid, but allowing us to increase our borrowing cap by £121m will enable us to do this regeneration work.

“For obvious reasons the Treasury isn’t too happy with the idea, but from our point of view, while we can finance the borrowing cost, we can’t just magic up £121m.”

Arlingclose consultant David Blake says that he had hoped to hear something about the debt cap in the last budget statement.

“It is a contradiction that councils are constrained in terms of their cap in building new houses,” he says, “but are nonetheless encouraged to build as many new houses as possible. A few authorities have ambitious plans to build and the cap is a real barrier for them.”

Working on the City Deal seemed an opportune time to raise the problem of the cap again, according to Kennedy. London Councils and the Greater London Authority agreed earlier this year to lobby the government for HRA reform, arguing: “A relaxation of the HRA borrowing rules could potentially stimulate a significant increase in council house building activity. Government has so far been reluctant to entertain further reforms because of their potential impact on the national debt, and the lack of safeguards that could ensure that borrowing was used chiefly to stimulate house building activity.”

Darren Johnson, chair of the London Authority’s housing committee called the borrowing rules “over cautious”. But Blake points out that an across the board change to the debt cap might not be prudent. “Whether an authority could cope with extra borrowing would depend on its business plan and its ability to absorb extra costs and manage extra repayments. It’s clearly not something you can do without limit,” he says.

Oxford City currently has £18m of head-room on its borrowing cap, with a limit of £234m and £198.5m in self-financing borrowing.