Question to the Ministry of Housing, Communities and Local Government:

To ask Her Majesty's Government whether local authorities are free to borrow against the security of their capital assets, for example for new housing; if so, whether such borrowing is treated as increasing the national debt; and if so, why.

Under the prudential system, local authorities in England are free to borrow without government consent, providing that their borrowing is affordable. When calculating an affordable level of borrowing, local authorities are required by statute to have regard to the Prudential Code issued by the Chartered Institute of Public Finance and Accountancy. Borrowing in the Housing Revenue Account can be used to fund the delivery of new social housing. This borrowing is capped, but there remains unused borrowing headroom of £3.5 billion (up from £2.9bn in 2012).

The measure used in the Government fiscal mandate to measure the national debt is Public Sector Net Debt excluding public sector banks (PSND). This covers all institutions classified to the public sector by the Office for National Statistics apart from RBS and is produced on a consolidated basis. As part of the public sector, local authorities borrowing will therefore increase PSND.