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Councils urged to plug public spending gap

Local authorities have been urged to fill the funding gap left by the Government’s capital spending cuts.

The New Local Government Network said councils should use the Local Government Pension Fund, municipal bonds, council reserves and other sources of funds to fill the gap

A report by the NLGN said state investment in construction projects was set to fall by half over the next four years.

The report, which said up to £12 billion of building projects were at risk, claimed such projects could provide stable, long-term investment opportunities for the estimated £97bn in the pension fund.

It also added that the projects could create new jobs and stimulate the local economy.

In March 2010, just 0.7 per cent of the UK’s total pension fund assets were invested in infrastructure, said the report. There is no mechanism at present for local government pension funds to invest directly in pooled local authority infrastructure projects.

The report, entitled Capital Momentum, also warned the Government not to curtail councils’ ability to raise money through the Public Works Loan Board, as has happened in previous recessions.