Local Authorities: Are they too big to fail?

Last week we had a positive announcement from Nick Clegg on increased borrowing freedoms for local authorities and the planned introduction of Tax Increment Financing schemes, which was broadly welcomed across local government and the private sector.
Debate at the Conservative conference has now turned to its implementation.

How much freedom will local authorities really be given? How loose will the Treasury allow its purse strings to go?

One interesting question raised at a Respublica fringe event today is what happens if a local authority borrows to much? Of course, the rhetoric from councils is that it will only ever be 'prudential' borrowing. But this can mean different things to different people and no investment is ever 100 per cent secure.

So what would happen if a local authority was allowed to borrow what it liked and left itself overstretched? Will local government then be left with the potentially painful result of its freedoms and flexibilities? Or is it too big too fail?

We need to debate these issues not just at a national level but at a local level too. There is a vital role for communication between councils, business and local people about the risks that should be taken. Otherwise they may be left to foot the bill for a debt they knew nothing about it. And we know where that has left trust in the financial services sector.


Tony Cox - Linstock Consultant
http://www.linstockcommunications.com/