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Senior council figures from 20 boroughs across London have called on the chancellor to reverse a hike in the interest rates for the Public Works Loan Board (PWLB), claiming the changes will mean “fewer homes get built across the capital”.
A group of 36 councillors and mayors have put their names to a letter which demands that Sajid Javid reverses his decision or scrap the increase for money borrowed to fund housebuilding or regeneration projects.
The letter, whose signatories include Rokhsana Fiaz, mayor of Newham, and Damien Egan, mayor of Lewisham, says a reversal would safeguard council regeneration plans.
Last month the Treasury made the surprise announcement that it would be increasing the cost of new borrowing from the government’s PWLB by 1% with immediate effect.
Councils are able to borrow from the PWLB for capital projects, such as housebuilding schemes, at rates lower than those offered by private investors.
The move was met with opposition from many council leaders and the Local Government Association, which predicted the rate increase could cost councils an extra £70m a year to borrow next year.
The letter, sent last Friday, said: “From being forced to scale back and/or slow down our current housebuilding and regeneration plans, to putting them on hold altogether, the 1% rise will affect us in different ways, but it will undoubtedly mean that fewer homes get built in all local authorities across the capital.”
It comes as other large councils across the country reveal the impact it will have on their housing and regeneration plans.
Earlier this week, Manchester City Council said the PWLB rate rise would add £18.9m to the cost of servicing its planned borrowing for capital projects by 2024, making it one of the first major authorities to outline the full scale of the impact.
Councils are eligible to apply for a discounted PWLB borrowing rate of 60 basis points above gilts to build non-housing infrastructure in their areas.
Inside Housing revealed two weeks ago that the Treasury was considering adopting the plan for discounting loans for housing and regeneration schemes, with a source saying it was keeping the proposal “under review”.