An increase in borrowing rates for councils across the country will not lead to a fundamental rethink according to Reading Borough Council’s (RBC) leader.

The treasury announced the decision to up the Public Works Loan Board (PWLB) borrowing rate by one per cent yesterday (Thursday, October 10).

The PWLB’s low interest loans are the main source of local authority borrowing, helping councils to finance the construction and maintenance of things like schools and roads.

Councillor Jason Brock, leader of RBC, said: “Like any change in borrowing rates we will need to consider it on a case by case basis.

“We operate a prudent property management scheme and any adjustments will be incorporated into that.

“One per cent wouldn’t cause a fundamental rethink. We might to make some adjustments going forward.

“We hadn’t anticipated it, but it is not unexpected in terms of our medium-term financial strategy.

“Interest rates go up and down. It is not what we could call a major rise.”

The Treasury said the decision to up the loan rate from 1.81 per cent to 2.82 per cent came after “some local authorities substantially increased their use of the PWLB in recent months”.

The higher rate will only apply for future investments.

The amount councils have spent on properties has risen rapidly from £76.4 million in 2014/15 to £1.4 billion in 2017/18.

PWLB loans are increasingly being used to invest in multi-million pound properties.

RBC has spent more than £70 million on four properties in the last three years as part of its commercial investment strategy.

This includes a £32.9m investment in Four 10 Thames Valley Park in April.

The council expects to raise around £1.5m annually from the four properties.

RBC’s updated commercial investment strategy was approved on June 10.

Councillor Rob White, leader of the Reading Green Party, hit out at the council’s strategy at the Policy committee meeting.

He said: “Green councillors don’t support gambling taxpayers’ money on commercial properties.

“Local authorities are meant to follow a set of guidelines when borrowing money, which caution against becoming too dependent on commercial income and taking on too much debt.”

Conservative councillor David Stevens criticised “resistance to any commercial investment”.

He said: “This is trying to generate income of something like £750,000 which is no small sum of money to support the main budget this year.

“If you are going to resist things like this, you should come up with alternatives.”

Chief executive Peter Sloman added: “There is a difference between managed risks and gambling.

“When we buy offices, we look very closely at who the tenants are and what their contracted rents are and whether those contracted rents have a guarantee from head office.

“There is always risk that you might have a tenant go into liquidation but our diverse portfolio reduces that risk considerably.”