History of Public Works Loans

The Exchequer Loan and Bill Commissioners 1793-1875

Originally known as Exchequer Loan Commissioners, the Public Works Loan Commissioners were first appointed as an ad hoc body in 1793 to alleviate commercial distress resulting from the trade recession which followed the French Revolutionary Wars.

In 1817 another single purpose body of Commissioners, known as Exchequer Bill Commissioners, were appointed to provide relief following the Napoleonic Wars. They were to receive "no fee, reward or emolument or gratuity whatever" and their task was to consider applications in respect of any works of a public nature which might aid employment. In subsequent years, instead of appointing further bodies of Commissioners, Parliament prescribed additional purposes for lending for the existing Exchequer Bill Commissioners thus creating the continuous office of the Commissioners which has survived to present time. Over the subsequent 50 years a considerable number of public projects were financed by loans advanced by the Exchequer Bill Commissioners, including, in 1826, £400,000 for improvements to Charing Cross and the Strand which involved the formation of Trafalgar Square. In 1832, £250,000 was used for the construction of the Rotherhithe Tunnel under the River Thames and, in 1846, £200,000 for the establishment of Battersea Park.

The Public Works Loan Commissioners 1875-2020

The next major landmark was the Public Works Loans Act 1875 which created the Public Works Loan Commissioners and replaced the Exchequer Bill Commissioners. The purpose of the Public Works Loan Commissioners was different from that of the Exchequer Bills Commission and the Exchequer Loan Commissioners as it was not focused on relieving commercial distress, but rather on providing funding to specific bodies for certain categories of expenditure. The Public Works Loans Act 1875, together with the National Loans Act 1968, became the prime statutory basis for the constitution, duties and operations of the Public Works Loan Commissioners. The Public Works Loans Act 1875 introduced a requirement that the Public Works Loan Commissioners make an Annual Report to Parliament.

Since the Public Works Loans Act 1875, there have been many changes to the scope of the work of the Public Works Loan Commissioners, which are set out below. In 2004, the decisions around borrowing requirements and how local authorities use PWLB funds were devolved to local authorities. Local authorities must have regard to the prudential framework as set out by CIPFA and MHCLG to ensure they are borrowing prudently. Following this reform, the role of Commissioners was merely ceremonial and existed so that government lending complied with statute. Lending was managed within a policy framework set by HM Treasury and loans were processed through the DMO.

Subsequently, new governance arrangements were proposed in a consultation led by HM Treasury in 2016 and the Public Works Loan Commissioner role was formally abolished on 25 February 2020. Their statutory functions, roles and responsibilities transferred to HM Treasury. Day-to-day administration of PWLB loans continues via the DMO on HM Treasury’s behalf.

Scope of the Public Works Loan Commissioners work and sources of funding 1875-2020

In 1887 the method of funding lending by the Public Works Loan Commissioners was changed as it had become increasingly difficult to estimate the amount of loan applications. A Local Loans Fund was created pursuant to the National Debt and Local Loans Stock Act 1887, which was financed by the issue of Local Loans Stock, borrowings on the security of bonds, temporary borrowing and repayments of loans made. Pursuant to the terms of the Public Works Loans Act 1887, funds raised under the National Debt and Local Loans Stock Act 1887 were used to fund lending by the Public Works Loan Commissioners.

In 1897 the responsibility for fixing the interest rates provided by the Public Works Loan Commissioners became vested in the Treasury, as is still the case today.

By the end of the First World War the foundations of the present local government structure were firmly in place and substantial funding was required for extensive development programmes of local authorities, particularly for housing and town planning; in 1921-22 nearly £49 million was lent for housing alone. By 1939 total lending by the Public Works Loan Commissioners had reached almost £600 million.

Towards the end of the Second World War, the Treasury issued a memorandum to local authorities which referred to the heavy demands on the money market that would be made after the end of the hostilities. It was proposed that local authorities should borrow for their capital development programmes through the government who would themselves raise money as part of their general borrowing programme. The rates of interest on loans to local authorities would be determined by the government’s own credit and the advances would be made by the Public Works Loan Commissioners.

In 1963, a government white paper, noting the increased reliance of local authorities on temporary borrowing, proposed greater access to funding from the Public Works Loan Commissioners in return for a limitation on temporary debt under a Quota System.

The National Loans Act 1968 re-organised the accounting arrangements and, since then, monies for local loans are provided by section 3 of the National Loans Act 1968 and drawn from the National Loans Fund (NLF). Certain obsolete or duplicated lending powers of the Public Works Loan Commissioners were repealed in the 1968 Act and the remainder consolidated. The Treasury’s power to fix the interest rates on loans made by the Public Works Loan Commissioners were re-enacted in terms corresponding with those prescribed for other loans made out of the NLF.

In 1982 the government, in support of its monetary policy, set out to reduce the dependence of local authorities on bank borrowing. The Public Works Loan Commissioners were asked to take steps to increase their share of lending and in a short time they revamped their lending facilities from being a provider of solely longer term fixed rate funding which took up to ten days to advance to a wide range which included variable rate loans and one year minimum periods.

Whilst the scope of the Public Works Loan Commissioners, and the source of funding, changed over time, ultimately the Commissioners were still responsible for assessing whether to lend money and to assess such matters as the level of security that should be required.

In 2000 the government issued a Green Paper, which suggested replacing the then existing credit approval system for controlling capital expenditure with a prudential regime to determine affordability. This Green Paper was followed by a White Paper in 2001, which proposed a new prudential capital finance system. The framework for this proposal was introduced in the Local Government Act 2003. The framework provided by the Local Government Act 2003 was supplemented and developed through the Prudential Code, which was published by Chartered Institute of Public Finance and Accountancy (CIPFA). This formed the governance framework for the PWLB lending from 2004.

Previous Circulars

Title Size Date Published
Circular 160 detailing the Board’s lending arrangements supersedes Circular 159 issued 25 May 2018 123KB 9 Oct 2019
Circular 159 detailing the Board’s lending arrangements supersedes Circular 158 issued 1 March 2016 338KB 25 May 2018
Circular 158 detailing the Board's lending arrangements supersedes Circular 157 issued 22 September 2014. 322KB 1 Mar 2016
Circular 157 detailing the Board's lending arrangements supersedes Circular 156 issued 1 November 2013.
239KB
22 Sep 2014
Circular 156 detailing the Board's lending arrangements supersedes Circular 155 issued 12 August 2013.
228KB
1 Nov 2013
Circular 155 detailing the Board's lending arrangements supersedes Circular 154 issued 21 December 2012.
224KB
12 Aug 2013
Circular 154 detailing the Board's lending arrangements supersedes Circular 153 issued 1 November 2012.
283KB
21 Dec 2012
Circular 153 – detailing the Board's lending arrangements supersedes Circular 152 issued 16 August 2012.
283KB
1 Nov 2012
Circular 152 - Lending arrangements (supersedes Circular 148 issued 4 January 2011).
59KB
16 Aug 2012
Circular 151 - replaces Circular 149 and sets out the methodology for calculating interest rates for fixed and variable rate loans.
31KB
1 May 2012
Circular 150 - Announces that the special, reduced rates will be available for applications received on 26th March 2012 only.
52KB
21 Nov 2011
Circular 149 - Sets out the methodology for calculating interest rates for fixed and variable rate loans.
53KB
4 Jan 2011
Circular 148 - Detailing the Board's lending arrangements, supersedes Circular 144 and incorporates the changes notified in Circulars 145-147.
89KB
4 Jan 2011
Circular 147 - Sets out changes to the Board's interest rates following the Chancellor's announcement on the Spending Review.
50KB
20 Oct 2010

Circular 146 - Announces changes to the Board's banking arrangements which take effect on 15 November 2010.

48KB
18 Oct 2010
Circular 145 - Announces an additional question to loan applicants.
50KB
22 Jun 2010
Circular 144 - Details the Board's lending arrangements, supersedes Circular 138 and incorporates the changes notified in Circulars 139 to 143.
142KB
26 Apr 2010
Circular 143 - Announces results of last September's consultation and the introduction of routine intra-daily changes to fixed interest rates from Monday 26 April 2010.
43KB
22 Mar 2010
Circular 142 - Announces a change in the method of calculating interest on the initial broken period on fixed rate loans with effect from 1 December 2009.
45KB
26 Oct 2009
Circular 141 - explanatory note - Changes to PWLB’s interest rate structure: an explanatory note.
45KB
5 Nov 2007
Circular 141 - Announces the introduction of a separate set of rates applicable to the early repayment of fixed rate loans with effect from 1 November 2007.
50KB
31 Oct 2007
Circular 140 - Announces changes to the structure of interest rates applying to fixed rate loans with effect from 1 November 2007.
132KB
16 Oct 2007
Circular 139 - Maximum period for fixed rate loans
42KB
1 Dec 2005
Circular 138 - Arrangements for lending to local authorities
148KB
1 Aug 2005
Circular 137 - Variable rates
35KB
11 Apr 2005
Circular 136 - Change to the Transaction Timetable
51KB
4 Jan 2005
Circular 135 - Arrangements for lending to Local Authorities from 1 April 2004
118KB
16 Mar 2004
Circular 134 - Lending Policy from 1 April 2004
42KB
15 Jan 2004
Circular 133 - Maximum period for PWLB fixed rate loans
39KB
1 Sep 2003
Circular 132 - Provision of data to third parties
40KB
16 May 2003
Circular 131 - Arrangements for lending to Local Authorities from 1 April 2003
126KB
27 Mar 2003
Circular 130 - Arrangements for 2003-2004
56KB
13 Feb 2003
Circular 129 - Changes to the frequency of review and structure of PWLB lending rates
45KB
4 Feb 2003
Circular 128 - Change of Address
34KB
29 May 2002
Circular 127 - Arrangements for lending to Local Authorities from 1 April 2002
77KB
March 2002
Circular 126 - Quotas for 2002-2003
39KB
20 Feb 2002
Circular 125 - Refinancing of fixed rate loans
41KB
6 Dec 2001
Circular 124 - Arrangements for lending to Local Authorities from 1 April 2001
129KB
30 Mar 2001
Circular 123 - Quota arrangements for 2001-2002
77KB
13 Mar 2001
Circular 122 - Changes to rate structure; Fees for converting loans
72KB
3 Oct 2000
Circular 121 - Arrangements for lending to Local Authorities from 1 April 2000
78KB
17 Apr 2000
Circular 120 - Formula for quotas for 2000-2001
39KB
30 Mar 2000
Circular 119 - National Loans Fund Lending Rates
38KB
22 Feb 2000
Circular 118 - Arrangements for lending to Local Authorities from 1 April 1999
89KB
25 Mar 1999
Circular 117 - Quotas for 1999-2000
39KB
12 Mar 1999
Circular 116 - Arrangements for lending to Local Authorities from 1 April 1998
91KB
27 Mar 1998
Circular 115 - Quotas for 1998-99
40KB
17 Mar 1998
Circular 114 - Arrangements for lending to Local Authorities from 1 April 1997
89KB
25 Mar 1997
Circular 113 - Option to replace a variable rate loan / Premature repayment of a variable rate loan
41KB
20 Mar 1997
Circular 112 - Quotas for 1997-98
41KB
5 Mar 1997
Circular 111 - Option to replace a variable rate loan
37KB
29 May 1996