Treasury bans Spelthorne-type loans

A direct result of Spelthorne's excessive borrowing

The Treasury has decided how Local Authorities will be allowed to borrow via cheap government loans in future, and it has made it very clear that borrowing purely for income will definitely not be allowed.

Spelthorne borrowed over £1bn from the PWLB (Public Works Loan Board) since 2016, with most of the money being invested in commercial property. This type of borrowing is now banned, with the response saying "The government is clear that this is not an appropriate use of PWLB loans".

The government is not preventing new loans for what it regards as proper purposes, for example new homes and town centre regeneration. There is also good news in the document in the form of a 1% reduction in the cost of new loans, which will make proposed schemes more affordable.

The changes are not being applied retrospectively and the document says "These reforms will not affect the income that local authorities receive from existing assets. The reforms apply only to new transactions."

Local Liberal Democrat Finance spokesperson, Cllr Lawrence Nichols welcomed the report saying "This response provides the absolute clarity that has been missing for some time. The lower rates of interest will improve the financial viability of the Council's housing developments and we need to make sure this translates into more affordable housing to meet the pressing housing need." The full government response to the consultation is available here.