• Home
  • About
  • Subscribe
  • Conference
  • Events Calendar
  • Webcast151
  • MOTB
  • Log In
  • Register

Room 151

  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews

Manchester reveals £18.9m cost of PWLB rate rise

0
  • by Colin Marrs
  • in 151 News · Resources · Treasury
  • — 29 Oct, 2019

The Public Works Loan Board rate rise (PWLB) will add £18.9m to the cost of servicing Manchester City Council’s planned borrowing for capital projects, reducing its future borrowing capacity, it says.

The council is one of the first to outline the impact of October’s shock hike in the PWLB rate by 100 basis points in a report to councillors.

SAVE THE DATE – LATIF NORTH
March 25th, 2020, Manchester
Council treasury investment & borrowing

It found that the Treasury’s move is set to add £0.5m to interest payments this year, with the cumulative total reaching £18.9bn by 2023/24.

The report said: “The policy change took PWLB rates back to where they were towards the end of 2018, and as such the existing capital programme was predominantly budgeted for at that time, meaning that the programme remains affordable.”

However, it said that some of the planned projects which involve loan finance to a third party or are based on a “spend-to-save” calculation, will need to be reviewed.

“Where projects may have been pursued on a spend to save basis,” the report said, the income from them will need to cover both minimum revenue provision and the higher interest cost the council faces, which may mean that they can no longer be self-funding.

“This could affect regeneration schemes where a return on investment was expected.

The report also said that the most significant impact on the council relates to its future borrowing capacity.

“The rate change means that the existing forecast borrowing becomes more expensive and therefore there will be less revenue budget available in future years to service further debt, alongside that future debt also now being more expensive,” the report said.

The council approved its capital budget in February, and at that point did not include any borrowing for housing revenue account projects.

However, a number of schemes using borrowing through the HRA are understood to have been in the process of being worked up when the rate rise was announced.

The report said that these “future schemes become unviable or will need redesign to value engineer costs out of the project due to the limited funding available within the business plan.”

Manchester is set to review its borrowing strategy once more clarity emerges about alternative sources of borrowing.

“There may be a case, for example, of looking to borrow for shorter duration and therefore at lower rates, if the council feels this will provide value for money and is willing to accept the refinancing risk that this would create,” the report said.

Officers said that the council has added its voice to those lobbying central government to consider introducing a new discount PWLB rate “which recognises borrowing to fund housing, regeneration and infrastructure schemes that are clearly in line with local authority strategic objectives, rather than for commercial investments

Last week a Room 151 survey found that almost nine in ten councils are planning to push ahead with planned capital projects despite the rate rise – with more than half set to seek funding from alternative sources.

The Room151 Weekly Newsletter covers local government treasury and pension investment, funding, development, resources and technical finance. Register here. 

The LGPS Quarterly Briefing focuses purely on pension fund investment. Register here.

Share

You may also like...

  • The high cost of freedom passes could be about to get a lot worse for some councils The high cost of freedom passes could be about to get a lot worse for some councils 6 Feb, 2019
  • Game of loans… Game of loans… 30 Sep, 2014
  • London housing associations pledge to tackle housing crisis London housing associations pledge to tackle housing crisis 30 Nov, 2018
  • Reserve cap plans face criticism Reserve cap plans face criticism 3 Sep, 2015

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • Register to become a Room151 user

  • Latest tweets

    Room151 16 hours ago

    The vaccine may help settle cash flows but inflation remains a risk: Sponsored article: Lauren Sewell examines the prospects for long-term borrowing as Brexit settles and vaccines are deployed against Covid-19. On the 9th October 2019 Whitehall sent… dlvr.it/RqZXCr pic.twitter.com/PzgOZOGQ0k

    Room151 16 hours ago

    ESG in liquidity: Sponsored article: Gavin Haywood looks at the integration of ESG in Federated Hermes’ money market funds. Federated Hermes has over 300 public sector clients invested in our AAA rated money[...] dlvr.it/RqZX5f pic.twitter.com/E87sBXsay8

    Room151 2 days ago

    New realities of investing cash and liquidity: “What to do now?”: Sponsored article: Brian Buck looks at the “unique challenge” for cash management strategies. As investors assess the ongoing impact of the pandemic on their business, levels of cash and… dlvr.it/RqVbk9 pic.twitter.com/ZElVASmEUV

    Room151 2 days ago

    Extra finance promised by the government receives a broad welcome: Sponsored article: The financial pressures facing local authorities this year continue to pose challenges for council treasurers. While the launch of the UK’s Covid-19 vaccination… dlvr.it/RqTzTF pic.twitter.com/HCjH0pyHR5

    Room151 2 days ago

    A savvy approach to managing your cash: Sponsored article: Caroline Hedges examines the need for active cash management to achieve a higher than average return. Last year saw the already mountainous pile of negative-yielding debt around the[...] dlvr.it/RqTzMK pic.twitter.com/uP0RQYTJLt

    Room151 3 days ago

    Putting alternatives at the heart of multi-asset portfolios: Sponsored article: Nick Edwardson looks at the assets that provide the “most attractive opportunities”. We believe that asset allocation is the primary driver of investment returns and that the… dlvr.it/RqQ2Qt pic.twitter.com/WLBzvRRRUQ

    Room151 3 days ago

    Thriving in the pandemic: Avoiding the stragglers: Sponsored article: George Crowdy looks at the sectors providing opportunities for sustainable investment. Throughout much of 2020, we talked about why sustainable investing has thrived in the pandemic,… dlvr.it/RqQ2NQ pic.twitter.com/dxiPWKFsPl

    Room151 3 days ago

    The development of CCLA’s mental health benchmark: Sponsored article: Amy Browne examines the importance of investing in mental health in the workplace. We are living through a public health emergency in more ways than one. Physical health[...] dlvr.it/RqQ2Jx pic.twitter.com/o6yRSCX3oF

    Room151 4 days ago

    Brexit: What the EU trade deal means for the UK economy: Sponsored article: Hetal Mehta looks at the impact of Brexit on economic prospects. Four and a half years after voting to leave the EU, on Christmas Eve the UK finally[...] dlvr.it/RqLBDt pic.twitter.com/No62srfE8h

    Room151 4 days ago

    Cash dethroned: The quest for liquid yield: Sponsored article: Peter Hunt and George Carne ask how treasury departments can balance the need for yield and liquidity. The massive stimulus and waves of liquidity provided by central banks[...] dlvr.it/RqLBDj pic.twitter.com/05g6Zhu1kU

    Room151 4 days ago

    Richard Harbord: Delayed “capital determinations” make section 25 opinions a new crunch point: The severe pressure on local government budgets now means section 151 officers confront a tricky call on  whether they can make a judgement on the robustness… dlvr.it/RqLBDV pic.twitter.com/vTAbDKFzkI

    Room151 4 weeks ago

    PWLB Consultation: Analysis straight from Dickens: Helen Radall and Paul McDermott present a legal examination of the new PWLB borrowing rules as Charles Dickens might have imagined it. Free and easy PWLB (“Marley” to his friends)[...] dlvr.it/RnmwLq pic.twitter.com/yFxcPrQqEG

    Room151 4 weeks ago

    Room151’s top stories from a momentous year: 2020 was the year in which local government grappled with Covid-19, funding strains, controversy over borrowing rules and the threat of financial collapse. It has been an exhausting and historic[...] dlvr.it/RnlpZg pic.twitter.com/g3myNyox6J

    Room151 4 weeks ago

    Tracy Bingham: 2020, a year best forgotten but also one of learning: Many will rush to erase 2020 from their memories but, writes Tracy Bingham, there were also many lessons about finance teams, strategic planning and leadership. 2020: A year we’d… dlvr.it/RnlpY2 pic.twitter.com/m7G1krrtCu

    Room151 1 month ago

    Settlement must address ‘precarious’ local government finances: Dan Bates crosses his fingers for “no nasty surprises” in this week’s funding settlement but argues the “bigger prize” is post-Covid financial certainty. Thursday (17 December) should be the… dlvr.it/Rnj9dG pic.twitter.com/KLKjjuBqJE

    Room151 1 month ago

    PWLB consultation: Big change on the way but there are ‘grey areas’ and opportunities: The consultation on PWLB borrowing has concluded creating a new landscape for funding property acquisition. Our experts look at the implications. Tracie Langley The… dlvr.it/RndRvJ pic.twitter.com/KEqXEBmEfq

    Room151 1 month ago

    2021: Better income outcomes?: Sponsored article: Investors should be mindful of structural challenges posed to income generation as a result of rapid thematic change. Jon Bell looks at the prospects for the coming year.[...] dlvr.it/RndRsw pic.twitter.com/TxVk8aXkMq

  • Categories

    • 151 News
    • Agent 151
    • Blogs
    • Chris Buss
    • Cllr John Clancy
    • Dan Bates
    • David Crum
    • David Green
    • Development
    • Forum
    • Funding
    • Graham Liddell
    • Ian O'Donnell
    • Interviews
    • Jackie Shute
    • James Bevan
    • Jobs
    • LGPSi
    • Mark Finnegan
    • Recent Posts
    • Resources
    • Richard Harbord
    • Stephen Fitzgerald
    • Stephen Sheen
    • Steve Bishop
    • Technical
    • Treasury
    • Uncategorized
  • Archives

    • 2021
    • 2020
    • 2019
    • 2018
    • 2017
    • 2016
    • 2015
    • 2014
    • 2013
    • 2012
    • 2011
  • Previous story Survey: Brexit preparations sucking resources from council services
  • Next story LGA writes to ministers over audit delays

© Copyright 2021 Room 151. Typegrid Theme by WPBandit.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we'll assume that you are happy to receive all cookies from this website.OK