The scheme, known as the Debt Management Account Deposit Facility was launched as a pilot on 2 April. Any deposits made through the facility will be guaranteed by the government and have the equivalent of a sovereign triple-A credit rating.
The facility has been developed jointly by the Debt Management Agency - an executive agency of the Treasury responsible for managing government debt and Exchequer cash flows - and the Public Works Loans Board, responsible for making loans to councils.
Funds deposited with the facility will be placed in the Debt Management Account, which is administered by the DMO and through which all its existing gilts and Exchequer cash management transactions flow.
The office also has an objective to provide advice and expertise to other government departments as required. The operation of the facility will allow the DMO to extend the specialised expertise it has acquired in the operation of financial markets to other parts of the public sector.
The main objectives of the scheme are to provide local authorities with a flexible and secure facility to supplement their existing range of cash management options and, at the same time, save interest costs for central government.
It has since been announced that the PWLB will be integrated with the DMO from 1 July 2002. This is part of a more general restructuring of the organisation of government debt and asset management, but as an added benefit it will bring together the lending and deposit facilities for local authorities.
However, the re-organisation will not affect the terms or conduct of business between PWLB and local authorities - the provision of existing services will be maintained.
Press officer, Debt Management Office