Previous SectionIndexHome Page

10.17 pm

The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Mr. Alan Meale): Before congratulating the hon. Member for Harrogate and Knaresborough (Mr. Willis), Madam Speaker, I congratulate you. Some of us have early nights and get home, but when we are involved in Adjournment debates we realise that you are here all the time. It is nice to put that on the record.

I congratulate the hon. Member for Harrogate and Knaresborough (Mr. Willis) on securing an Adjournment debate on a very important subject. Since entering this place the hon. Gentleman has never missed an opportunity to fight with vigour the cause of his constituency. I pay tribute to him for that.

The hon. Gentleman has explained well the circumstances surrounding Harrogate borough council's application for trading credit approvals for capital investment in a new exhibition hall and hospitality facility for the Harrogate international centre. I shall undoubtedly disappoint him at the outset when I say that the Department rarely gives extra credit approvals. One of the main reasons for that is that the 1999-2000 budgets in the Department are identified from within specific funding programmes. There is only £4.5 million for local authority airports and only £1 million for ports in total. More generally, the importance that the Government

29 Mar 1999 : Column 837

attach to capital investment by local authorities is evidenced by the announcement made last summer by my right hon. Friend the Chancellor of the Exchequer in his statement on the economic and fiscal strategy report.

In that statement, my right hon. Friend announced new measures for the modernisation and improvement of Britain's infrastructure and public sector, including a near doubling of net public sector investment over the next three years. Since then, my Department has published a White Paper, "Modern Local Government--In Touch with the People", setting out our detailed proposals for a long-term capital investment framework for improving the system of capital allocations. It also gives local authorities greater freedom as well as encouraging better local authority asset management, thereby ensuring that spending is conducted in the most efficient, fair and effective way.

The hon. Gentleman will know that the Government are committed to sound economic strategies and to spending no more than we can afford. That means prudent policies that meet our fiscal rules and maximise the value of local government investment within public spending constraints.

Under present arrangements, a local authority's borrowing for capital spending is limited to the amount of credit approvals issued by the Government, as the hon. Gentleman acknowledged. Basic credit approvalsare issued each year to local authorities for capital expenditure for all purposes. In addition, supplementary credit approvals may be made available through specific programmes focused on Departments' particular policies.

The total amount of provision for credit approvals made available each year is for individual Departments to determine, within the limits of their overall budgets and in accordance with their spending plans. Departments have announced their capital provision for 1999-2000, as well as provisional figures for the next two years, in accordance with the comprehensive spending review.

As I said, my Department has no plans to make provision for trading credit approvals--

Mr. Paul Tyler (North Cornwall): I am sorry that I have not precisely followed the Minister's argument, but I understood that as the public sector borrowing requirement does not provide a cap or ceiling on the amount of money that can be made available for such purposes, it should not be necessary for Departments to have ceilings.

Mr. Meale: That is a factor, within the constraints in the budget, the design and plan of which is for a three-year spending programme. We want to stick to our programme.

My Department has no plans to make provisionfor trading credit approvals for the period of the comprehensive spending review, other than a small amount for specific transport schemes. In the past, such credit approvals have been issued to only a small number of authorities for investment in transport schemes such as railway lines, tunnels or ports, which generate fares, tolls or some other form of revenue stream. That is because trading credit approvals do not receive revenue support from central Government, so the scheme must generate sufficient operating revenues to pay financing costs.

29 Mar 1999 : Column 838

That is the position with regard to planned expenditure. It is also open to local authorities to apply for extra credit approvals, as the hon. Member for Harrogate and Knaresborough pointed out, which Ministers may issue at any time, taking account of factors that seem to them to be appropriate. My Department receives numerous requests for such increased borrowing for a wide variety of purposes. However, because of pressures on public finances, the hon. Gentleman will not be surprised to hear me say that additional credit approvals--

Mr. Willis: Four were received last year.

Mr. Meale: If the hon. Gentleman waits a little longer, I may finish the explanation. Additional credit approvals, including trading credit approvals, outside existing programmes can be given only in the most exceptional circumstances.

The hon. Gentleman suggested that issuing a trading credit approval would have no impact on central Government resources. As I explained, trading credit approvals are different from other supplementary credit approvals in that they do not attract central Government revenue support for the revenue costs of borrowing. Because of that, it is a fairly common misconception that trading credit approvals are in some way free, and that Ministers are being perverse if they refuse to grant them.

Trading credit approvals, like all other credit approvals, other than those issued in connection with the private finance initiative, count as public spending. Additional trading credit approvals therefore lead to additional public spending. Any extra amounts would have to be found from within the relevant Department's expenditure limit.

In other words, outside identified expenditure programmes, additional trading credit approvals could be given only by taking resources from some other programme. Before my Department agreed to such a transfer, we would need to be fully convinced that it was for a purpose more pressing, especially from the national perspective, than our other expenditure priorities.

As I am sure the hon. Gentleman will understand, my Department's budgets are always stretched, and there is no shortage of projects that Ministers could fund if the resources were available. Another reason why Ministers must be cautious about the issue of additional credit approvals is that increased borrowing means an extra burden on the local authority. That is because trading credit approvals are not supported by revenue payments from central Government. The whole burden of the debt falls on the local authority--in this respect, the local citizen. We would therefore need to be fully convinced on the self-financing aspects of any scheme funded through the trading credit approval route.

Indeed, if the authority could not afford the loan, it would help nobody for the Government, further down the line, to find that they were faced with the dilemma of either pouring more national resources into a rescue measure or writing off the initial investment, leaving the authority to cope with mounting debt. That would help nobody, least of all the local authority. In such circumstances and whatever was decided, either the national or the local taxpayer might have reason to feel justifiably aggrieved if we went about our business in that way.

A further question needs to be addressed in assessing the merits of applications for extra credit approvals--that of precedent. As the hon. Member for Harrogate and

29 Mar 1999 : Column 839

Knaresborough will no doubt appreciate, every local authority making such an application is, naturally, able to make arguments for why it thinks that it should receive assistance and to point to circumstances that it considers to be exceptional. Although the circumstances of particular cases may vary, they are all similar in that they represent opportunities or unavoidable expenditures which authorities face outside their planned programmes.

My Department often hears the argument from local authorities that funding their proposal would cost peanuts in the overall scheme of things. Indeed, they cannot understand the Government's hesitation in that regard, but, although many cases may have merits, it may be extremely difficult for my Department in particular to determine whether any one of those applications for expenditure is more pressing than another. Clearly, helping them all would have a significant impact on public expenditure.

I have said that additional credit approvals, including trading credit approvals, could be given only exceptionally. As all requests for additional resources are looked at on their merits, it is not possible to have rigid criteria for assessing applications. However, together with the considerations that I have mentioned, we take into account whether national or Government policy objectives could be seriously impaired or whether an authority appears to be in imminent danger of failing to deliver effective statutory services.

In that respect, we have had a number of discussions over the past two or three weeks in this place, in particular on the Local Government Bill. The debate amply showed that there are circumstances--whatever the political persuasions of local authorities--where there may be a risk of failure to deliver essential services to our citizens. In that regard, we must always be hesitant about emptying the bank--those services would be more difficult to afford.

Whatever the circumstances, the arguments for giving any additional support would need to be very compelling indeed. All applications for additional credit approvals must be viewed in the general context that I have described. In the case of Harrogate's application for trading credit approvals for upgrading the Harrogate international centre, I can tell the House and the

29 Mar 1999 : Column 840

hon. Gentleman that Ministers met the authority, as he described, and considered written reports and other evidence, as well as the arguments in the case. That included the helpful report of the public-private partnerships programme--the 4Ps to which the hon. Gentleman referred--on a possible public-private partnership approach.

As the hon. Gentleman knows, after weighing all the circumstances of the case, we concluded that the project was not sufficiently exceptional to divert departmental resources from other spending priorities and that a trading credit approval should not be given. I understand that the council proposes to proceed with the upgrading of the conference centre in a phased programme funded by other resources, including usable capital receipts. I hope that that may be assisted by the decision taken last summer to allow the whole of the capital receipts from the sale of council-owned assets, other than council houses, to be used to fund investment rather than to repay debt.

May I expand on some of the issues that have been raised in relation to our decision? The conference centre has been compared with local authority airports, which it cannot be in this case. Controls in respect of airports, tunnels and other such structural items are very different from those in respect of whether a local authority should fund and employ people in an international business centre. The relationship in that case has a different set of priorities.

The Government hope in future to relax the restrictions placed on a number of airport companies, particularly small ones, which now operate on a full commercial basis. To qualify for the removal of borrowing controls, the hon. Gentleman's local airport company, Leeds-Bradford, and the other three local authority airport companies concerned have had to demonstrate a track record of consistent profitability and a strong balance sheet with the prospect of positive cash flows, which has not been the case in respect of the Harrogate international centre. In those cases, my understanding is--

The motion having been made after Ten o'clock, and the debate having continued for half an hour, Madam Speaker adjourned the House without Question put, pursuant to the Standing Order.

 IndexHome Page