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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 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).

 
Bill 953/2
 
 

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

performance of the duty under subsection (1).

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

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           (a)           make provision about—

                  (i)                 when a local authority is to make a determination under

subsection (1),

                  (ii)                how a local authority is to make such a determination, and

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

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

subsection (1);

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

determination under subsection (1) or in monitoring an amount

determined under that subsection.

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     (4)    Regulations under subsection (2) may include provision requiring a local

authority to have regard to one or more specified codes of practice, whether

issued by the Secretary of State or another.

 4     Imposition of borrowing limits

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

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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

authority does not borrow more than it can afford.

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

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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

corresponding limit.

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

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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

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

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

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effect—

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

headroom exists were reduced by that amount, and

 

 

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

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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 a local

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

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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

           (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

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

           (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—

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           (a)           a liability to repay money,

           (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

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regulations made by the Secretary of State.

 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 it under section 3, or

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

 

 

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

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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

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

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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

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

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

by the authority when it becomes payable to it.

 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

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

wholly of money payable to the authority, or

           (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.

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

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

such an amount as may be determined under the regulations;

 

 

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

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           (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

capital receipts by a local authority.

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     (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

                  (ii)                debts or other liabilities;

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           (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

authority derives from the disposal of housing land.

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     (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).

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

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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.

Investment

 12    Power to invest

A local authority may invest—

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

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

Miscellaneous

 13    Security for money borrowed etc

     (1)    Except as provided by subsection (3), a local authority may not mortgage or

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charge any of its property as security for money which it has borrowed or

which it otherwise owes.

     (2)    Security given in breach of subsection (1) shall be unenforceable.

     (3)    All money borrowed by a local authority (whether before or after the coming

into force of this section), together with any interest on the money borrowed,

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shall be charged indifferently on all the revenues of the authority.

     (4)    All securities created by a local authority shall rank equally without any

priority.

 

 

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

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     (5)    The High Court may appoint a receiver on application by a person entitled to

principal or interest due in respect of any borrowing by a local authority if the

amount due remains unpaid for a period of two months after demand in

writing.

     (6)    The High Court may appoint a receiver under subsection (5) on such terms,

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and confer on him such powers, as it thinks fit.

     (7)    The High Court may confer on a receiver appointed under subsection (5) any

powers which the local authority has in relation to—

           (a)           collecting, receiving or recovering the revenues of the local authority,

           (b)           issuing levies or precepts, or

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           (c)           setting, collecting or recovering council tax.

     (8)    No application under subsection (5) may be made unless the sum due in

respect of the borrowing concerned amounts to not less than £10,000.

     (9)    The Secretary of State may by order substitute a different sum for the one for

the time being specified in subsection (8).

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 14    Information

A local authority shall supply the Secretary of State with such information

relating to any of the matters dealt with in this Chapter, and at such time, as he

may request.

Supplementary

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 15    Guidance

In carrying out its functions under this Chapter, a local authority shall have

regard—

           (a)           to such guidance as the Secretary of State may issue, and

           (b)           to such other guidance as the Secretary of State may by regulations

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specify for the purposes of this provision.

 16    “Capital expenditure”

     (1)    Subject to subsection (2), references in this Chapter to capital expenditure, in

relation to a local authority, are to expenditure of the authority which falls to

be capitalised in accordance with proper practices.

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     (2)    The Secretary of State may—

           (a)           by regulations provide that expenditure of local authorities shall be

treated for the purposes of this Chapter as being, or as not being, capital

expenditure;

           (b)           by direction provide that expenditure of a particular local authority

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shall be treated for the purposes of this Chapter as being, or as not

being, capital expenditure.

 17     External funds

     (1)    For the purposes of this Chapter—

 

 

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Part 1 — Capital finance etc and accounts
Chapter 1 — Capital finance etc

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           (a)           borrowing of money by a local authority for the purposes of an external

fund shall be treated as not being borrowing by the authority;

           (b)           the temporary use by a local authority of money forming part of an

external fund, if not for a purpose of the fund, shall be treated as

borrowing by the authority;

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           (c)           entry into a credit arrangement by a local authority for the purposes of

an external fund shall be treated as not being entry into a credit

arrangement by the authority;

           (d)           a disposal by a local authority of—

                  (i)                 an interest in an asset which, at the time of the disposal, is an

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asset of an external fund, or

                  (ii)                an investment held for the purposes of such a fund,

                         shall be treated as not being a disposal by the authority;

           (e)           the making of an investment by a local authority for the purposes of an

external fund shall be treated as not being the making of an investment

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by the authority;

           (f)           expenditure incurred by a local authority in respect of payments out of

an external fund shall be treated as not being expenditure of the

authority.

     (2)    In this section, references to an external fund, in relation to a local authority,

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are to—

           (a)           a superannuation fund which the authority is required to keep by

virtue of the Superannuation Act 1972 (c. 11), or

           (b)           a trust fund of which the authority is a trustee.

 18    Local authority companies etc

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     (1)    The Secretary of State may for the purposes of this Chapter by regulations

make provision for things done by or to a body mentioned in subsection (2) to

be treated in such cases and to such extent as the regulations may provide as

done by or to a local authority specified in, or determined in accordance with,

the regulations.

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     (2)    Those bodies are—

           (a)           a Passenger Transport Executive,

           (b)           a company which, in accordance with Part 5 of the Local Government

and Housing Act 1989 (c. 42) (companies in which local authorities

have interests), is under the control, or for the time being subject to the

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influence, of a local authority or a Passenger Transport Executive, and

           (c)           a trust to which the provisions of section 69 of that Act (companies

subject to local authority influence) are applicable because of an order

under section 72 of that Act (trusts influenced by local authorities).

     (3)    A local authority to which regulations under this section apply and any body

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or bodies falling within subsection (2)(a) or (b) with which the regulations link

the authority are referred to in this section as the members of a local authority

group.

     (4)    Regulations under this section may include—

           (a)           provision for the application of any of the provisions of this Chapter to

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members of a local authority group subject to such modifications as the

regulations may specify;

           (b)           provision as to the way in which—

 

 

 
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