The local statecraft of borrowing and debt management

Abstract

Abstract Spendthrift local governments with a ‘debt addiction’ on a borrowing ‘spree’ are evident in the ‘councillors at the casino’ narrative in England. Borrowing and debt management strategies evolved and grew in importance for local statecrafters addressing funding gaps since 2010. A national system governs local government borrowing. From 2003, the UK government encouraged greater local autonomy and responsibility while retaining control within the highly centralized funding system. Reflecting the use of specific loan types and new, more complex debt instruments as evidence of local state financialization, more active strategies for borrowing and managing debt portfolios are evident. Local statecrafters interpret and work with and around the centralized national codes and guidance in devising their borrowing and debt management. Importing greater risk into local government, borrowing has grown overall and in particular ways across England since 2010. Underpinning the differentiated landscape of local statecraft engagements with financialization, vanguard, intermediate, and long-tail approaches are evident. The local political and officer leadership’s strategic vision, aims, and responses to closing funding gaps determine local statecraft, reflecting external advice and involvement (or not) with financial institutions developing loan products for the local public sector market. Local governments are borrowing from and beholden to a widening range of lenders with different instruments and terms, from internal resources, each other, national government agencies, and external financial institutions and investors. Financial innovations are evident in vanguard approaches but are a relatively small proportion of overall borrowing activity.