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The Government wants the public sector to take a more commercial approach. When it comes to the way councils borrow money, of course, the Treasury has been robustly commercial for a long time. Through the Public Works Loan Board (PWLB), it has a near-monopoly of lending to councils and uses it to make a profit at council taxpayers' expense. It is time for councils to be equally commercial and look for a better deal. The Local Government Association's (LGA) work has shown that councils, working together, could issue bonds of our own that cost us less than using the PWLB. This isn't far-out financial engineering. Local government bond agencies are not just common in other countries, they are becoming more so. And very popular they are too, hence the bizarre situation where local government pension funds can invest in Danish municipal bonds but not English ones. And it's not just about cutting out the Treasury middleman. It is also about subjecting him to competition. The evidence of the last couple of years shows that the mere threat of a local bond agency keeps PWLB rates down. Imagine what the effect of a functioning agency would be, benefiting both councils that use it and those that don't. So the time has come to move on from promoting the idea of a municipal bond agency to actually building one. In the summer I issued an invitation to councils to come forward if they are interested in working to set up an agency. I have been delighted by the response I have had so far from some of the most serious authorities in the country. I know that other councils are still actively considering their response and I am looking forward to hearing from them too. LGA officers are now in detailed talks with treasurers from the most interested councils about what getting in on the ground floor of this exciting project would involve. Later this year, I hope to announce how the LGA will proceed with those pioneers into the practical stages of setting a municipal bond agency up. There is still time for others to join us; and I look forward to welcoming leaders from the authorities concerned to Smith Square soon. A local government bond agency would allow us to take a more commercial approach to borrowing, and benefit our council taxpayers and the infrastructure the nation needs to grow. This is what mature and visionary local government is all about. Sir Merrick Cockell is chairman of the LGA

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Cockell: The time has come for a municipal bonds agency

By Merrick Cockell | 30 October 2013

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