Policy & Resources Cabinet Member – Minutes – 16 July 2014
In September 2013 the Local Government Association (LGA) Executive outlined a project plan to establish a collective Municipal Bond Agency (MBA), which would raise funds from capital markets at regular intervals and use this capital to lend to participating authorities. This was a key strand in the LGA’s Rewiring Public Services paper which set out the changes it believed were needed at both local and national levels so that public services could help communities to meet people’s future needs and aspirations.
The report identified that 75% of councils borrowing was sourced through the Public Works Loans Board (PWLB), which offered money at the rate of Treasury Gilts plus an additional percentage set by the Chancellor (which was 1%). A discount of 20 basis points (0.2%) was then available for local authorities qualifying for the Governments Certainty Rate.
The LGA believed an MBA would allow local authorities to borrow at rates significantly below that offered by the PWLB and that there was a strong public interest case for this.
The LGA produced an outline business case in January 2012 which following revitalised interest had been updated and a revised business case published on 20th March 2014.
Details of the proposals were outlined within the report.
An urgent decision was required as the Bond Agency required a letter of intent from each investor by noon on the 17 July 2014. Without this decision the letter could not be submitted and the full benefits of membership could not be realised.
Resolved – (a) That an investment of £50,000 in the Phase 1 of the Municipal Bond Agency funding process be approved, and (b) that the inclusion of this investment in the capital programme be approved.