Business case

Why the agency was created

The Local Government Association considered the establishment of an agency to reduce the cost of councils’ debt financing at some length.  An outline business case was prepared in 2011-12 and following a brief review in October 2013 the decision was taken to update the business case.  This was published as the Revised Business Case in March 2014 and led to the establishment of what was to become the UK Municipal Bonds Agency plc.

The Revised Business Case set out a clear rationale for the establishment of a bonds agency, noting there was ample evidence from Scandinavia, Japan and New Zealand that a bonds agency would deliver ample benefits to local authorities, not least reduced borrowing costs.  Most importantly, the Revised Business Case established a clear justification for a bonds agency on public interest grounds, primarily that it would:

  • Exercise effective oversight of local authority borrowing to help ensure that local authorities would not undertake excessive and risky borrowing.
  • Would act in the interests of local authorities and would not offer complicated and high-risk financial products to them.
  • Would be transparent and fair in its dealings with local authorities.

The key benefits for local authorities set out in the Revised Business Case were:

  • Savings due to lower interest rates
  • Protection from changes to the PWLB’s terms and conditions and diversified funding sources
  • Fully transparent pricing
  • Tailored products to suit local authorities’ needs
  • Economies of scale thereby reducing costs

A copy can be downloaded here.

In 2019, the guarantee arrangements set out in the Revised Business Case were amended so that the liability of local authorities borrowing through the UK Municipal Bonds Agency’s pooled loan programme would be proportional to their borrowings rather than joint and several.


The UK Municipal Bonds Agency believes that the rationale for its creation has been validated. 

On 5 March 2020, the UK Municipal Bonds Agency issued its innaugural £350 million bond on behalf of Lancashire County Council.  The bond was a 5-year floating rate note, priced at 0.8 per cent over SONIA.  This pricing was significantly better than could be obtained from the PWLB, thereby demonstrating that the UK Municipal Bonds Agency can deliver significant savings for local government, validating the key assumption that led to its creation.  The interest rate was 0.81 per cent below the PWLB 3-month variable rate on the day and 1.08 per cent lower than the 5-year maturity rate.

Other developments in the recent past have proven the public interest case:

  • Frequent changes to the PWLB’s interest rates and its terms and conditions prove the LGA’s belief that local authorities would benefit from a lender that is accountable to them and who cannot arbitrarily alter its terms, conditions and interest rates.
  • There have been regular instances of opaque, hard to understand financial products being offered to local authorities.
  • There has been concern regarding what some believe to be high risk borrowing and investment strategies pursued by some councils, thus the public interest case for greater scrutiny of borrowers is justified. 

Supplementary Documentation