By Richard Johnstone | 15 November 2011
An extension to the London underground network could be one of the projects given the go-ahead after a London council was awarded two top credit ratings.
The London Borough of Wandsworth, which has become the third council in England in just over a month to get a credit rating, has been awarded triple-A status by two agencies, Moody’s and Fitch.
The council said that the ratings were a recognition that the authority’s financial management and budgetary control were among ‘the best in the world’.
Cabinet member for finance and corporate resources Guy Senior said that the announcement opened up new possibilities for the council, including for any necessary borrowing to pay for a planned extension to the Northern Line.
More than £200m has already been pledged towards the cost of the new line between Kennington and Battersea via Nine Elms by REO, the owners of Battersea power station.
It is planned that the project will be completed through private sector contributions. However, Senior added that the council could now be in a position to raise any extra necessary funds.
‘If we have to raise funds for big capital investment projects like the extension of the Northern Line to Nine Elms, then we would be able to do at the best rates of interest,’ he said.
‘Investors and lenders will be prepared to invest money into the borough at low rates of return because they know that we are a safe and solid bet. This means our council tax payers will be getting the best deal available on big capital projects that [will] make Wandsworth a better place to live.’
Local authorities began to get credit rated as part of plans to issue bonds to raise the money needed to buy out of the Housing Revenue Account system.
It was initially thought it would be cheaper to borrow this way, to take on a proportion of council housing debt, after the Treasury raised the Public Works Loan Board interest rates in October 2010.However, in September the government cut the rate for HRA borrowing from 1% above gilts to around 0.2%.
Despite this, some authorities have continued with the process of becoming credit rated to allow them to issue bonds in the future, potentially to pay for capital schemes such as transport projects.
Birmingham was the first to announce its rate in October 12, and on November 3, Lancashire County Council was given an Aa1 rating.
