CASH-STRAPPED Worcestershire County Council wants to tackle its debt levels - by setting up a new "bank" to borrow at super-low levels.

Your Worcester News can reveal how the authority, which currently owes £240 million to third parties, is a leading light behind the creation of a new UK-wide lending facility.

The county council is still trying to push ahead with a raft of major projects over the next few years, like the Worcester Technology Park and dualling most of the A4440 Southern Link Road, but does not want to lumber taxpayers with growing repayments costs.

Now it is attempting to create a new agency, teaming up with other councils to fund an organisation which can lend at interest rates of around 0.02 per cent - a miniscule amount.

So far 22 councils have signalled intent to sign up as shareholders, with Worcestershire prepared to stump up an initial £50,000 to get it off the ground by March 2015, rising to £75,000 afterwards.

County Hall's Conservative leadership is hoping to spend £47 million on major projects over the next few years, and is hoping the new 'municipal bonds agency' will help it become reality.

Experts at the council say being a part of the agency, it could save taxpayers at least £7 million over the next 20 years in interest repayments.

Crucially, it will mean bosses do not need to turn to the banks, and provide competition for the Government-backed Public Works Loan Board (PWLB), which borrows at low rates to town halls.

In recent weeks the PWLB has upped its repayment rates, leading to concern about the impact on councils.

Sean Pearce, chief financial officer at the council, said: "The council needs to raise £47 million of new debt to fund its capital programme and if we join this bonds agency and are able to influence it the benefits would be substantial.

"The savings to this council could be £350,000 a year. It will give us more competitive rates so we're looking for commitment and support on it."

It was debated during a meeting of the resources scrutiny panel, where councillors welcomed the move.

Labour Councillor Robin Lunn said: "I'm strongly in favour of this - councils can't go lending money from anywhere, we've all seen the problems from the collapse of the Icelandic banks which affected the Wyre Forest in particular.

"But this can only be a positive step, I'm only surprised it hasn't been done before."

Tory Councillor Marc Bayliss said: "It sounds a really interesting development, if we can bring competition to the PWLB it's a jolly good thing."

Mr Pearce said any profits made from the agency would be split between all the shareholders, providing another benefit.

A vote will take place at full council on Thursday, September 18.

It comes as County Hall is battling unprecedented financial pressure, and it looking to cut around £25 million from spending every year until at least 2017.