Select Committee on Transport, Local Government and the Regions Minutes of Evidence

Examination of Witnesses (Questions 20-39)



Mr Betts

  20. Is it not a bit like the Government saying "at present you cannot borrow unless we say you can and in future you will not be able to borrow unless we say you cannot"?
  (Cllr Bruce-Lockhart) Yes, it is a little bit like that.
  (Mr Kinghan) The threat will be there, you are right. I do think the notion that every authority might borrow up to its own prudential limits and that somehow together that would amount to a total that was more than the national economy could afford, which is what the explanatory notes in the Bill say, does seem an odd one given that local government, while it is an important factor in the economy but it is not such an enormous factor and given that local authorities are not spending that much on capital at the moment.

  21. I want to raise one other issue and that is the issue of the sources from which local authorities can borrow. Do you think these should be restricted at all?
  (Mr Kinghan) I think that part of the purpose of these restrictions, as I understand it, is to stop authorities borrowing in foreign exchange and it may be that there is a case for limiting borrowing in that respect, but they are cast quite wide. To take the point you have been making about the other powers, they could be used to limit authorities more significantly, so there would be a case for narrowing the constraints there.

  22. So you would really want to be free to borrow, like a housing association?
  (Mr Kinghan) I think we accept that it is right that local authorities should be subject to prudential rules and that professional rules of the kind that CIPFA produce should guide what local authorities could borrow. The present degree of restriction is too great but things have changed slightly for the better recently and we will carry on pressing for them to change more.


  23. You really want changes to Clause 2. Can you tell us what you would like to see disappear from Clause 2?
  (Mr Kinghan) I think I might have to ask for your forbearance to send you some drafting changes, if we may.

  24. Yes. The only restraint on that is can we have them very quickly?
  (Mr Kinghan) Certainly.

  Chairman: That would be helpful.

Mr Cummings

  25. Your evidence indicates more than a degree of displeasure with Clause 10 of the Bill which relates to the control of capital receipts. Would you explain to the Committee in some detail these concerns and why they have given you so much angst?
  (Mr Kinghan) Clause 10 is the clause which allows the Secretary of State to require local authority capital receipts to be paid to the Government. This is a distributional issue. What we were seeking to set out in our evidence was that this was the cause of a great deal of controversy in local government. Some authorities stand to lose, we do not know yet how much but may stand to lose millions of pounds as a result of this, other authorities may gain as a result of redistribution. Obviously those authorities which gain are fairly positive about the proposal and those which stand to lose are not so keen on it. The Government originally announced its intention to legislate in this way in the White Paper in November/December last year. We have been waiting since then for more detail.

  26. Are you suggesting that what local authorities have they hold forever more?
  (Mr Kinghan) No, I am saying that those local authorities which will lose as a result of these proposals are not surprisingly hostile to them and those which think that they may gain as a result are more positive about them. The LGA has not taken a firm view since there are different views among local authorities. What we are saying is that all authorities should have an opportunity to comment on the proposals in detail and we want the Government to get on with spelling out what its proposals are.

  27. So you have nothing to suggest to the Committee as to how you would prefer Clause 10 to be written?
  (Mr Kinghan) We would certainly like—

  28. Are you giving a lead to your association members or are you just sitting back and taking notes?
  (Mr Kinghan) I think the Committee has come across this issue before.

  29. Are you taking a positive lead?
  (Mr Kinghan) Where there are questions of distribution then individual member authorities take different views and what the LGA seeks to do is to provide an opportunity for them all to express their views.

  Chairman: Surely the LGA ought to be able to look at the sum principle of equity. Is there an argument in equity that there ought to be some redistribution or is it merely an opportunity for those local authorities short of resources to get some extra?

Sir Paul Beresford

  30. The other way of putting it is those local authorities that want to hang on to their properties, etc., and therefore have not got capital receipts are going to be recipients of those who sell.
  (Mr Kinghan) There are lots of philosophical arguments here.


  31. Is there a line that would be fair, if you like, that you would put forward and then you can apply this or are you really saying it should not be in the Bill at all?
  (Mr Kinghan) I am not saying that it should not be in the Bill because, as I said, some authorities are keen to see it in the Bill and some are not. You are asking us to take sides and, as you know, that is a very difficult issue for the LGA to do. We are saying that the Government should spell out its proposals more quickly. We have said, also, that it is important that the Government should be clear that these proposals relate only to housing because the Bill does not refer specifically to housing, although we understand that is the intention. I am afraid that in this area, as in other questions of distribution, the LGA is not going to take sides between its member authorities.

  32. You are not saying that there is an argument in equity to do some of it, you are just saying that there are some gainers and losers and you want to sit on the fence?
  (Mr Kinghan) I think there are gainers and losers and we have to deal with that position. What is quite clear is that housing needs more capital investment and that the argument that there ought to be more investment in the system is one that we would wholly support. Receipts are one source of expenditure but there are others including borrowing and including Government support as well.

Sir Paul Beresford

  33. What does the LGA think of it being retrospective?
  (Mr Kinghan) I do not think it is retrospective. As I understand it, it applies to newly arising receipts.

  Sir Paul Beresford: That was not the way I read it.

Mr O'Brien

  34. Does the LGA have a view as to what would be an appropriate balance between central and local government funding to provide local government services? If so, what is that?
  (Cllr Bruce-Lockhart) I think that the LGA certainly would want to see a greater share of funding raised locally. There are a variety of ways you can do that and one of the reasons why the LGA does not want to see the RSG merged with the NNDR is because of the possibility of moving that way in the future. So the LGA is wholly committed to seeing a greater share of funding raised locally.

  35. What is your view on the determination and calculation and distribution of the formula grant for SSAs?
  (Cllr Bruce-Lockhart) On the distribution of grant?

  36. And the formula which builds up to it, have you a view?
  (Cllr Bruce-Lockhart) Are you talking about the changes which were announced today in the consultation paper?

  37. Your view on the changes which have been announced today would be helpful.
  (Cllr Bruce-Lockhart) I am sure they would. I think my personal views on that would not be helpful as I come from a southern shire county and I speak for the LGA. The LGA has always sat firmly on the fence on this issue because it is trying to speak for all three types of authorities and all parts of the country. We come back simply to your first point about where you raise money locally and doing that through the business rate is extremely important. The fact that the business rate is at the moment separated out so you can see it is important for our relationships with businesses whom we have to consult. There are other mechanisms, of course, in other countries which would be well worth looking at: tourism tax in the United States, fuel tax, motor tax, other means of raising finance locally but where we stand is we would like to see a greater share raised locally.

  38. Has the LGA submitted any amendments to include some of these taxes that you referred to?
  (Cllr Bruce-Lockhart) It has not done.

  39. Are you considering doing that?
  (Cllr Bruce-Lockhart) We have not.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 30 August 2002