The government’s hike in the Public Works Loan Board rate was “ideological”, “perverse” and “punishing” according to experts speaking this week.
The government shocked the sector in October by putting an extra 1% on the rate of borrowing from the Treasury loan facility for local authorities.
Speaking this week to delegates at the Housing and Regeneration Finance Summit organised jointly by Room 151, Martin Reeves, chief executive at Coventry City Council hit out at the move.
He said: “It is an arbitrary ideological hike on the PWLB that is about clipping local government infrastructure investment and commercial development.
“All because of the polarisation of the views that either councils are making investment as casino finance at one end of the scale or are doing nothing and sitting on their asset base at the other.
“Neither of these things are true.
“There was no practical, fiscal reason for that hike other than an ideological one to clip local government.”
Also speaking during the same session, Jackie Sadek, chief executive of developer UK Regeneration said: “Martin is absolutely right. That was absolutely perverse and needs to be sorted out.”
Duncan Whitfield, strategic director of finance at London Borough of Southwark told the audience that the rise in the rate will mean the council has to think about its plans.
He said: “It is really quite a punishing thing to do.”
But speaking during a separate session, Conrad Hall said that the sector had only been shocked because it has been cossetted from sudden rate rises in recent years.
He said: “You could argue it was a punch in the mouth. Probably been lulled into a false sense of security by having the lowest and most stable interest climate for the past 150 years. “In the 1990s interest rates were much higher and more unstable.”
The comments made at the conference, which was jointly organised with Social Housing magazine, came after local government secretary Robert Jenrick told MPs that he did not expect the rate rise would have a significant impact on council plans.
He told the Commons Housing, Communities and Local Government committee: “As local government secretary, obviously, my part of my role in government is to represent the views of local authorities and many have, as you’d expect, made representations to me expressing concerns, but it does only return the rates to the place that they were in 2018.”
Earlier this week, Manchester City Council said the PWLB rate rise (PWLB) will add £18.9m to the cost of servicing planned borrowing for capital projects, reducing its future borrowing capacity.
