The Public Works Loan Board (PWLB) has long been the primary source for local authority borrowing, but its overwhelming dominance has raised concerns among finance experts. In a finance panel discussion at Room151’s Monthly Online Treasury Briefing, James Graham from Kent County Council expressed the difficulty of reaching the price discovery point with limited borrowing options due to the PWLB’s dominant position. He stressed the need for more borrowing options to promote diversity in the sector.
Although the PWLB remains Kent’s default borrowing option, Graham highlighted the potential value that the UK Infrastructure Bank (UKIB) could offer to local authorities. He also noted the increasing popularity of climate bonds and private placements as alternative routes for some authorities. According to David Green, director at Arlingclose, the PWLB offers convenient pricing and is the easiest place to procure loans, despite the availability of similar rates from the UKIB.
The discussion also addressed the potential impact of interest rate cuts on the local authority sector, emphasizing the need for local authorities to be prepared to react to opportunities and engage in scenario planning of debt portfolios. Additionally, the panel considered the inter-authority lending market, suggesting that there should be more loans between local authorities to minimize banks’ profit margins.
Another important point of discussion was the compliance with IFRS16 and IFRS9 reporting standards, highlighting the implications for local authorities’ financial reserves. Green stressed the need to explore alternative products that do not require an override, as the potential expiration of the IFRS9 reporting standard could disadvantage local authorities.
The panel also featured a macroeconomic update from Jack Holmes, portfolio manager at Artemis Fund Managers, who emphasized the growing interest in short duration bonds among investors in the current market climate. The insights provided during the panel discussion shed light on the complex landscape of borrowing options and financial standards that local authorities need to navigate.
In conclusion, the dominance of PWLB as a source of local authority borrowing is a growing concern, and the need for alternative options has been emphasized by experts in the field. As the financial landscape continues to evolve, it is essential for local authorities to consider a diverse range of borrowing options and remain adaptable to changes in the market. Room151’s Monthly Online Treasury Briefings provide an invaluable platform for exploring these critical issues and staying abreast of the latest developments in the sector.