By Daniel Hunter
Councils could create thousands of new jobs by issuing bonds to raise investment for the construction of new homes, roads and infrastructure projects if this month's Budget removes the barriers standing in their way, the Local Government Association has said.
The LGA, which represents more than 350 councils in England and Wales, has written to Chancellor George Osborne setting out plans for local government to unlock billions of pounds of investment — including from private council pension schemes — through issuing public bonds in a move which could mitigate the impact of public sector cuts and revive the economy.
Councils are already at the heart of planning and economic development in their areas. The LGA believes that by giving control over skills and transport funding to local authorities and lifting restrictions on borrowing, councils could work in partnership with the private sector to generate of "virtuous circle" where investment boosts growth and in turn creates more jobs.
English and Welsh councils have better credit ratings than many European governments and believe a revived triple-A municipal bond market would make an attractive proposition to investors seeking a secure home for their capital in the current turbulent markets.
Local authorities would use funding raised through the markets to commission major new infrastructure projects like bridges, roads and new buildings that would reap benefits for the local economy, while creating new jobs in the construction industry and other sectors.
This could help plug the gap in council infrastructure budgets which have seen grants from government cut almost in half.
The LGA has challenged the Treasury to remove the regulation and obstacles that currently stand in the way of councils unleashing their potential to revitalise the economy and create growth.
Council leaders are calling for:
- Government to deliver on its promise to devolve funding for transport and skills projects to local areas
- Regulatory barriers to be lifted to make it easier to pool public sector capital
- Councils to be given greater autonomy over tools to promote growth, for instance using tax increment financing powers, local control over setting planning fees and for the Government to deliver on its ‘city deals'
- Tax regulations which discourage foreign investors taking up municipal bonds to be scrapped
- Government to work with the LGA to raise awareness among pension fund trustees of the opportunities for prudent triple-A infrastructure investments.
"Now is the time for local government to unlock private investment — including a proportion of the £140 billion in prudently managed UK pension schemes — to kickstart the vital infrastructure projects the economy needs, while also securing the financial strength of pension funds," LGA Chairman Sir Merrick Cockell said.
"Councils have it within their potential to instigate a virtuous circle of economic growth where private investment pays for new roads, bridges and buildings to bolster the economy, which in turn create the new jobs and skills we need to keep it growing in the long-term.
"This is a win-win deal for everyone from investors and businesses to job-seekers, pension scheme members and taxpayers.
"Government has taken some steps towards giving councils the tools they need to get local economies growing. But the cuts to local authority budgets mean it is now more important than ever for the Treasury to give councils the financial autonomy they need to create jobs and bring growth to the economy."
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