|Local Government Bill
Mr. Raynsford: The hon. Gentleman raises a fair point. He will be aware that we have had lengthy and detailed discussions with the LGA and other interested parties about the appropriate basis for Government support for local authority capital investment. No decision has yet been taken, but we will, of course, decide in good time, so that local authorities can plan for the implementation of the new arrangements from April 2004. The principle is that Government support will continue on the same basis on which it has been available for the great majority of local authority capital spending. There is no intention to change that.
The additional freedoms implicit in the Bill will allow local authorities to extend their borrowing to cover unsupported projects, and the authorities will be responsible for the revenue payments. That is what would apply to any person considering their personal budgeting. If they decided to take out a new loan for some purpose for which they had no current income stream, they would obviously have to be satisfied that they had the means to repay that loan. That is a proper element of prudential planning. It is right that local authorities should have that freedom, but it would be wrong to imply that Government should provide additional support for that extra flexibility; that is not the intention. I hope that that clarifies the matter.
There are technical and complex issues involved in any change to the current revenue support framework, and we need to be satisfied that such issues are fully covered before we reach a decision. However, I give the hon. Gentleman an assurance that that will be done in good time to enable local authorities to implement the new arrangement expeditiously.
Mr. Davey: I have two points of clarification. First, will the Government make their decisions before the Committee has finished its deliberations? Clearly, the revenue regime that will support the capital regime is a rather important part of the equation. [Interruption.] I think that I have just destroyed part of the parliamentary furniture; no doubt the cost will be deducted from my pay.
On the second point, the Minister gives a fair explanation of the technical issues that his Department has to grapple with, and I hear what he says. However, is he saying that there may well be a sort of shadow credit approval system in place beneath the prudential regime? Will the Government be telling local authorities that they will support so much borrowing, but for anything above that sum, the authorities are adrift?
Mr. Raynsford: I sincerely hope that the hon. Gentleman's parliamentary salary will not be subject to deductions to meet the loan charges on the cost of replacing the furniture that he appears to be vandalising so early in the proceedings. We know that frustration in the later stages of Committee can lead to all sorts of intemperate behaviour, but in my
Column Number: 015experience it is unusual for Opposition Members to break up the furniture in the first sitting. Be that as it may, a remedy is at hand: if the hon. Gentleman has to meet the costs, he will be able to borrow, and he will work out whether his parliamentary salary is sufficient to cover that borrowing.
We will consult later in the spring on the framework for Government support of local authority borrowing, so I am afraid that it is unlikely that the consultation will be completed before the end of the Committee's proceedings. However, I repeat that the intention is that the Government will continue to support local authority borrowing on the same basis as they do currently—that is, supported borrowing. We are giving local authorities the freedom to borrow in support of their policies without Government support. That is a perfectly reasonable freedom, but they should not expect the Government to have to produce additional support for that borrowing. I believe that the prudential regime is sensible and meets that objective.
Mr. Hammond: I, too, would find it outrageous if the hon. Member for Kingston and Surbiton were to have his salary docked merely for destroying a piece of parliamentary furniture when, as my hon. Friend the Member for New Forest, West says, we are faced with a Government who appear intent on destroying the entire parliamentary structure, and they have not, so far as I know, had any of their salary docked.
The Minister talks about two classes of local authority borrowing: supported borrowing—in which the Government will support the cost in revenue terms—and unsupported borrowing. I do not want us to get too far ahead of ourselves, but if I understand correctly, all borrowing by a local authority is essentially in one pot. Local authorities cannot create mortgages, or dedicate revenue streams to particular forms of borrowing. Is there not a danger that we will have a situation in which local authority borrowing that is unsupported by revenue from central Government is seen as a higher risk class of borrowing carrying a higher coupon? Owing to the inability of local authorities to ring-fence parts of their borrowing, the effect might be a downgrading of overall local authority credit ratings. Has that been extrapolated by the Minister and his officials? Is he satisfied that there is no risk that unsupported local authority borrowing by some authorities will drag down the credit rating of all local authority borrowers?
Mr. Raynsford: I wholly reject the hon. Gentleman's suggestion that the Government are breaking up the parliamentary structure. He should be careful about using such analogies because many people believe that his party is in the process of breaking up what was once a great party of government. Let us not take the analogies any further.
The hon. Gentleman made a distinction between supported and unsupported borrowing. The key purpose of the reforms is to allow local authorities greater discretion to determine their borrowing. However, they are required to do that in a prudential framework, which is the safeguard against
Column Number: 016the hon. Gentleman's fear about possible downgrading of local authority credit ratings. He will know that all local authority debt is treated comparably. There is no question of ring-fencing any debt to specific revenue flows or repayment means. That gives the security that he wants to ensure that local government credit ratings should not be undermined—providing that local authorities act prudently. That is the obverse side of the coin: we are giving greater freedom, but that is in a framework that rightly expects authorities to operate a prudential framework.
Mr. Andrew Turner (Isle of Wight) rose—
Mr. Raynsford: I give way to the hon. Gentleman.
The Chairman: Order. This issue can be debated under a subsequent amendment, so unless the Minister wishes to conclude his remarks on clause 1 stand part, I would prefer to put the Question.
Mr. Raynsford: Under that guidance, I shall say that the framework is coherent and achieves the objectives that the hon. Member for Runnymede and Weybridge set out. I hope that he will agree that the clause should stand part of the Bill.
Mr. Hammond: I am grateful to the Minister for his clarification. We will need to return to several issues raised by his past few comments when we consider clause 3, although the Liberal Democrat amendment to clause 2 will provide a vehicle for that.
I do not want to take up more of the Committee's time, but may I draw the Minister's attention to the fact that we have been sensibly debating clause 1 for 18 minutes, although the clause was his example of a clause on which we would not need to spend any time. There has been no time wasting and no unnecessary debate. The debate has been valid and it clarified many issues. That underlines the real difficulty of considering the Bill under the timetable before the Committee.
Question put and agreed to.
Clause 1 ordered to stand part of the Bill.
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