The interest rate offered to local authorities by the Public Works Loan Board (PWLB), the public sector lending arm of the Treasury, will be temporarily reduced from January next year, allowing councils to reinvest millions in housing.
This will help deliver the Government’s historic reforms of the Housing Revenue Account which currently supports the finance of local housing. It will allow councils to finance the one-off payments needed to leave the existing system and will save local authorities up to £100 million per year that can be reinvested in housing.
This reduced interest rate will be available for borrowing from the PWLB to establish the new local self-financed council housing system which will replace the Housing Revenue Account subsidy system. The Treasury and the Department for Communities and Local Government are implementing this temporarily reduced rate to support the one-off adjustment to each local authority’s local housing debt.
The overall borrowing rate for local authorities offered by the PWLB will be kept under review.
Notes for Editors
The lending to which this reduced rate will apply is solely that of local authorities undertaking borrowing from the PWLB in order to make their ‘settlement payment’ to leave the existing annual subsidy system for council housing finance and from that point on be ‘self-financing’. If all the local authorities which are due to make a payment borrowed all this money solely from the PWLB this would amount to approximately £13 billion on current data.
The reduced rate will apply to Housing Revenue Account reform loans taken with the Public Work Loan Board from January 2012 until close of business on 26 March 2012. The PWLB will issue a circular to notify Local Authorities of the precise starting date.