The UK's first municipal bonds agency has moved closer to launching, with 48 councils signed up to invest. The agency will allow councils to borrow more cheaply for infrastructure projects as an alternative to the Treasury-controlled Public Works Loans Board. Councils could save over £1 billion in borrowing costs over 30 years if half their debt transfers to the new agency. Council investors must finalize their investments by the end of February 2015 for the agency to issue its first bond.

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15.12.14
Councils pool resources to make
borrowing cheaper for one another
The UK’s first ‘municipal bonds agency’ has moved a step closer, with 48 councils
signed up to become investors.
The Local Government Association (LGA) says the new agency will give councils a
‘viable lending alternative’ to the Treasury­controlled
Public Works Loans Board
(PWLB), from which authorities currently source 75% of borrowing, potentially saving
more than £1bn in borrowing costs for investing in infrastructure.
After a successful start to the second round of equity raising by the new Local Capital
Finance Company (LCFC), the LGA Executive says there is enough council support to
launch the agency.
Signed­up
councils include cities and unitaries, counties, districts and London
boroughs, with cross­party
political control.
The new agency will be independent, with its own governance structure, but
accountable to its council shareholders and the LGA.
According to LGA figures, if half of the outstanding debt with the PWLB was transferred
to the new agency, the saving to the local government purse could be between £1.2bn
and £1.45bn over 30 years.
Prospective shareholders will now have until the end of February 2015 to finalise their
equity investment, at which point it is hoped that preparations will be under way for the
issuing of the agency's first bond.
Michael Lockwood, executive director of the LGA, and director of the LCFC, said: "The
decision to move into the launch phase is a significant and important step. It reflects
the overwhelming appetite among local authorities for us to make this happen.
"There is no doubt about the support for a local government owned bonds agency that
saves taxpayers money by making borrowing cheaper. We're now entering the crucial
final leg where we will be looking for councils to finalise their equity investment.
"This company will be owned by local government and will have the single purpose of
reducing councils' long­term
capital financing costs. The introduction of a council­owned
competitor into the lending market can be a great showcase for local
government's strength and ambition while demonstrating the very real benefits of local
independence."
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