What is it?

A council has a general power to borrow under Section 1 of the local government act 2003. In recent decades, local authorities in England have borrowed from the Public Works Loan Board at favourable rates of interest.

A council also has a general power to borrow and to make loans under the general power of competence in section 1 of the localism act 2011.

The government has also introduced tax increment financing schemes, founded on the Business Rates Retention Scheme introduced in 2013-14. Under these schemes, local authorities may borrow for infrastructure projects against the future growth in business rate receipts which will result from the projects.

Who’s doing it?

Frome: Using borrowing powers to invest in the town’s infrastructure

Since 2011 the town council of Frome has been governed by ‘Independents for Frome’ (IfF). They have brought fresh thinking to local politics and are demonstrating the transformative possibilities of policy even at this hyper-local level. The results have been a range of policy measures including a local community interest company, a renewable energy co-operative and a local ‘share shop’, where people can exchange equipment and skills – going above and beyond the services usually delivered by town councils. One of the most radical among these was the decision to make use of historically low interest rates and long-term fixed borrowing available through the Public Works Loan Board to finance investment in Frome. Since May 2011 it has borrowed a total of £1.77m on which it pays £122,000 a year. With that investment it has bought and restored Frome town hall, now home to the council and four other organisations as well as meeting spaces for the community. It also bought a green space in the centre of town that was at risk of development and restored an unused building to turn it into a community recording studio. There are great financial constraints on local government, but the Frome example shows that there is space for manoeuvre, given creativity and political will.

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