City Hall Hits Its Credit Limit

Rachel Holdsworth
By Rachel Holdsworth Last edited 81 months ago
City Hall Hits Its Credit Limit

The GLA's pre-budget report isn't our usual bedtime reading, but Mayorwatch found an interesting aspect of it: City Hall is about to hit the ceiling for how much it can borrow.

Since the budget was set for 2011/2012, the GLA has decided to borrow £110m over the next four years, chiefly to fund the £50m regeneration fund for riot-affected areas and the £40m Outer London Fund. The pre-budget report has looked at these plans and realised:

The capacity for borrowing to support Mayoral objectives may already have been reached. The Committee was told that the £110 million of borrowing planned would use all the GLA’s current borrowing capabilities. Any additional borrowing in future years would therefore require the GLA to find new funding streams to borrow against.

Interest and repayments on this borrowing are going to be £10m a year from 2014/15 "for an unspecified period". To put this into context, proposed and achieved efficiency savings at City Hall over the last two years total £9.6m.

We know there are financial pressures on GLA budgets as the central government grant is cut, plus the cost of the Olympics (running the Olympic stadium will be another, unexpected, cost). But, worryingly, the report says that the Outer London Fund hasn't provided any information about expected economic benefits, repayment or interest costs: in short, a large chunk of the GLA loans are going on something for which the business case is yet to be proven. Are we seeing the 'doughnut' electoral strategy being employed again?

Boris is banging on about the freeze on City Hall's share of your council tax as part of his re-election campaign, but there's no mention of this extra burden on London's taxpayers that he's committing us - and whoever wins next year's election - to.

Photo by tezzer57 from the Londonist Flickr pool

Last Updated 19 October 2011