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Councils are now spending more than £1.5bn on leasing assets, according to latest research. New findings published by Siemens Financial Services Limited revealed that the introduction of the Prudential code for capital finance in local authorities, which was introduced four years ago, had made a minimal impact on the levels of leasing. On average, councils are spending £1m annually on lease payments, and are using loans from the Government's Public Works Loan Board (PWLB) for long-term infrastructure investments of more than £5m which will appreciate in value. Leasing is now being used for assets that depreciate, such as plant, equipment and vehicles. The report also concludes that local authority financing is becoming increasingly polarised. A substantial number of authorities lease almost everything, whereas at least 12% of authorities do not lease anything at all. The code was introduced by CIPFA in 2004 to enable local authorities to borrow capital from the Government, but not add excessive debt to the public sector accounts. The research concluded that councils tried to match their choice of funding with asset's life-span. David Martin, general manager public sector of Siemens Financial Services, said: ‘Leasing remains popular in the sector because it offers accounting advantages and can contribute to the stringent efficiency and cost savings targets that must be met. However, it is still difficult for today's public finance managers to get to grips with all the financial options open to them, assess their merits and weigh up the true cost implications. ‘There is confusion about how to include asset finance within option appraisals, for instance. Given this obstacle, it is encouraging that the leasing market has remained buoyant.'

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BUSINESS

Spending on asset leasing now £1.5bn

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