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COUNCILS' DESIRE TO PLAY THE MONEY MARKETS

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The links between local authorities and private finance is examined in an article in the Public Sector Finance sect...
The links between local authorities and private finance is examined in an article in the Public Sector Finance section of The Independent (p28).

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.

But one leading private sector investment manager argues government reluctance to see councils borrow privately is a political decision. 'It allows the government to keep control of local authority borrowing,' he says.
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