Kingston borrows £40m for Crossrail property investment
0London Borough of Kingston has borrowed £40m through the Public Works Loan Board (PWLB) – the largest loan taken by a council out of July’s total lending of £125m.
Kingston has taken the cash in eight loans ranging from £3m to £10m, with durations of between 13 and 34 years.
The council will spend the money on the purchase of King’s Place and Conquest House, an office and retail block in Kingston town centre. The purchase was approved by council committees during June.
A report to councillors said: “Strategically the property is seen as a potentially important asset in Kingston’s future development strategy sitting at the heart of two specific areas of development, together with the land in between with unrivalled proximity to the station which will enable the borough to shape the arrival of Crossrail 2 and influence the overall future development of this area of the Borough.”
The July total for PWLB lending was down £100m from the £223m forwarded to local authorities during June.
Other significant borrowing by councils through PWLB in July included £14m to Torbay Borough Council and £10m to Chiltern District Council, Swindon Borough Council and Nottinghamshire County Council.
In recent months, concern has been growing that local authorities are borrowing millions of pounds from PWLB to buy commercial property and create income streams to prop up services.
In April, before becoming Liberal Democrat leader, Vince Cable said that borrowing by councils to fund property purchases was “not a wise and sensible thing to do”.
He told The Guardian: “Local authorities have a long and inglorious history of gambling in financial and property markets.”
Separately, PWLB has also released its 2016-17 annual report, showing a rise in the value of new loans made from £3bn in 2015-16 to £3.6bn. The majority – around £3bn of this year’s total was made up from maturity loans, according to PWLB.
Year on year, the PWLB’s interest income decreased by £94m. Contractual interest income decreased by £10m and premiums received decreased by £84m.
The average length of loans grew slightly during the past year – up from 22.8 years in March 2016 to 23 years in March 2017.
Only £1m of variable rate loans were advanced, with the vast bulk being fixed rate borrowing.
£3.3bn of the PWLB’s advances in 2016-2017 were made at the certainty rate, £256m at the project rate and £19m at the standard rate.
The total sum of early repayments made during the year was just £55m, down from £282m the previous year. The PWLB now holds £66.6bn in outstanding loans, compared to 64.8bn during the previous year.
