The read in full

Every slide's text, as the read shows it. The charts are in the read itself.

Introduction

The £135bn question

Update. Budget 2026 announced the PWLB lending limit will rise from £135bn to £155bn, with the option to go to £175bn later by statutory instrument (Budget 2026, section 7.7). This read was published on 15 October 2026; its figures and projections are as at that date.

Limit rising to £155bn. Budget 2026 · 28 October

PWLB lending is capped by law. The cap has been raised whenever it got tight. This time it can only be raised by a new Act of Parliament, and on current trends the limit could be reached at the 2027/28 or 2028/29 year end, or as early as 2026/27 on high-growth settings.

£116.9bn owed to the PWLB at 31 March 2026

£18.1bn of headroom under the £135bn limit

None no further increases are possible by order

In one minute

Where we are Councils owe the PWLB £116.9bn against a legal limit of £135bn. That leaves £18bn of headroom, and the total is growing by about £7bn a year.

The constraint. The Treasury has used every increase it can make by order. The next one needs a new Act of Parliament.

When. On current trends, including £5bn of LOBO refinancing, the limit is reached around early 2028, at the year end when borrowing peaks. Without the LOBOs, around early 2029.

The fix. The 28 October Budget is the natural moment to fix it. If that's missed, the next chance arrives around the time the limit is reached.

The risk. If it isn't raised in time, expect dearer or slower PWLB lending: last time, in 2019, rates rose a full point overnight.

What to do. Map your 2027/28 and 2028/29 maturities, keep February and March clear, and stress-test a 1-point rise. Don't borrow early to beat the cap.

Dates are projections from slide 11, not forecasts. The LOBO figure is an assumption you can change there.

How the cap works

A cap on what councils owe the PWLB

Section 4 of the National Loans Act 1968 caps the PWLB loans outstanding at any one time, plus any loans agreed but not yet paid out. It is a cap on the stock of debt, not on each year's lending.

PWLB principal outstanding at 31 March 2026 against the limit

Repayments create headroom. Every loan repaid, on schedule or early, makes room for new lending. Refinancing one PWLB loan with another uses no extra headroom.

Cash doesn't offset it. The cap counts PWLB loans gross. Deposits, including with the DMO's own deposit facility, don't reduce it.

Every PWLB loan counts. Certainty, HRA, infrastructure and project rate loans all count, for councils in England, Scotland and Wales.

Principal outstanding from the PWLB Annual Report and Accounts 2025-26. In practice there are no material undrawn commitments: loans agreed but not advanced were £29m at 31 March 2026. Accrued interest does not count.

Raised by order, up to a ceiling set by an Act

An Act of Parliament sets the limit and a ceiling. The Treasury can raise the limit by order, with a vote in the House of Commons, but only up to the ceiling. Since 1984 every order has gone straight to the ceiling, and the 2024 order used the last of it.

Every change to section 4(1) since the Finance Act 1984, from legislation.gov.uk. Squares mark Acts, circles mark orders. Loans outstanding from the PWLB annual reports, 2015 to 2026. Before 1984 the section capped cumulative lending in tranches.

An Act sets the limit and a ceiling. Usually a clause in a Finance Bill. Recent Finance Acts took 54 to 141 days from Budget to Royal Assent.

An order raises the limit, up to the ceiling. The 2024 order was debated on 13 November and was in force on 22 November.

Today the limit equals the ceiling. Nothing in the Finance Acts 2025 or 2026 changes it, so the next increase needs a new Act.

Raised each time it got tight

Each of the last four increases came when between 89% and 95% of the limit was in use. In October 2019 the minister told Parliament only £2.3bn was left. At 31 March 2026, 87% was in use.

Principal outstanding at 31 March against the limit then in force, from the PWLB annual reports. "£2.3bn" from the Economic Secretary to the Treasury in the Commons committee debate on the 2019 order, 3 October 2019. The link between tight headroom and each increase is our reading; no report states it.

What happened last time

2019: a higher limit and a higher price, on the same day

On 9 October 2019 the limit rose from £85bn to £95bn. The same day, every new PWLB loan cost a full percentage point more. The Treasury later said the rise was to slow borrowing because of the limit.

PWLB 10-year maturity certainty rate, from the DMO's daily rate notices. The 2019 order was made on 8 October and came into force on 9 October.

The Treasury's account, March 2020. "This raised the risk that the statutory limit ... would be reached, leading to an abrupt halt in lending." Borrowing had surged, including £500m in a single day in summer 2019.

Since 2020: rules rather than price

The Treasury called the 2019 rise "the right decision at that time", but said targeted tools would be better. In November 2020 it cut rates by a percentage point and barred borrowing to buy investments mainly for yield.

What the Treasury can already do

Price. Raise the margin on all new loans, as in October 2019.

Access conditions. Refuse loans that break the lending terms, as since November 2020 for debt-for-yield.

Delay or suspend. Delay an advance, suspend an authority's access, or in extreme cases require repayment. Set out in 2020 for misuse.

Legislate. Raise the ceiling in a Finance Act, as in 2014 and 2020.

HM Treasury, Public Works Loan Board: future lending terms, consultation (March 2020) and response (November 2020). No rationing procedure for a limit has been published.

The March 2020 consultation. "It cannot be assumed that Parliament would continue raising this limit to accommodate ever-increasing levels of commercial investment." That warning was about debt-for-yield, which has since been barred. Today's growth is mainly capital programmes, HRA and refinancing.

Where we are now

£18bn of headroom

Update. Since Budget 2026 the limit is set to rise to £155bn. Figures on this slide are as at 15 October 2026.

PWLB loans outstanding were £116.9bn at 31 March 2026, against a limit of £135bn. By our estimate the total was about £115.2bn at the end of August 2026: the stock dips in the summer and peaks each March.

PWLB annual reports. The August 2026 estimate adds DMO monthly advances since April and deducts repayments scheduled in the DMO year-end loan file; early repayments since April are not yet published and would add headroom.

Growing by about £7bn a year

In 2025/26 the PWLB lent £18.5bn and was repaid £9.5bn on schedule and £1.8bn early, so the stock grew by £7.2bn, close to the year before. Since 2021 it has grown by an average of £6.2bn a year.

PWLB flows in 2025/26

New loans: +£18.5bn

Scheduled repayments: −£9.5bn

Early repayments: −£1.8bn

Net growth: +£7.2bn

PWLB Annual Report and Accounts 2025-26, notes 6 and 7, rounded to £0.1bn. HRA and one-year figures from the DMO's monthly advances files.

Of the new lending in 2025/26

£6bn was at the HRA rate, available to March 2027

£4.4bn was for one year or less, so it comes back for refinancing within the year

Borrowing peaks in February and March

On average 41% of a year's PWLB lending is taken in February and March. So the stock of debt peaks at each year end, and that is when the cap would bite first.

Share of each financial year's PWLB advances by month, average of 2022/23 to 2025/26. Source: DMO monthly advances files.

When could the limit be reached?

Update. Since Budget 2026 the limit is set to rise to £155bn. Figures on this slide are as at 15 October 2026.

Choose a growth rate and any LOBO or intra-LA refinancing. These are projections, not forecasts: they assume the limit stays at £135bn and that nothing else changes.

March 2028 is when outstanding PWLB lending would first reach £135bn on these settings: growth of £7.2bn a year (the 2025/26 pace), plus £5bn of LOBOs over 2 years. That is the 2027/28 year end.

History: 2025/26 rebuilt from DMO advances and scheduled repayments (within £0.1bn of the annual report), then the estimate to August 2026. Each projected year follows the 2025/26 within-year pattern. The LOBO figure is an assumption: there is no official series. MHCLG's closest proxy, long-term market loans, was £12.1bn in June 2026. Later slides use these settings.

The legislative clock

Update. Since Budget 2026 the limit is set to rise to £155bn. Figures on this slide are as at 15 October 2026.

The Budget on 28 October 2026 is the natural moment. A clause in that Finance Bill would be law by about December 2026 to March 2027, well ahead of the projected squeeze in March 2028. Miss it, and the next Finance Act lands around the time the limit is reached.

Royal Assent windows apply the fastest and slowest recent Finance Bills (54 and 141 days from fiscal event to Royal Assent, Finance Acts 2020 to 2026) to a 28 October 2026 Budget, and to an assumed autumn 2027 Budget at the same time of year. The date the limit is reached comes from slide 11, on the default settings: £7.2bn a year (the 2025/26 pace), plus £5bn of LOBOs. After Royal Assent the Treasury still needs a Commons-approved order, which has taken weeks.

Two scenarios

Scenario 1: the cap is raised in time

Update. Since Budget 2026 the limit is set to rise to £155bn. Figures on this slide are as at 15 October 2026.

The Treasury is watching: it "keeps the PWLB's lending arrangements under review". The government acts as it did in 2014 and 2020, creating room in a Finance Act before the limit is reached.

What it looks like

A clause in the Finance Bill after the 28 October 2026 Budget raises the ceiling

An order uses the new room before the limit is reached

PWLB rates and access carry on as now

Councils refinance as planned, including the £16bn of PWLB loans falling due in 2027/28 and 2028/29

What makes it more likely. Every past increase came once headroom was seen to be tight, so making it visible helps. Treasury written answer, 30 September 2026: HM Treasury "keeps the PWLB's lending arrangements under review to ensure borrowing supports local investment while managing risks to the public finances".

Scenario 2: the limit is reached first

Update. Since Budget 2026 the limit is set to rise to £155bn. Figures on this slide are as at 15 October 2026.

Growth, LOBO refinancing and intra-LA debt moving to the PWLB take the total to £135bn at a year end before an Act is passed. The Treasury cannot lend past the limit, so it reaches for the tools that work immediately.

How a squeeze would work

New lending is priced up, as on 9 October 2019, or delayed and gated

On current trends, including £5bn of LOBO refinancing, the limit is reached around the 2027/28 year end (early 2028), when demand peaks

Intra-LA rates are likely to rise, just as March cash is scarcest

LOBO calls and maturing intra-LA loans have to be met regardless

Who is most exposed

PWLB-to-PWLB refinancing frees the headroom it uses, unless rationing rules say otherwise

Most exposed: intra-LA loans and LOBOs that need refinancing into the PWLB

Also exposed: new capital borrowing due in the window

Authorities with large March maturities and thin cash buffers

The Treasury has no published rationing procedure. National Loans Act 1968 s3 makes its lending powers subject to the s4 limit. Dates are projections from slide 11, not forecasts.

What a squeeze would do to spreads

Update. Since Budget 2026 the limit is set to rise to £155bn. Figures on this slide are as at 15 October 2026.

A squeeze would work in two ways. A margin rise lifts the cost of every new PWLB loan. And the PWLB 1-year rate stops working as a ceiling on what other councils can charge, because the fallback costs more or may not be there.

The ceiling on intra-LA rates

£500k a year more on £50m, if it is refinanced from the PWLB at 100 basis points more. Across the sector, the £16.2bn of PWLB loans due in 2027/28 and 2028/29 would cost about £162m a year more.

PWLB 1-year certainty rate and SONIA on 28 September 2026. Scheduled PWLB repayments from the DMO year-end loan file at 31 March 2026. Intra-LA spreads are not shown as numbers: they are indicative and vary by month and lender.

Why the PWLB matters for intra-LA pricing. A council will rarely pay another council much more than it would pay the PWLB for a year. If the PWLB costs more, or a loan may be delayed, that ceiling lifts. Spreads can widen most in March, when cash is scarcest.

What councils can do

What to do now

Map 2027/28 and 2028/29. List everything needing refinancing or new money, especially in February and March. Separate PWLB from intra-LA, LOBOs and other market loans.

Don't create maturities in the window. When you borrow now, choose terms that mature before early 2028 or after 2029/30, and keep March clear.

Lengthen where it is affordable. Fewer refinancings in the window means less exposure to price or access. But don't borrow early just to beat the cap.

Stress-test a 1-point PWLB rise. Apply it to everything refinancing in the window, and show members the cost in pounds.

Line up alternatives. Bank and institutional lenders, intra-LA relationships, and a year-end cash buffer, arranged before you need them.

Plan your LOBO responses. Decide now what you'd do if one is called in the window.

Make the case. Tell CIPFA, the LGA and your treasury adviser that the ceiling needs raising in the next Finance Bill.

Don't borrow early to beat the cap

Borrowing before you need it brings the cap closer for everyone, and it costs you money while the cash sits on deposit. In 2019 a rush to borrow was part of what brought on the rate rise.

£2.1bn held by councils in the DMO's own deposit facility at 31 March 2026. Borrowing to deposit there uses headroom but achieves nothing: the money goes straight back to the Treasury.

2.1 points the yearly cost of carrying borrowed money: a 5-year PWLB loan at 5.80% against SONIA at 3.73% on 28 September 2026.

£500m in a day borrowed from the PWLB on a single day in summer 2019, shortly before the limit was raised and rates rose a full point.

The sensible response is the opposite of a rush: know your dates, keep the window clear, and make the case for legislation early.

DMADF deposits from the MHCLG borrowing and investment live table. PWLB rates from the DMO; SONIA from the Bank of England. "£500m in a single day" from HM Treasury's March 2020 consultation.

Close

Sources and method

National Loans Act 1968, section 4 (limit for local loans)

Finance Act 2020, section 112

Local Loans (Increase of Limit) Order 2024 (SI 2024/1201)

Local Loans (Increase of Limit) Order 2019 (SI 2019/1317)

Draft Local Loans (Increase of Limit) Order 2024, Commons committee debate, 13 November 2024

Written statement HCWS13, PWLB lending limit, 11 May 2022

HM Treasury, PWLB: future lending terms, consultation, March 2020

PWLB Annual Report and Accounts 2025-26

PWLB Annual Reports and Accounts, earlier years

DMO PWLB data: monthly advances and year-end loan files

MHCLG borrowing and investment live tables

Method. Headroom is the £135bn limit less PWLB principal outstanding from the annual report. The August 2026 estimate and the within-year pattern use the DMO's loan-level files. Projections are arithmetic, not forecasts: they assume the limit, rates and policy stay as they are. The LOBO and intra-LA amounts are user assumptions. Figures to August 2026; rates on 28 September 2026. Nothing here is advice to borrow or not to borrow.