The Treasury has published details of its Local Infrastructure Rate, which will provide £1bn of low-cost loans for English councils.
Managed by the Public Works Loan Board (PWLB), the loans will be set at gilts plus 60 basis points.
Gilts are government bonds that have coupon rate (ie interest) that varies with the maturity date. Sixty basis points are equivalent to 0.6 per cent.
The access to lower-cost funds for infrastructure comes a week after the chancellor set aside £3bn for infrastructure linked to new housing in his Autumn Budget.
The first £500m of funds will be open to bids in Q1 2018, while the remaining £500m will be available in Q1 2019.
Local authorities will have to submit business cases to secure loans, which must include explanations of the type of infrastructure they want to install, how they complement that authority’s strategy, how the investment will make a difference and how quickly the project can begin.
In a consultation on the rate run between December 2016 and January 2017, the Treasury noted there was a generally “positive response” to the proposal.
One respondent, however, suggested that the gilt plus 60 basis points rate was not particularly low considering that local authorities can already borrow from the PWLB at gilt plus 80 points with the Certainty Rate.