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Session 2002 - 03
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Other Bills before Parliament

Local Government Bill


Local Government Bill
Part 1 — Capital finance etc and accounts
Chapter 1 — Capital finance etc

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A

Bill

To

To make provision about finance, and other provision, in connection with

local and certain other authorities; to provide for changing the dates of local

elections in 2004; to amend the Audit Commission Act 1998; and for connected

purposes.

Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and

consent of the Lords Spiritual and Temporal, and Commons, in this present

Parliament assembled, and by the authority of the same, as follows:—

Part 1

Capital finance etc and accounts

Chapter 1

Capital finance etc

Borrowing

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 1     Power to borrow

A local authority may borrow money—

           (a)           for any purpose relevant to its functions under any enactment, or

           (b)           for the purposes of the prudent management of its financial affairs.

 2     Control of borrowing

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     (1)    A local authority may not borrow money if doing so would result in a breach

of—

           (a)           the limit for the time being determined by or for it under section 3, or

           (b)           any limit for the time being applicable to it under section 4.

     (2)    The Secretary of State may, in relation to specific borrowing by a particular

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local authority, by direction disapply subsection (1)(b), so far as relating to any

limit for the time being applicable under section 4(1).

 
HL Bill 4353/2
 
 

Local Government Bill
Part 1 — Capital finance etc and accounts
Chapter 1 — Capital finance etc

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     (3)    A local authority may not, without the consent of the Treasury, borrow

otherwise than in sterling.

     (4)    This section applies to borrowing under any power for the time being available

to a local authority under any enactment, whenever passed.

 3     Duty to determine affordable borrowing limit

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     (1)    A local authority shall determine and keep under review how much money it

can afford to borrow.

     (2)    In the case of the following authorities, namely—

           (a)           the Greater London Authority, and

           (b)           a functional body,

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            the Mayor shall determine and keep under review how much money the

authority can afford to borrow.

     (3)           Before making any determination under subsection (2), the Mayor shall

consult the London Assembly.

     (4)           Before making a determination under subsection (2) for a functional body, the

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Mayor shall consult that body.

     (5)    The Secretary of State may by regulations make provision about the

performance of the duty under subsection (1) or (2).

     (6)    Regulations under subsection (5) may, in particular—

           (a)           make provision about—

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                  (i)                 when a determination under subsection (1) or (2) is to be made,

                  (ii)                how such a determination is to be made, and

                  (iii)               the period for which such a determination is to be made;

           (b)           make provision about the monitoring of an amount determined under

subsection (1) or (2);

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           (c)           make provision about factors to which regard may be had in making a

determination under subsection (1) or (2) or in monitoring an amount

determined under that subsection.

     (7)    Regulations under subsection (5) may include provision requiring a person

making a determination under subsection (1) or (2) to have regard to one or

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more specified codes of practice, whether issued by the Secretary of State or

another.

     (8)    A local authority’s function under subsection (1) shall be discharged only by

the authority.

     (9)    Section 38(1) of the Greater London Authority Act 1999 (c. 29) (delegation by

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Mayor) does not apply in relation to functions under subsection (2).

     (10)          In this section—

                    “functional body” has the same meaning as in the Greater London

Authority Act 1999;

                    “local authority” does not include the Greater London Authority or a

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functional body;

                    “Mayor” means Mayor of London.

 

 

Local Government Bill
Part 1 — Capital finance etc and accounts
Chapter 1 — Capital finance etc

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 4     Imposition of borrowing limits

     (1)    The Secretary of State may for national economic reasons by regulations set

limits in relation to the borrowing of money by local authorities.

     (2)    The Secretary of State may by direction set limits in relation to the borrowing

of money by a particular local authority for the purpose of ensuring that the

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authority does not borrow more than it can afford.

     (3)    Different limits may be set under subsection (1) or (2) in relation to different

kinds of borrowing.

     (4)    A local authority subject to a limit set under subsection (1) may transfer any

headroom it has in relation to the limit to another local authority subject to a

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corresponding limit.

     (5)    The Secretary of State may by regulations make provision about the exercise of

the right under subsection (4) and may, in particular, make provision about—

           (a)           the circumstances in which a local authority is to be regarded as having

headroom for the purposes of that subsection, and

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           (b)           the amount of headroom which it has for those purposes.

     (6)    Where an amount is transferred under subsection (4), this Chapter shall have

effect—

           (a)           in relation to the transferor, as if the limit in relation to which the

headroom exists were reduced by that amount, and

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           (b)           in relation to the transferee, as if the corresponding limit to which it is

subject were increased by that amount.

 5     Temporary borrowing

     (1)    Subject to subsection (2), any limit for the time being determined by or for a

local authority under section 3, or applicable to it under section 4, shall be

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treated for the purposes of this Chapter as increased by the amount of any

payment which—

           (a)           is due to the authority in the period to which the limit relates, but

           (b)           has not yet been received by it.

     (2)    In the case of a limit determined under section 3, or set under section 4(2),

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subsection (1) shall not apply to any payment whose delayed receipt was

taken into account in arriving at the limit.

 6     Protection of lenders

A person lending money to a local authority shall not be bound to enquire

whether the authority has power to borrow the money and shall not be

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prejudiced by the absence of any such power.

Credit arrangements

 7     “Credit arrangements”

     (1)    For the purposes of this Chapter, a local authority shall be taken to have

entered into a credit arrangement where—

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           (a)           it enters into a transaction which gives rise to a liability on its part, and

 

 

Local Government Bill
Part 1 — Capital finance etc and accounts
Chapter 1 — Capital finance etc

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           (b)           the liability is a qualifying liability.

     (2)    A transaction entered into by a local authority is to be taken for the purposes

of subsection (1) as giving rise to a liability on the part of the authority if—

           (a)           it falls in accordance with proper practices to be treated for the

purposes of the authority’s accounts as giving rise to such a liability, or

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           (b)           it falls in accordance with regulations made by the Secretary of State to

be treated as falling within paragraph (a).

     (3)    The reference in subsection (1)(b) to a qualifying liability is to any liability other

than—

           (a)           a liability to repay money,

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           (b)           a liability in respect of which the date for performance is less than 12

months after the date on which the transaction giving rise to the

liability is entered into, and

           (c)           a liability of a description specified for the purposes of this provision by

regulations made by the Secretary of State.

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 8     Control of credit arrangements

     (1)    A local authority may not enter into, or vary, a credit arrangement if doing so

would result in a breach of—

           (a)           the limit for the time being determined by or for it under section 3, or

           (b)           any limit for the time being applicable to it under section 4.

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     (2)    In applying those limits for the purposes of subsection (1)—

           (a)           entry into a credit arrangement shall be treated as the borrowing of an

amount of money equal to the cost of the arrangement, and

           (b)           variation of a credit arrangement shall be treated as the borrowing of

an amount of money equal to the cost of the variation.

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     (3)    The Secretary of State may by regulations make provision about the calculation

for the purposes of subsection (2) of the cost of a credit arrangement or a

variation and may, in particular, make provision about the treatment of

options.

     (4)    The Secretary of State may by regulations impose additional restrictions on the

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power of a local authority to enter into or vary credit arrangements.

Capital receipts

 9     “Capital receipt”

     (1)    Subject to subsection (3), references in this Chapter to a capital receipt, in

relation to a local authority, are to a sum received by the authority in respect of

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the disposal by it of an interest in a capital asset.

     (2)    An asset is a capital asset for the purposes of subsection (1) if, at the time of the

disposal, expenditure on the acquisition of the asset would be capital

expenditure.

     (3)    The Secretary of State may by regulations—

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           (a)           make provision for the whole of a sum received by a local authority in

respect of the disposal by it of an interest in a capital asset, or such part

 

 

Local Government Bill
Part 1 — Capital finance etc and accounts
Chapter 1 — Capital finance etc

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           (a)           of such a sum as may be determined under the regulations, to be

treated as not being a capital receipt for the purposes of this Chapter;

           (b)           make provision for the whole of a sum received by a local authority

otherwise than in respect of the disposal by it of an interest in a capital

asset, or such part of such a sum as may be determined under the

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regulations, to be treated as being a capital receipt for the purposes of

this Chapter.

     (4)    Where a sum becomes payable to a local authority before it is actually received

by the authority, it shall be treated for the purposes of this section as received

by the authority when it becomes payable to it.

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 10    Non-money receipts

     (1)    The Secretary of State may by regulations apply section 9 to cases where—

           (a)           a local authority makes a disposal of the kind mentioned in subsection

(1) of that section and the consideration for the disposal does not consist

wholly of money payable to the authority, or

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           (b)           a local authority receives otherwise than in the form of money anything

which, if received in that form, would be a capital receipt under that

section.

     (2)    Regulations under subsection (1) may, in particular—

           (a)           make provision for a local authority to be treated as receiving a sum of

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such an amount as may be determined under the regulations;

           (b)           make provision about when the deemed receipt is to be treated as

taking place.

 11    Use of capital receipts

     (1)    The Secretary of State may by regulations make provision about the use of

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capital receipts by a local authority.

     (2)    Regulations under subsection (1) may, in particular—

           (a)           make provision requiring an amount equal to the whole or any part of

a capital receipt to be used only to meet—

                  (i)                 capital expenditure, or

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                  (ii)                debts or other liabilities;

           (b)           make provision requiring an amount equal to the whole or any part of

a capital receipt to be paid to the Secretary of State.

     (3)    The power under subsection (1), so far as relating to provision of the kind

mentioned in subsection (2)(b), shall only apply to receipts which a local

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authority derives from the disposal of an interest in housing land.

     (4)    The reference in subsection (3) to housing land is to any land, house or other

building in relation to which the local authority is, or has been, subject to the

duty under section 74 of the Local Government and Housing Act 1989 (c. 42)

(duty to keep Housing Revenue Account).

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     (5)    Regulations under subsection (1) may include provision authorising the

Secretary of State to set off any amount which an authority is liable to pay to

him under this section against any amount which he is liable to pay to it.

 

 

 
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