Magazine article Public Finance

Councils May Sell Income for Loans

Magazine article Public Finance

Councils May Sell Income for Loans

Article excerpt

Councils are set to examine the possibility of raising finance through selling the rights to future income, such as council house rents.

The Department for Local Government and Communities has launched a consultation on the use of securitisation, where authorities sell the entitlement to revenue, such as council house rents, to a bank for a fixed period. In return they receive an immediate lump sum payment.

Alan Aisbett, a partner and local government specialist at law firm Pinsent Masons, told Public Finance that it was uncertain whether councils can currently enter into these kinds of contracts.

However, he said that the provisions of the Localism Bill would lead to securitisation being examined under the General Power of Competence, with councils using it to provide 'increased flexibility' in raising finance for capital projects.

The DCLG consultation does not confirm that the GPC would provide a legal basis for the deals, stating that 'whether any such securitisation transaction would be lawful is a matter for individual authorities to decide, taking account of the specific nature of the contract and of all relevant legislation'. …

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