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Updated: Hammond floats £1bn for infrastructure spending

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The government has confirmed the extension of borrowing powers to combined authorities and will consult on a making a new £1bn fund available to councils for infrastructure projects.

Documents published alongside the autumn statement this afternoon said the government would consult on lending up to £1bn to local authorities “at a new local infrastructure rate of gilts + 60 basis points for three years. The funding would be available to projects that are “high value for money”.

A basis point is one hundredth of one per cent. Gilt rates vary according to the level at which the government chooses to sell its bonds.

The gilts plus 60 basis points rate has been available since 2013 for projects nominated by local enterprise partnerships, but the normal rate at which the Public Works Loans Board would lend to councils is gilts plus 80 basis points.

One source said: “If you were borrowing a lot of money that is a difference of 20 points, which is worth having.”

The statement also confirmed that combined authorities with elected mayors will gain powers to borrow to borrow in relation to all of their functions, not just transport as at present. LGC reported last week this was under consideration by ministers, amid widespread frustration among combined authorities.

The new freedom would be subject to agreeing a borrowing cap with HM Treasury.

Judith Barnes, partner at law firm Bevan Brittan, said the broader borrowing powers would be “a shot in the arm [combined authorites] desperately needed”.

She added: “With devo deals in the order of £6 billion on health and social care in Greater Manchester and 10 year deals around £1 billion elsewhere, the potential for local growth was in danger of being severely hampered without wider borrowing powers to leverage the grant money and revolving funds provided, as well as to fund working capital and set-up costs pending receipt and distribution under local levies.”

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