Municipal bank proposed for Birmingham.

Plans for a proposed £200,000 equity investment into a new Municipal Bonds Agency are due before Birmingham City Council’s Cabinet on June 16.

The agency, formed by the Local Government Association, has been designed to offer councils access to a cheaper rate of borrowing than that currently offered by the traditional local authority lender of choice – the Government’s Public Works Loans Board.

The council’s initial investment would give the city council proportionate voting rights and influence over the agency’s future. A report to councillors estimates that borrowing from the new agency would enable the city council to access lending rates that are 0.2 per cent lower than currently available.

Cllr Ian Ward, Deputy Leader of Birmingham City Council, said: “There are occasions when the council needs to borrow money to fund major projects, which is then repaid over a period of time, just like individual families do when they make large purchases for the home. It is therefore vital the council does everything within its powers to get the best interest rate possible. Increases to the PWLB’s rates mean we have a duty to Birmingham’s taxpayers to look at alternatives.

“The Municipal Bonds Agency is a way of getting the best value for citizens, using a model that has worked successfully in other countries.”

The council’s £200,000 would help the LGA meet the start-up costs for the new agency, which aims to eventually lend around £750 million annually to local authorities.