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LGA warns chancellor over borrowing restrictions

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Any moves to curb council commercialisation in today’s Budget would be “perverse” and “hugely” damaging to services, the Local Government Association has warned.

As LGC has reported, the government is currently consulting on revisions to the Local Authorities Investment Code, which if implemented as planned would effectively ban councils from borrowing for investments designed solely to generate income. There are concerns the chancellor could go further when he stands up in the Commons today.

The LGA says since 2010 councils have generated £700m in income to support services after being encouraged by ministers to act more commercially and find alternative sources of funding. This comes in the face of reductions in revenue support grant which will total £16bn by the end of the decade.

Recent research by LGC found councils had invested more than £2.4bn in property specifically to generate an income since 2010. 

John Fuller (Con), vice chair of the LGA’s resources board, said: “Councils face a choice of either accepting funding reductions and having to cut services as a result, or making investments that can secure those services in the long term.

“Councils must be able to continue to make prudent investments to finance services in their local area. Any moves to restrict this would be perverse and hugely damaging to already stretched local services that our communities rely on.”

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