Treasury bans councils from commercial property loans

The Treasury will block new public loans to councils with any commercial property investment from 9am tomorrow (26 November). The change to the Public Works Loan Board lending will apply to any local authority seeking commercial property investments for yield anywhere in their capital plan, including via a local authority-owned company or joint venture. It comes as part of a government clamp-down on local authority so-called “debt-for-yield” investments. The reform of PWLB lending will require councils to submit a “high-level description” of their capital and plans for the next three years in any new PWLB application. This must include specific use of the PWLB finance, with confirmation that the local authority has no intention to buy investments for yield during this period. Councils found to deliberately misuse the PWLB may be suspended from using the finance and asked to repay loans. The government will reverse the 1% interest hike implemented last year to curb borrowing. According to Radius Data Exchange, councils have invested £7.5bn in property since 2013, with £3.5bn in offices and £2.4bn in retail and leisure. The top spender has been Spelthorne Council with £947m, followed by Warrington at £472m and Surrey at £373m. To send feedback, e-mail emma.rosser@egi.co.uk or tweet @EmmaARosser or @estatesgazette