Written Ministerial Statements
Tuesday 14 October 2008
Treasury
2008-09 Debt Management Remit to Facilitate Bank Recapitalisation (Revision)
The Economic Secretary to the Treasury (Ian Pearson): I am today revising the Debt Management Office’s (DMO) 2008-09 financing remit to raise £37 billion to facilitate bank recapitalisation. The £37 billion will be raised through:
£30 billion in additional gilt sales (taking total gilt sales to £110 billion in 2008-09); and
£7 billion in additional Treasury bill sales, (taking the contribution to financing of Treasury bills in 2008-09 to + £6.1 billion and the planned Treasury bill stock at end-March 2009 to £23.7 billion).
The planned increase in gilt sales will be split by maturity/type as follows:
£21 billion of additional short-dated conventional gilts (taking total issuance to £46 billion) including the launch on 13 November 2008 of a new, current coupon, gilt maturing on 7 December 2011 (with a long first dividend period);
£7 billion of additional medium-dated conventional gilts (taking total issuance to £19.8 billion);
£1 billion of additional long-dated conventional gilts (taking total issuance to £25.2 billion); and
£1 billion of additional index-linked gilts (taking total issuance to £19 billion).
Seven additional gilt auctions will be scheduled, five of short-dated and two of medium-dated conventional gilts. The DMO has committed not to add any further gilt auctions in the third quarter of this financial year in the event of a further remit revision in the 2008-09 pre-Budget report.
The maximum size of conventional gilt auctions will be increased from £4 billion to £5 billion (cash). The revised gilt auction calendar to the end of 2008 is shown below.
The DMO also plans to supplement sales at auctions with a number of sales of gilts by mini-tenders, which are operations conducted directly with Gilt-Edged Market Makers by the DMO’s dealing desk.
The first such operation in this programme is being announced today to take place on Monday 20 October 2008, for £1 billion (nominal) of 4 per cent. Treasury Stock 2009, for settlement on Tuesday 21 October 2008.
Other mini-tender operations are planned for 4Â1/4 per cent. Treasury Gilt 2055 in the week commencing 17 November, and for 1Â1/4 Index-Linked Treasury Gilt 2055 in the weeks commencing 3 November and 1 December 2008.
| Gilt Auctions to End-2008 (£nom) | |||
| Currently Scheduled | Additional | ||
This revision to the DMO’s remit does not take account of any other changes to the Government’s forecasts of the public finances. These forecasts will be updated in the pre-Budget report. An updated remit, incorporating the changes announced today, will be published, as usual, after the Chancellor’s statement.
This revision to the DMO’s financing remit is being made in accordance with paragraph 5.18 of the published remit which provides that:
“Any aspect of this remit may be revised during the year, in light of exceptional circumstances and/or substantial changes in the following:
the Government's forecast for the gilt sales requirement;
the level and shape of the yield curve;
market expectations of future interest and inflation rates; and market volatility”.
Under the terms of its Operational Notice, the DMO is not obliged to give more than one hour’s notice of such an operation, but in this case, it is pre-committing to the week(s) in which the intended operations will take place, and also commits to give a minimum of 24 hours, notice of the actual size and timing of the planned tenders at the relevant time. Such decisions will be taken in the light of market feedback and conditions at the time.
Communities and Local Government
Local Authority Finances (Icelandic Bank Failures)
The Secretary of State for Communities and Local Government (Hazel Blears): A number of Icelandic banks went into administration in the middle of last week. It quickly became clear that many local authorities were among those who had deposits in those banks. The Government’s first priority has been to do everything we can to help local authorities, along with other creditors, get back the money which they had deposited in the banks. In parallel, my Department has been working closely with the Local Government Association to ensure that individual authorities who are experiencing severe short-term difficulty get assistance to help them through this period. We are doing this to protect individuals, communities and the local services on whom the most vulnerable people in our society depend.
We have put in place a five point plan:
my right hon. Friend the Chancellor of the Exchequer froze the UK assets of Landsbanki last Wednesday, to ensure that local authorities and other creditors are treated fairly; and an
HM Treasury delegation was sent to Iceland on Friday to discuss ways in which deposits could be protected;
in relation to the banks in administration in the UK—Kaupthing Singer and Friedlander and Heritable—we are working to ensure that deposits are recovered as quickly as possible; and the Local Government Association has opened discussions with the administrators, Ernst and Young;
the Local Government Association agreed with the Government last week that it would undertake an urgent analysis of the effects of the situation on individual local authorities, to provide a full picture of the impact on local government. As part of that exercise, which is nearing completion, the LGA have asked any local authority which is facing severe short-term difficulties to let them know as a matter of urgency. My right hon. Friend, the Minister for Local Government and my hon. Friend the Economic Secretary to the Treasury met the Local Government Association last Thursday; and we will be meeting again this week. My hon. Friend the Minister for policing met the Association of Police Authorities on the same day;
we have established a joint rapid response unit with the LGA and Improvement and Development Agency - which is already operational—to provide sector-led support to authorities facing severe short-term difficulties. The Government and the LGA will agree an appropriate set of ways to assist authorities in that position; and have agreed that we will look at the issues facing each authority on a case-by-case basis; and
the rapid response unit now has a team of experts in local authority financial management and treasury management in place, ready to go immediately into any authorities who need that assistance. Her Majesty’s Inspectorate of Constabulary is similarly ready to provide support for police authorities.
Our guidance to local government on investments makes clear that “the general policy objective is that local authorities should invest prudently the surplus funds held on behalf of their communities”. It emphasises that “priority should be given to security and liquidity” and goes on to say that “it will be appropriate to seek the highest rate of return consistent with the proper levels of security and liquidity”. This guidance appears to have been adhered to.
Many authorities have already publicly stated that any risk is not a threat to frontline services—but a small number of authorities may have specific problems, which is why we have put in place support and expertise which is immediately available. No local authority has told the LGA that it is in such short-term difficulty that it cannot pay the wages of its staff.
The Government and international partners have already acted to support stability of the banking system. The LGA and the Government encourage all councils to continue managing their finances prudently and sensibly in difficult times. My hon. Friend the Minister for policing met the Association of Police Authorities last week and my right hon. Friend the Home Secretary is keeping in close touch with the situation to ensure that the steps we are taking are applied as necessary to police authorities.
We will continue to monitor the situation closely and to take appropriate action.
This set of actions should be seen in the context of the wider action taken last week by my right hon. Friend, the Chancellor of the Exchequer. Acting on the advice of the Bank and the Financial Services Authority, my right hon. Friend the Chancellor of the Exchequer last week took action to protect the retail depositors banking subsidiary of Landsbanki and Kaupthing Singer and Friedlander, a UK-based banking subsidiary of Kaupthing Bank. Using powers under the Banking
(Special Provisions) Act 2008, retail deposits in Heritable and Kaupthing, Singer and Friedlander have been transferred to ING Direct. Savers’ money is safe and secure. The Chancellor has also guaranteed retail deposits in Icesave in full. The Treasury and the Financial Services Compensation Scheme are working with the Icelandic authorities and their Deposit Insurance Scheme to ensure that depositors in Icesave are paid back as quickly as possible. The Bank of England has also provided a short-term secured loan of up to £100 million to the London branch of Landsbanki, to help ensure an orderly wind-down and maximize the returns to UK creditors. The Government have also frozen the funds and financial assets held by Landsbanki. This is a precautionary measure to protect UK economic interests and we are continuing to work closely with the Icelandic authorities to ensure a fair process for UK creditors.
Sustainable Communities Act 2007
The Secretary of State for Communities and Local Government (Hazel Blears): I would like to inform Parliament that we have issued today an invitation to local authorities to make proposals which they consider would encourage the improvement of the economic, social or environmental well-being of local areas. The invitation falls under section 2(1) of the Sustainable Communities Act 2007. A copy of the invitation has been deposited in the Library of the House.
Regulations relating to the Act were made on 9 October 2008 and laid before Parliament on 13 October 2008. They come into force on 3 November 2008. The regulations include further details about the procedure to be followed in relation to the submission of proposals under the Act. In particular, they require a local authority, before making any proposal, to establish or recognise a panel of representatives, consult it about the proposal, and to have regard to any guidance issued. The SI number is 2008/2694.
Statutory guidance relating to the Act was published on 9 July 2008, as an annex to statutory guidance on the Local Government and Public Involvement in Health Act 2007 (Creating Strong, Safe and Prosperous Communities: Statutory Guidance).
The text of the formal invitation letter is as follows:
SUSTAINABLE COMMUNITIES ACT 2007: FIRST INVITATION TO LOCAL AUTHORITIES TO SUBMIT PROPOSALS
Dear Colleague
The Sustainable Communities Act 2007 creates a useful opportunity for local authorities to propose new ways to improve local neighbourhoods for their residents, visitors and businesses. I am formally inviting local authorities under section 2(1) of the Sustainable Communities Act to submit their proposals.
This initiative is part of the drive to empower citizens and communities; others are highlighted in the White Paper “Communities in Control: real people, real power”, which was published in July this year.
The principal aim of the Act is to promote the sustainability of local communities by encouraging the improvement of the economic, social or environmental well-being of the authority’s area, including participation in civic and political activity.
It begins from the principle that local people know best what needs to be done to promote the success of their area, but that sometimes they need central Government to act to enable them to do so. It provides a channel for local people to ask central Government, via their local authority, to take such action and for central Government to work in co-operation with the Local
Government Association (LGA)—which represents the interests of local authorities—in making it happen.
I hope this invitation leads to a productive dialogue between central and local government and local communities, and that this will lead to innovative suggestions on how to improve the sustainability of local communities and what central Government can do to help.
Local authorities have until 31 July 2009 to put forward proposals. All proposals should be sent to the LGA which has been appointed as the ‘selector’ under the terms of the Act. I enclose a letter from the Director for Empowerment at CLG, Stuart Hoggan, which gives further details about the process for submitting and progressing proposals.
I look forward to working closely with the LGA to identify those proposals on which Government can best assist local authorities and local communities in promoting the sustainability of local areas, in ways which benefit local people in tangible ways.
Yours sincerely,
Hazel Blears
A copy of the letter from the Director for Empowerment at CLG has been deposited in the Library of the House.
Culture, Media and Sport
Digital Switchover
The Secretary of State for Culture, Media and Sport (Andy Burnham): Digital switchover is the process by which the UK’s analogue television signals are switched off and replaced by digital television signals. Switchover will take place ITV region by ITV region. The next region to switch will be Border in November 2008.
In order to help those who may otherwise have difficulty in switching to digital, the Government, with the BBC, have established the Digital Switchover Help Scheme which provides digital equipment, installation and after-care support to those who:
are aged 75 or over;
have a significant disability; or
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