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2.51 pm
The Parliamentary Under-Secretary of State for Wales (Mr. Jon Owen Jones): I congratulate my hon. Friend on securing the debate. Today was almost his last chance to raise the subject here, because within six days it will be a matter for the National Assembly for Wales.
I recognise the importance of the issue. From the moment that it became evident, after the reorganisation of local government in 1996, that Denbighshire county council would be facing financial difficulties as a result of the capital spending of the former Rhuddlan borough
council, the Welsh Office began to work closely with the council. By early 1997 it was clear that the council had inherited a substantial, unanticipated debt, although its precise level is still unclear.
On the basis of the figures that I have looked at, the outstanding loan debt of Denbighshire is in the lowest third of all Welsh unitary authority debts. All Welsh unitary authorities inherited debts. That relative position takes into account the council's relative size. It is difficult to accept that the problem is particularly acute in Denbighshire in an absolute or a relative sense. However, I sympathise with my hon. Friend on the potential and uncertain increase that could confront the authority as a result of possible clawback that may be required by the European Commission owing to the apparent poor control exercised by the former Rhuddlan borough council.
Those problems are highlighted by the fact that the district auditor had considerable difficulty in tracing papers relating to the accounts. Denbighshire was offered a financial package that helped the authority to service its capital debt and to minimise the effect on service provision and the level of council tax. The package allowed the council to use £1 million of supplementary credit approval, originally issued for home renovation grants, for unfinanced capital expenditure. The package also gave the authority an additional SCA of £1.5 million towards unfinanced expenditure. That SCA was issued on the understanding that the authority would repay it by accepting a reduction of £500,000 a year in its basic credit approval over three years, starting in 1998-99.
In August 1997, following the publication by the district auditor of a public interest report, the then Under-Secretary, my hon. Friend the Member for Bridgend (Mr. Griffiths), authorised an enhanced financial package, which included a supplementary credit approval of £2.5 million, with a repayment period of five years beginning in this financial year.
Because of the particular circumstances surrounding the financial position of Denbighshire and the public interest that it evoked, the Welsh Affairs Committee has been investigating the problems caused by the inherited debt, and has sought to establish what lessons could be learned for the future. The Committee is expected to issue its report in a few weeks' time.
In giving oral evidence to the Committee, Denbighshire's chief executive took a positive approach, saying that now that the authority has
Among those matters--as my hon. Friend the Member for Clwyd, West (Mr. Thomas) has indicated--are certain issues concerning four European regional development fund projects sponsored by Rhuddlan borough council. My officials have already held informal discussions with chief officers of Denbighshire about these projects, and are now urgently considering in greater detail the various options that might be open to us to handle the apparent difficulties.
The Commission has also become aware of the review and the possible implications for its ERDF investment, and has been sent a copy of the report. Arrangements have been made for my officials to meet the Commission on Monday to discuss the report and its possible implications.
This is not the only ERDF-related issue facing the authority. In October 1997, the European Commission informed the Welsh Office that it was considering, under article 24 of the co-ordination regulations, reducing, suspending or cancelling assistance to the Ffrith beach project on the basis that there had been a significant modification of the conditions on which the grant was awarded to it.
Having consulted Denbighshire about this approach, the Welsh Office responded to the Commission that, as action by the authority to attract private investment to the site was continuing, it was not unreasonable to expect substantial progress towards meeting the project outputs by 31 December 1999 so action under article 24 was inappropriate.
The Commission does not at this stage appear to be convinced by that response and is currently seeking the repayment of £768,000 of ERDF grant, with the caveat that it is prepared to leave the remaining £357,000 with the authority until 31 December 1999--the programme's closure date. At that point, it will wish to consider whether the original outputs have been achieved. The Commission will decide at that time whether or not to seek repayment of the £357,000 from Denbighshire.
Both we and the authority are continuing to resist the Commission's demands over Ffrith beach, but whether we will ultimately be succesful is impossible to predict. To provide the authority with the wherewithal, if necessary, to make any repayments, we have agreed with Denbighshire that if the Commission reclaims grant, we will reduce the amount of supplementary credit approval that the authority has to repay.
I trust that it will be evident to my hon. Friend the Member for Clwyd, West that I fully recognise the gravity of the financial position confronting Denbighshire and that we have done all that is possible and reasonable to assist the authority either to avoid potential repayments or, where those are inescapable, to assist, as far as we can, with the necessary resources to facilitate the repayments. My hon. Friend will realise that the Welsh Office has to be seen to act fairly with Denbighshire, but also with other local authorities.
From next Thursday, these responsibilities will pass to the National Assembly for Wales, which I am sure will continue to work closely with Denbighshire to help it resolve its problems.
Question put and agreed to.
"brought the Rhuddlan accounts into Denbighshire's and obtained assistance from the Welsh Office, we can actually put this behind us and create something new for Denbighshire."
The district auditor, in summarising his evidence, said:
"Given Denbighshire's positive approach, the assistance provided by the Secretary of State and the Council's position relative to other Welsh authorities, if further problems do not arise, with careful planning and monitoring, Denbighshire should be able to manage its financial position."
The financial packages had been offered against a background of uncertainty as to the precise extent of the debt. Earlier this year, my right hon. Friend the Secretary of State issued Denbighshire with a further supplementary credit approval to enable the council to complete a review of its capital programmes, and particularly the capital projects that it had inherited from Rhuddlan. This review,
conducted by Deloitte and Touche, has recently been completed, and highlighted various matters that needed to be addressed.
Adjourned accordingly at Three o'clock.
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