![]() ![]() This power is not to be relied upon as a specific power to lend or invest but rather to supplement Section 12 of the Local Government Act 2003 or Section 24 of the Local Government Act 1988 when investing or lending.ĭo councils have to be authorised by the FCA?Īnother question often asked is: “If we lend, will we need to go through a lengthy and costly process of getting FCA authorisation?” The answer is no, councils do not necessarily need to get FCA authorisation when they lend. A council also has a general power to borrow and to make loans under the General Power of Competence in Section 1 of the Localism Act 2011. Therefore a council could borrow from the Public Works Loan Board and make an investment under Section 12 of the Local Government Act 2003 or a loan under Section 24 of the Local Government Act 1988.Ĥ. A council has a general power to borrow under Section 1 of the Local Government Act 2003. A council has a specific power to make a loan under Section 24 of the Local Government Act 1988 (housing loans only).ģ. ![]() A council has a specific power to invest under Section 12 of the Local Government Act 2003.Ģ. The investment and related powers in summary are:ġ. If the loan was used by the entity borrowing it to expand, it could also provide additional revenues for councils, if as announced by the Government in the 2015 Spending Review, they are to retain business rates.Ĭouncils often ask: “do we have the power do lend and if so, do we have to create a separate trading vehicle?” The answer is yes, councils do have the power to lend and no, they do not have to set up a separate trading vehicle. By lending to the third sector or commercial entities it could help to drive growth and the number of jobs within the area. If councils funded or match funded regeneration projects, this could unlock a number of projects which have struggled to get off the ground. Regenerating areas that have suffered from not enough investment.From a risk perspective, it is important to note that to date no housing association has defaulted on repaying a loan, which makes the proposition of lending to housing associations more attractive. By providing a loan to housing associations it enables councils to generate income, fees as well as more council tax and the New Homes Bonus whilst also helping to deliver the one million new homes target set by Government. ![]() A solution to the housing shortage could be to lend money to housing associations that are often in a better position to develop housing in a quicker time-scale. Over the years many councils have completed housing stock transfers and no longer manage housing.
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