Local Capital Finance Company

The Local Capital Finance Company is a private company^[1] set up to allow local authorities to diversify funding sources and borrow at lower cost, instead of having to borrow via the Public Works Loan Board of the UK Debt Management Office, which in turn is part of HM Treasury.^[2] The official reason for the creation of the Local Capital Finance Company is that it increases competition and diversifies funding sources for local authorities, giving them greater independence. The company aims to deliver the larger, more liquid bond issues in response to capital market demand. It also provides a centre of expertise between local authorities and capital markets.^[1] On the other hand, one critic, John Ralfe of John Ralfe Consulting, fears that it is a means by which the British government can pretend that government debt is lower that it actually is.^[2] This criticism is unfounded as all local government debt, whether sourced from the UK Debt Management Office or the open market, is included within measures of government debt ^[3]

Municipal bond agencies have a proven track record in other countries internationally. In countries such as Sweden and Finland they have demonstrably improved local government financing.^[4]

The Chairman of the LCF is Sir Merrick Cockell, who was previously head of the Local Government Association; its deputy chairman is Adrian Bell,^[5] head of Debt Markets UK for Canaccord Genuity in London;^[6] and its Chief Executive is Aidan Brady, who was previously a Chief Operating Officer at Deutsche Bank, an investment bank.^[7]

As of February 2015, nearly 50 local authorities have signed up to the Local Capital Finance Company.^[8]

References