The article states that the government is determined that local authorities should borrow within the public sector from the Public Works Loan Board.
The PWLB lends on behalf of government to local authorities to finance spending programmes. However, in recent years its interest rates have drifted above those in the private sector, increasing the desire of local authorities to go straight to the money market.
The Treasury is understandably nervous about local authority borrowing and how it invests what it raises, the paper reports. The £24m lost by the Western Isles Council through deposits with BCCI is an example of how things can go wrong.