Local authorities’ prudential borrowing decreased by £353m in the last financial year, new government data has revealed.
According to data published by the Department for Levelling Up, Housing and Communities (DLUHC) capital grants were the largest source of financing of capital expenditure in 2022/23.
The figures revealed that the use of capital grants, which are provided by government departments or organisations, increased to £11.5bn in 2022/23, which is up £599m (5.5%) in real terms compared to 2021/22. However, prudential borrowing decreased to £9.6bn, down £353m (3.7%).
In turn, capital grants made up 39.6% of total financing of capital expenditure in 2022/23 compared to 38.8% in 2021/22, while prudential borrowing made up 31.9% in 2022/23 compared to 33.9% in 2021/22.
This trend reflects the cost of local authority borrowing from the Public Works Loan Board increasing significantly since September last year, with fixed interest rates exceeding 6%. This is due to a recent increase in UK gilt yields, which prudential borrowing rates move in line with.
In addition, at the beginning of this week (23 October) the 30 year UK gilt yield surged to 5.209%, its highest since 1998, as investors anticipate the Bank of England to keep interest rates higher for longer.
The data also revealed that capital expenditure by local authorities in England totalled £27bn in 2022/23, which is down £228m (0.8%) in real terms compared to 2021/22. It found that total financial expenditure increased by £258m (4.1%), up to a total of £6.6bn, but this was offset by a decrease of £486m (2.3%) in total expenditure on fixed assets, which totalled £21bn.
DLUHC stated that the increase in financial expenditure was largely due to an increase in grants, loans and other financial assistance, which increased by £553m (10%) compared to 2021/22.
Also, the department said that his was partly due to decreased expenditure on the acquisition of land and existing buildings, which has decreased by £251m (11.6%) compared to 2021-22.
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