The Treasury has outlined how £1.5bn will be lent at low rates to the country’s 39 local enterprise partnerships to fund infrastructure projects.
Further details of the ‘project’ rate offered by the Public Works Loan Board were released as the chancellor’s Budget speech included an announcement of a number of initiatives aimed at boosting housing and infrastructure construction.
LEP chairs were sent a letter this week detailing their portion of the £1.5bn allocation of cheaper borrowing which is 40 basis points - 0.4 percentage points - below the PWLB’s normal rate for councils.
The biggest winners are LEPs in the South East, Manchester and Leeds (see table below for all allocations). All of the 38 partnerships outside London have been told they must submit a business case to the Treasury by September and that they should aim for construction of the nominated projects to begin by June 2014.
However, one local government finance expert who did not want to be named said these deadlines were “optimistic” because not all LEPs and councils had projects ready to go.
“We have not detected a significant amount of work or indeed interest in these [project rates] through our local authority channels,” he said. “This places a lot of emphasis on councils to agree it with LEPs and when you look at LEP structures they are pretty thin.”
He added: “It is pretty optimistic to expect projects going across regions to be in a spend ready phase within 15 months. However, the 15-month deadline does bring it nicely into election season.”
The letter to LEP chairs accepts that construction by June 2014 “may not always be possible” and says delays would require “a short explanation alongside the business case outlining the factors holding up delivery”.
While London’s LEP had previously agreed it would borrow £1bn to fund a Northern line extension to Battersea, the country’s 38 other LEPs have been waiting to find out the ‘project’ rate they could borrow.
This lower rate was first mooted in Budget 2012 when the chancellor announced a ‘certainty’ rate of 20 basis points below normal rates and hinted at an even lower ‘scrutiny’ rate to be unveiled at a later date.
However, the lower rate was rebadged as the ‘project’ rate in the Autumn Statement. This week’s letter to chairs suggests there will be minimal scrutiny of the business cases put forward.
The Treasury has requested a “short business case of no more than three sides” which “will not be subject to stringent analysis or interrogation, as we will expect that to have taken place at the local level”.
The letter also indicates that project borrowing up to the allocation limit can be shared between multiple authorities but also makes clear the cheaper rate cannot be used to refinance existing borrowing.
|Local Enterprise Partnership ‘project’ rate borrowing allocations||£m|
|Leeds City Region||85|
|Coast to Capital||66|
|North Eastern Local Enterprise Partnership||60|
|Derby, Derbyshire, Nottingham and Nottinghamshire||60|
|Greater Birmingham and Solihull||53|
|Heart of the SW||51|
|Liverpool City Region||46|
|South East Midlands||46|
|Sheffield City Region||45|
|Greater Cambridge & Greater Peterborough||40|
|West of England||39|
|Thames Valley Berkshire||37|
|Cheshire and Warrington||32|
|Leicester and Leicestershire||32|
|Coventry and Warwickshire||31|
|Stoke and Staffordshire||27|
|York and North Yorkshire||23|
|Swindon and Wiltshire||23|
|The Marches Enterprise Partnership - Shropshire and Herefordshire||20|
|Cornwall and the Isles of Scilly||15|