|
Mr. Desmond Swayne (New Forest, West): The clause is almost identical to the clause that appeared in the draft Bill, and it is that fact that has generated such strong representations to members of the Committee. I see from the agitated body language of many Government Members that they are as affected by those representations as we are. The answer proposed by my hon. Friend the Member for Runnymede and Weybridge is that we should vote against the clause. He is a wise man, but also a hard man in such respects.
I should like to offer the Minister an opportunity to try to draw the sting of the opposition that has been caused by the fact that the Bill contains that almost
Column Number: 101
unamended clause. The Minister described the ''prudent safeguards'' as being for extreme circumstances, and said that such provisions were unlikely to be used. Given the lack of anything in the Bill, would it not have been wise—indeed, he still has an opportunity to do this—to give the Committee an exposition of the extreme conditions in which the powers would be used.
The prudential tests that apply to borrowing will clearly not provide any great scope for increases in capital expenditure. Therefore the key to affordability for local authority capital investment will remain the level of Government funding for that. The Local Government Association pointed out that the debate takes place against the background of an expected paper from the Government on the future of Government support for local authority capital finance. I had not known that. Would it not be possible for the Minister to draw some of the sting of the opposition to the clause by sharing with the Committee some insight into the details of that expected Government paper on local authority capital finance?
9.45 am
Mr. Raynsford: Opposition Members' nice cop, nasty cop routine is a fascinating challenge to the normal stereotypes. I must tell the hon. Member for New Forest, West (Mr. Swayne) that I have already spelled out the extreme circumstances by describing the lamentable mismanagement of this country's economy by his noble Friend Lord Lamont a decade ago. I hope we will never return to that. As a prudent Government we have put these provisions in so that in the event of the country making a great mistake and ever again returning a Conservative Government there would at least be a safeguard.
Mr. Turner rose—
Mr. Hammond rose—
Mr. Raynsford: The ease with which one can get a rise out of the Opposition is extraordinary.
Mr. Hammond: The Minister may joke, but he has just said something very important. Is he ruling out the use of the power under section 4(1) for so long as his Government are in power?
Mr. Raynsford: No. I am saying that we do not at present envisage circumstances in which the power has to be used because the economy is being well and prudently managed. As a prudent Minister, I cannot possibly anticipate what is likely to happen in the foreseeable future if there were to be major upheavals in the world economy that affected this country. It is right that these powers should be there, but we do not envisage using them. We do not anticipate their need but we think it prudent to put them in the Bill.
Mr. Hammond: Does the Minister regard a halving of the value of shares quoted on the London stock exchange over three years as being a serious economic circumstance?
Mr. Raynsford: It is a serious economic circumstance, but because the national finances have
Column Number: 102
been so well managed by the Chancellor, we are in a stronger position than almost any other country in the world to weather an international storm. The hon. Gentleman is well enough versed in the movements of stock exchanges to know that what is happening in London is not unique. He will see similar trends in Tokyo, New York and Frankfurt. But the British economy is more strongly placed to cope with that than almost any other economy in the world. We do not see a need to use these powers in the foreseeable future, but it is wise that they should be there.
The hon. Member for New Forest, West referred to drawing the sting out of the opposition. It may reflect my benign view of the world at the start of my 59th year, but it feels like a very minor prick by an irritating gnat.
Mr. Turner rose—
Mr. Raynsford: I give way to another hon. Gentleman.
Mr. Turner: I thought that the Minister was going to say another irritating gnat.
As the Minister is prepared to contemplate the possibility of a future Conservative Government, will he also contemplate whether his reassurances that the powers would be used only in circumstances that he might describe as a crisis would apply to a future Government? Is he legislating for his Government or for a future Government, who may have different views about the use of these powers?
Mr. Raynsford: I accept that, of course. I have already made it clear that we are legislating for the future, but in response to a question from the hon. Member for Runnymede and Weybridge I was happy to acknowledge that because of international factors such circumstances might arise in the lifetime of this Government. I am glad that I have given the hon. Member for Isle of Wight some comfort and that as a result of my remarks it is possible for him to contemplate a future Conservative Government. On that happy note, I urge the Committee to allow the clause to stand part of the Bill.
Question put, That the clause stand part of the Bill:—
The Committee divided: Ayes 15, Noes 8.
Division No. 4]
AYES
Borrow, Mr. David
Caton, Mr. Martin
Cruddas, Jon
Davey, Valerie
Dobbin, Jim
Hall, Patrick
Iddon, Dr. Brian
Lepper, Mr. David
Leslie, Mr. Christopher
Mountford, Kali
Quinn, Lawrie
Raynsford, Mr. Nick
Sawford, Phil
Todd, Mr. Mark
Woolas, Mr. Phil
NOES
Curry, Mr. David
Davey, Mr. Edward
Doughty, Sue
Goodman, Mr. Paul
Hammond, Mr. Philip
Pugh, Dr. John
Swayne, Mr. Desmond
Turner, Mr. Andrew
Question accordingly agreed to.
Clause 4 ordered to stand part of the Bill.
Column Number: 103
Clause 5
Temporary borrowing
Amendment made: No. 23, in
clause 5, page 3, line 4, after 'by', insert 'or for'.—[Mr. Raynsford.]
Mr. Hammond: I beg to move amendment No. 30, in
This is a technical amendment. Clause 5 gives local authorities the power to make temporary borrowing arrangements for managing their in-year cash flow, which is a sensible provision. The limit for borrowing for such purposes is effectively any amount due to the authority within the period, which it has not yet received. A local authority's receivables at any given time will include sums of money that will in practice not be collected. Until the Minister tells us differently, I will assume that an in-year receivable will include housing revenue account arrears, council tax arrears from previous years and 100 per cent. of the council tax due in the current year. No authority collects 100 per cent. of its council tax and some have a lamentable record of collection.
If the clause is to achieve what it intends, the additional words in the amendment are required so that the limit would be set by reference to amounts receivable within the current period and reasonably expected to be received. For example, an authority that has historically collected 96 per cent. of the council tax due will be allowed to take into account only 96 per cent., not 100 per cent. That is a sensible way to approach borrowing for in-year cash-flow management purposes; it must be based on real, anticipated receipts, not nominally receivable amounts that in practice everyone understands will not be received in full. I hope that the Minister will accept the amendment or undertake to deal with the issue in another way.
Dr. John Pugh (Southport): I have a technical query. The Bill's aim is to achieve prudential management. I agree with Aristotle that prudence is difficult to define and circumstantial. As it is defined in the Bill, prudence is setting and keeping to an authorised limit. Conservative Members argued in a previous debate that prudence sometimes consists of keeping clear of that limit because capital programmes can go wrong, mistakes can occur and it is always as well to have something in reserve. However, in temporary and exceptional circumstances it might be prudent to exceed that authorised limit.
All of us, including CIPFA, accept that the Bill's goal is to attain long-term prudence. The amendment seeks a little precision in the authorised limit, which will be a firm, almost mathematical calculation, defined by a relationship between capital and revenue. The revenue base will include what is in the accounts and the money due, and we should consider what that means. Money due is not necessarily what the authority will get, but what it is legally entitled to.
My inquiry relates to the real world of local authority finance. Can money that may, for example, be subject to a negotiable bond be included, as well as
Column Number: 104
money due that is on the books? In circumstances in which a capital project has failed and a bond is to be negotiated, it will be contested in the court and arrive during the course of the year. Can a local authority reasonably include that as money due? Conversely, if there are contestable legal liabilities in the year, which the treasurer does not think will become due but which might do so, would they be included? I argue that they would not, because in the prevailing circumstances there is a strong element of over-programming, allowance for slippage and so on in local authorities. When financial issues hinge on legal issues that may be debated during the financial year, will the money be included in the money-due or the money-owed category?
Mr. Raynsford: Clause 5 is a welcome and flexible provision to enable authorities to borrow temporarily when faced with deficits in income due to late payment of items including council tax, for example. To meet urgent commitments such as salaries, local authorities need to borrow short-term. The clause ensures that the authorities' borrowing limits in clauses 3 or 4 are increased by payments due to them in the financial year that have not yet been received.
The amendment would add an unwelcome restriction. To increase the borrowing limit, the payment would not only have to be due but reasonably expected to be received in the current year. That would create two problems: first, the expression ''reasonably expected'' is vague and would add speculation to the process, possibly exposing the authority to a risk of litigation, particularly if litigious members of the public wanted to challenge the authority's financial management.
Secondly, there are timing difficulties. A payment becoming due in late March but not expected until early April, in the next financial year, would fall outside the provision, yet it is precisely in such a situation that the temporary borrowing capacity is crucial. The amendment is not helpful and it would not be welcomed by local government.
The hon. Member for Runnymede and Weybridge referred to local authorities having a lamentable record on council tax collection. However, the evidence is that local authorities are improving their collection rate, and we are seeing significant improvement throughout the country, even in the authority that, by universal agreement, had the most lamentable record. One and a half years ago, the London borough of Hackney had a collection rate of about 66 per cent., but I am told that it is now at 80 per cent. That is still far too low, but it is going in the right direction, which is a general trend in local government. I hope that the hon. Gentleman will give credit to local authorities for improving their collection rate.
10 am
|
