Examination of Witnesses (Questions 20-39)|
MONDAY 8 JULY 2002
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
(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.
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
(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
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
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
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.