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Local authority collective agency

Local authority collective agency. Mark Luntley. Today. Why What we’ve done to date Headline conclusions Our planned next steps. Why. PWLB International lessons Stimulate market/reduce costs More than money Self confident sector Small and large councils. Steps. Specialist advisors

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Local authority collective agency

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  1. Local authority collective agency Mark Luntley

  2. Today • Why • What we’ve done to date • Headline conclusions • Our planned next steps

  3. Why • PWLB • International lessons • Stimulate market/reduce costs • More than money • Self confident sector • Small and large councils

  4. Steps • Specialist advisors • Political oversight • Technical reference • City discussions • Sector consultation

  5. Approach • 5 case model • Different options considered • Detailed evaluation • Cross guarantees • Capitalisation

  6. Vision • AAA/Aaa • Values: • Straightforward • Transparent • Collective • Efficient

  7. Drivers • Stimulate market • Educate bond investors • Support principles of prudential borrowing • Looking outwards to other nations • An alternative to PWLB – but mixed economy

  8. International models

  9. Developing a model • Capitalisation not cross guarantees • Uplift on individual ratings • Asset quality • Liquidity • Rules • Diversity of councils

  10. Headline conclusions

  11. Headline conclusions • 97% of sample councils interested “in principle” • AAA/Aaa possible • Lend at 0.7% to 0.8% above gilts • @£2.5m/ < two years to establish • Between £2m and £4m a year to operate (depending on complexity) • 25% market share

  12. LGCA structure

  13. Bond prices

  14. Risks – set-up • Government policy changes • City • Lack of sector interest (or waiting for another to lead) • Set-up costs • Alternatives emerge

  15. Risks - operational • Changes in prudential code • Reduced demand • Prudential code changes • PWLB changes • Actions of individual council(s)

  16. What now? • LGA Exec agreed (Jan ‘12) • Six months: • Detailed consultation on proposals • Determine sector/investor interest • Liaison with Government • OJEU procurement • Detail of arrangements

  17. Aim – August 2012 • Lead councils + funding in place • Shadow board • Agreement on shape of agency • Clear steer from government • Advisors identified • Rating?

  18. Questions? Mark Luntley 07909 962193 0207 664 3336 mark.luntley@local.gov.uk

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