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London regen chiefs call for reversal of rise in cost of borrowing

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London regeneration chiefs have issued an open letter urging the government to reverse its decision to raise public borrowing interest rates

Last month the government unexpectedly told local authorities that the cost of borrowing from the Public Works Loan Board (PWLB) would rise from 0.8 per cent to 1.8 per cent. 

The increase – which came with no warning – has been greeted with horror by many council leaders, who have warned that the decision could put the brakes on council housebuilding.

Now 36 senior councillors involved in regeneration in 20 London boroughs have written to the chancellor, Sajid Javid, calling on him to rethink the hike.

’From being forced to scale back and/or slow down our current housebuilding and regeneration plans to putting them on hold altogether, the rise will affect us in different ways but it will undoubtedly mean that fewer homes get built in all local authorities across the capital,’ he said.

’Choosing to reverse your decision to increase borrowing rates or giving councils committed to regeneration and housebuilding a preferential rate of interest will allow all of us to continue with our plans. It will also help meet your ambitious housebuilding targets.’ 

The Local Government Association has said the rate increase could cost councils £70 million a year. ‘It presents a real risk that capital schemes, including vital council housebuilding projects, will cease to be affordable and may have to be cancelled as a result,’ a spokesperson warned.

An investigation by the Royal Town Planning Institute (RTPI) published in June, which concluded that more than 13,000 homes may have been delivered by English local authorities last year – the highest number since 1990. 

A Treasury spokesperson said previously: ‘Even with this change, the PWLB rates offer very good value to local authorities. We have also legislated to increase the lending limit of the PWLB to £95 billion as part of the government’s commitment that local authorities can access financing to support their capital spending plans.’

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