Grahame Morris MP has signed a cross-party letter to the Chancellor, co-ordinated by Claudia Webbe MP, urging the government to cancel the debt held by the Public Works Loan Board.
The Public Works Loan Board is a lending facility, which is operated by the UK Debt Management Office on behalf of the Treasury. It provides loans to local authorities, and other public bodies, from the National Loans Fund.
MPs are calling on the government to cancel the £82 billion owed by local authorities to the Public Works Loan Board; they believe that doing so would ‘enable councils to begin to stabilise and grow their services in line with social needs.’ The letter states that to cancel the debt would provide local authorities with up to £4.5 billion in additional annual income, which would be necessary to ‘create local authority spending power after over a decade of brutal budget cuts.’
In response to the unprecedented situation caused by the pandemic, the government has increased the borrowing ceiling for local authorities by 20 billion, with the option to increase it by a further 20 billion if necessary. In the letter, MPs state that this move is counter-productive, as adding more debt at a time of falling revenues would be imprudent, and ‘the cost of servicing increased borrowing will eat into the finances available for providing critical services.’
MPs note that the government has set a precedent by cancelling £13.4 billion of NHS debt early last month, and they are calling on the government to do the same for local authorities, to help them cope with the current unprecedented circumstances.
The Easington MP said, “I welcome the government’s recent cancellation of £13.4 billion of NHS debt, and strongly believe that the same should be done for local authorities. It is vital that they are able to operate efficiently and deliver services to people who need them. For them to accumulate more debt at this time is not the answer.”