The consultation paper was issued before strict measures were implemented to address the COVID-19 pandemic. However, the financial environment for local government has changed so profoundly that we cannot overlook the issue.
Key messages
The COVID-19 pandemic has raised serious questions about the role of the PWLB and how it could be improved to support councils. Many councils have faced cash flow shortfalls as a result of the crisis. In order to meet essential commitments, they face having to take-out short-term loans at expensive rates. Such loans would take resources away from front line services and divert them to financial institutions. The Government has acted quickly to help by paying grants up front and by the deferral of business rates payments centrally. These have provided councils with a breathing space. The PWLB could provide a permanent solution to cash flow problems by offering low-cost short-term loans to local authorities.
Councils are also facing extraordinary costs of dealing with the pandemic as well as losing significant income streams and the opportunity to implement planned savings programmes. Further help could be given to councils by PWLB allowing for some loan repayments to be delayed. This would be a temporary measure; the loan would still have to be repaid but at a later date. However, the local government sector has also noted that NHS bodies have been allowed to write off debts as a result of the COVID-19 crisis and several local authorities have called for the same dispensation.
We call upon HMT to implement these two schemes quickly and urgently to help councils through the current crisis. This needs to be done as soon as possible and not wait for the outcome of the review or for the Comprehensive Spending Review.
Public Works Loan Board: Future lending terms consultation