Total outstanding debt among UK councils has been steadily rising since 2016 while investments have fallen back, according to figures from the government.
Statistics released by MHCLG (the Ministry of Housing, Communities and Local Government) shows that outstanding debt for UK councils stood at £94.08bn in Q3 of 2017-18, up almost £5bn from Q1 2016-17.
Meanwhile outstanding investments over the same period have dropped more than £2bn to £33.04bn.
Of the growth in borrowing, most is accounted for by a rise in long-term borrowing and most of that is explained by an increase in Public Works Loan Board debt which stood at £68.2bn in Q3, up on the £65.2bn a year and a half ago.
The rest of the growth in debt is substantially accounted for by a lift in the money owed to “other sources”, which MHCLG does not define.
Among the investments, bank deposits have become less popular. Twelve months ago total cash on deposit was £14.5bn. That now stands at £13.1bn.
Deposits with building societies continues to fall as well. Total balances are now £1.9bn compared to £2.8bn a year ago.
Government figures also reveal that the market for short-term loans between local authorities has increased substantially. At the end 0f 2016-17 outstanding debt between councils stood at £6.53bn. Outstanding debt as of Q3 2017-18 has reached £8.48bn. The quarter was also the first time total lending between councils — short and long term — had topped £10bn.
The beginning of March saw another player prepare to enter the local authority lending market when it was revealed that the Municipal Bonds Agency (MBA) had gained a credit rating from Moody’s of Aa3.
It was revealed that four local authorities are set to take part in the MBA’s first borrowing pool but there was no indication of which councils are participating, how much would be raised or the rate councils would pay for the money.
February saw the monthly total for PWLB borrowing reach £464m, up on January’s £315m
Much of the driver for borrowing has been investment in property. However, this has caused political concern. Earlier this year there were fears that a revision of the local authority investment code might restrict the ability of councils to invest in property.
But David Green, strategic director at Arlingclose, told Room151 that the final wording released in February made it unclear how much force the guidance would have. He said councils were taking legal advice and added it was unclear whether guidance provided by the government applies to treasury investment or whether councils could borrow to invest in property.
