Legislation governing the rules on council borrowing should be strengthened, CIPFA said today.
As part of its response to a HM Treasury consultation on the future lending terms of the Public Works Loans Board (PWLB), CIPFA called for compliance with the Prudential Code to be made a statutory requirement and has committed to strengthening the Code by early 2022.
The Prudential Code currently sets out that local authorities should not borrow purely for yield or other speculative purposes. However, while councils must ‘have regard to’ the Code, they can choose not to follow it (though adherence is a mandatory requirement for CIPFA members).
Changing the legislative requirement from ‘have regard to’ to ‘must comply with’ would ensure that all councils adhere to the requirements of the Code.
CIPFA CEO Rob Whiteman said:
“CIPFA absolutely supports the spirit in which the government’s proposals are intended and agrees that it is inappropriate for local authorities to risk taxpayers’ money on risky, profit-making ventures. I have already recommended that CFOs should immediately implement these proposals.
“As we recover from the impact of the pandemic, councils will be increasingly important to the revival of local economies. The financial pressures caused by COVID-19 will mean that councils will require support in the form of lending terms that do not impede their ability to undertake this vital role in society.
“To that end, we are clear that any revisions to the sector’s relationship with the PWLB are proportionate, fit for purpose, and remain principles-based rather than prescriptive.”
Notes to editors:
CIPFA’s recommendations also include:
You can view our response to the consultation in full here.
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