A hike in borrowing rates for councils was made due to ‘concerns' over local government spending, the sector's top Whitehall official has confirmed.

The increasing of Public Works Loan Board interest rates by one percentage point to 2.8% last week was made to encourage local authorities to abide by ‘the spirit, not just the technical letter of the prudential code,' permanent secretary of the Ministry of Housing, Communities and Local Government, Melanie Dawes, said.