By law, any local authority may borrow money for purposes relevant to its functions, or for the prudent management of its financial affairs. All amounts borrowed must be repaid.
Up to August 2010, we followed a traditional approach to local authority borrowing. This meant most loans came from the government's Public Works Loan Board (PWLB). We borrowed from other local authorities – called an 'inter-authority loan' – for short-term cash flow needs.
In August 2010, we redeemed our PWLB debt – for which were paying around 6% interest – with the intention of replacing it with a cheaper PWLB debt. Accounting rules meant, at the time we made the change, we had to use a different source for a short period of time.
This started our approach, from 2010, of more significant borrowing from other local authorities, as money could be borrowed at much lower rates of interest.
As interest rates for short-term inter-authority loans stayed well below PWLB rates, and funds remained available, there was no reason to change this approach.
Our Medium Term Financial Strategy assumes we will make a gradual switch to longer-term debt when it's prudent or necessary to do so. In general, however, a local authority would choose to use short-term loans for most of its borrowing because interest rates are better, and loans can be repaid earlier.
How much we borrow
Our page on current borrowing and investments gives a summary of how much we are borrowing, how much is invested, and our total net debt.