HC Deb 02 July 1986 vol 100 cc1104-6

Lords amendment: No. 2, after clause 19 insert the following new clause: —(1) Where a local authority dispose of any securities of a public airport company (whether it continues to be such a company after the disposal or not)—

  1. (a) any amount received by the authority in respect of the disposal shall be treated for the purposes of section 72 of the 1980 Act (expenditure which authorities may make) as a receipt of the authority which, by virtue of section 75(1) of that Act, is a capital receipt of the authority for the purposes of Part VIII of that Act (capital expenditure of local authorities etc.), but
  2. (b) only the relevant sum shall be taken into account under section 72(3)(d) of that Act.
(2) In subsection (1) "the relevant sum", in relation to an amount falling within paragraphs (a) of that subsection, means—
  1. (a) three-tenths of that amount, or
  2. (b) if regulations are made for the purposes of section 72(3)(d) of the 1980 Act which prescribe a proportion other than three-tenths in relation to disposals falling within subsection (1), the proportion of that amount so prescribed.
 (3) Where a local authority incur any expenditure in respect of the acquisition of any securities—
  1. (a) of a public airport company, or
  2. (b) of any company which, as a result of the acquisition by the authority of those securities, becomes a public airport company,
the amount of that expenditure shall, in so far as it is not prescribed expenditure of the authority for the purposes of Part VIII of the 1980 Act by virtue of Schedule 12 to this Act, be treated as prescribed expenditure of the authority for those purposes. (4) In this section and section 20 "the 1980 Act" means the Local Government, Planning and Land Act 1980; and this section and section 20 apply to England and Wales only.

Mr. Michael Spicer

I beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Deputy Speaker (Mr. Harold Walker)

With this it will be convenient to take Lords amendments Nos. 3 to 7 and No. 60.

Mr. Spicer

I believe that the new clause introduced by Lords amendment No. 2 will commend itself to the House. It creates a new incentive for local authorities to introduce private capital into their airports by enabling them to use the proceeds from the sale of shares to justify extra capital expenditure. This is achieved by classing the proceeds as capital receipts which the authorities may add to their capital expenditure allocation. The only constraint is that the use of these receipts to justify extra spending will be limited by the prescribed proportion of three tenths which already applies to other non-housing receipts. The additional spending power may be used for any services.

I believe that the House will also welcome Lords amendments Nos. 3 to 7, which create a further incentive to introduce private capital. Clause 20 applies to private capital raised by public airport companies the same controls as apply to capital finance provided by the controlling authority because both add to the public sector borrowing requirement. The amendments deal with the situation in which the airport company issues securities which transfer control of the company to the private sector. Because the private sector would then bear the risk of the investment, the amounts raised from those shares would not add to the public sector borrowing requirement. The amendments therefore provide that amounts raised by public airport company share issues which transfer control to the private sector will not count against the former controlling authorities' capital expenditure allocation.

Lords amendment No. 60 is purely technical.

I commend the Lords amendments to the House.

Mr. Robert Hughes

It looks as though there has been some shift by the Government in relation to the use to which money raised by the privatisation of local authority airports can be put for spending on other purposes. Nevertheless, I am somewhat concerned about the three tenths qualification in subsection (2)(a) of the new clause. How far does that limit apply? Is it three tenths in any one year? Does it mean that the authority can eventually spend all the money for other purposes? If so, that is certainly some move.

In my view, it is quite wrong that there should be any constraint whatever on the use of the money raised. As the Minister knows, I totally oppose the selling-off of local authority airports and I am not at all pleased at the way in which the Bill compels authorities to do this against their wishes. The Bill does not actually say that they must sell the airports but the financial conditions laid down about the way in which local authorities can develop their airports in terms of capital spending mean that they will be forced to sell them off. In those circumstances, it is grossly unfair to refuse authorities the freedom to use the money as they think best. Incidentally, it is also entirely against the Tory philosophy about which we have heard so much of freedom for local authorities from intervention by the dead hand of Whitehall, although the Government have been intervening far more vigorously in local authority affairs than any Government for many years.

If there is indeed a relaxation of the public sector borrowing requirement rules by the Treasury I hope that that is the influence of the new Secretary of State for Transport, perhaps initiated in his former position at the Treasury. Many of us have been utterly bemused at the illogicality of Treasury rules. This move is at least some recognition of reality.

I have one small question about subsection (3)(b) of the new clause, which says: that expenditure shall, in so far as it is not prescribed expenditure of the authority for the purposes of Part VIII of the 1980 Act by virtue of Schedule 12 to this Act, he treated as prescribed expenditure of the authority for those purposes. I am not sure that I understand all that gobbledegook. When a local authority decides that it has to form a private company and there are costs involved, will any extra cash be available to assist it? From the way the clause is drafted, I presume that it will be prescribed expenditure. I hope that no difficulty has arisen about that.

Mr. Stephen Ross

I wish to deal with a point that was raised by the hon. Member for Aberdeen, North (Mr. Hughes). It seems odd that the provision about three tenths is written into the Bill. Can it be changed by order, or will there have to be and amendment to the Bill? Surely that is considered annually. We hope that the Government may relax the provision in relation to housing receipts. They have relaxed the provision slightly already for county councils. I wonder why the provision has been written into the Bill at this stage.

Mr. Michael Spicer

The hon. Members for Aberdeen, North (Mr. Hughes) and Isle of Wight (Mr. Ross) asked about the three tenths and wondered whether the additional elements will be applicable over the years ahead. The answer is, yes. I hope that answers that point.

I do not want to paraphrase too liberally the remarks of the hon. Member for Aberdeen, North, but he said that there was implicit in this part of the Bill an element of compulsion. That is not so. Indeed, he will know that since we met in Committee we have said that in determining the debt equity ratio and in taking out any debt element and leaving it with the local authority, the interest on that debt can be taken into consideration for rate support grant. Concern was expressed about that in Committee. Some hon. Members felt that there was an implicit element of compulsion in respect of some airports, so we have dealt with that issue.

Despite pressures from various quarters, there is no compulsion, although I do not think that either hon. Gentleman would accuse me of disguising the fact that we are enthusiastic about the involvement of private capital in the development of regional airports.

Question put and agreed to.

Subsequent Lords amendments agreed to.

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