Don't curb councils' borrowing powers, CIPFA tells Osborne

20 Oct 10
Any new curbs on council finance powers would waste millions of pounds of public money, CIPFA warned ahead of today’s Comprehensive Spending Review.

20 October 2010

By Lucy Phillips

Any new curbs on council finance powers would waste millions of pounds of public money, CIPFA warned ahead of today’s Comprehensive Spending Review.

CIPFA issued a joint warning with the Local Government Association to Chancellor George Osborne, saying that limiting the power of councils to borrow risks driving up the costs of vital road and building projects.

Reforming the current borrowing rules, or the Prudential Code, would be a ‘false economy’ and ‘impose huge costs of taxpayers’, the council chiefs warn.

The move follows publication of a CIPFA and LGA report, submitted to the Treasury last week. This showed that the freedoms granted to local authorities in 2004 to borrow prudently against their assets had driven down the costs of capital and other major projects by replacing costly leasing deals.

CIPFA chief executive Steve Freer said: ‘The Prudential Code has worked very well indeed for councils over six years. It is important that the government retain the full flexibilities of these arrangements in the upcoming Comprehensive Spending Review.’

John Ransford, chief executive of the LGA, added: ‘Councils are determined to give taxpayers the very best possible value for money. We know the government wants to cut the deficit, but prudent borrowing by councils is a proven way of saving money.’

A spokeswoman from CIPFA said that the Treasury had made it clear that ‘everything is to be reviewed and all options are being looked at’.

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