Remove barriers to councils using bonds, LGA tells Osborne

The Local Government Association has called on the Chancellor of the Exchequer to use this month’s Budget to remove barriers that hamper local authorities from issuing bonds.

The LGA claimed a revived triple-A municipal bond market “would make an attractive proposition to investors seeking a secure home for their capital in the current turbulent markets”.

In a letter to George Osborne, the Association argued that bonds could be used to raise funds to invest in new homes, roads and infrastructure projects, which would in turn boost job creation.

The LGA said it would also like to see:

• The fulfillment of government promises to devolve funding for transport and skills projects to local areas;
• The lifting of regulatory barriers to make it easier to pool public sector capital;
• Greater autonomy given to councils over tools to promote growth. This would include using tax increment financing powers, local control over setting planning fees and the Government delivering on its so-called City Deals;
• The scrapping of tax regulations which discourage foreign investors taking up municipal bonds; and
• Work by the Government and the LGA to raise awareness among pension fund trustees “of the opportunities for prudent triple-A infrastructure investments”.

The Association said: "The LGA believes that by giving control over skills and transport funding to local authorities and lifting restrictions on borrowing, councils could work in partnership with the private sector to generate of 'virtuous circle' where investment boosts growth and in turn creates more jobs."

Bonds could help “plug the gap” in council infrastructure budgets that have seen government grants cut in half, it added.

LGA chairman Sir Merrick Cockell said: "Now is the time for local government to unlock private investment – including a proportion of the £140bn in prudently managed UK pension schemes – to kickstart the vital infrastructure projects the economy needs, while also securing the financial strength of pension funds.

"The Government has taken some steps towards giving councils the tools they need to get local economies growing. But the cuts to local authority budgets mean it is now more important than ever for the Treasury to give councils the financial autonomy they need to create jobs and bring growth to the economy."