TOWN Hall chiefs have been forced to ‘fundamentally reassess’ how to finance schemes after the rate for borrowing from the public works loan board (PWLB) increased.

As reported in October, local authorities were put on alert after the rate for borrowing from the body was increased with immediate effect.

The move increased the rate for a PWLB 50-year new maturity loan from 1.81 per cent to 2.82 per cent.

But it will not have an impact on the council’s existing loans.

A report highlighting the issue went before the audit and corporate governance committee on Thursday.

It said where the council has previously relied on PWLB as its main source of funding, it now has to ‘fundamentally reconsider’ alternative cheaper sources of borrowing.

It added: “There was no prior warning that this would happened and it now means that every local authority has to fundamentally reassess how to finance their external borrowing needs and the financial viability of capital projects in their capital programme due to this unexpected increase in the cost of borrowing.

“Representations are going to be made to HM Treasury to suggest that areas of capital expenditure that the Government are keen to see move forward e.g. housing, should not be subject to such a large increase in borrowing.

“At the current time, this is a developmental area as this event has also taken the financial services industry by surprise.”

Cllr Brian Axcell (LD – Appleton) raised the issue with the authority’s finance team.

He said: “Do you see that as a problem in the immediate to long term, even if existing loans don’t change?”

In response, he was told the move ‘could curtail development’ on housing and wider regeneration schemes in the medium to long term, although large councils will now be able to borrow money from banks ‘much more cheaply’.