Local Authorities: Debts (Hansard, 26 April 1995)

The Earl of Lindsay
My Lords, the total debt per head of population at 31st March 1994, the latest date for which figures are available, was as follows: Manchester, £2,955; Birmingham, £1,192; Sheffield, £1,409; and Leeds, £988.

§ Lord Orr-Ewing
My Lords, is my noble friend the Minister aware that those are very large sums of money? Are we sure that the ratepayers of those great cities are getting good value for money? Moreover, are we sure that equal effort is being made to collect debts which already exist because both tasks are necessary at the same time; in other words, economy in spending and perspicacity in collecting debts with the greatest rapidity?

The Earl of Lindsay
My Lords, the level of debt in those four cities is extremely large and is of concern to the Government. Their total debts come to nearly £4 billion. To put that in perspective, it represents just over 10 per cent, of total local authority debt in England, which stands at £37 billion. Servicing that debt costs us something like £4 billion per annum across England.
The Government are extremely keen that all local authorities reduce and pay off their debts wherever possible; indeed, the lower their debts, the greater the proportion of their revenues and grants that will be available for goods and services. Therefore, we encourage local authorities both to abide by the rules that we have set for debt redemption and to take up the incentives that we have put in place to encourage debt repayment. We also encourage local authorities to collect all moneys owing in an efficient manner.

§ Lord Dean of Beswick
My Lords, is the Minister aware that, in the case of Manchester, if it had received from Mr. Heath the money for the forced sale of its waterworks by the Government—indeed, the former Secretary of State the noble Lord, Lord Rippon, suggested that that money ought to be returned to the people to whom it belonged; namely, the ratepayers of Manchester—the figure that the noble Earl quoted could probably be wiped out completely? Why do not the Government give that money back to the people of Manchester?

The Earl of Lindsay
My Lords, notwithstanding what the noble Lord implies, Manchester's record in making efforts to redeem debt is not commendable. Large authorities such as Manchester are sitting on potentially saleable assets of great value. But, despite government incentives to encourage the sale of those assets in order to redeem their debts, such authorities are reluctant to do so.

Lord Bruce of Donington
My Lords, the noble Earl has been most frank in his answers to his noble friend 917 Lord Orr-Ewing. However, will he give us an undertaking that he will be equally frank as regards questions that come from this side of the House in relation, possibly, to different local authorities; or, for example, questioning the mathematics which have been used by the noble Earl in his answers? Moreover, if pertinent questions on the matter are put by Members of this side of the House, will the noble Earl confirm that the Government will not plead that the information could be provided only at a disproportionate expense?

The Earl of Lindsay
My Lords, the mathematics are very straightforward and, possibly, somewhat embarrassing to some Members of the House.

§ Lord Elton
My Lords, will my noble friend the Minister clarify both the question put by the noble Lord, Lord Dean of Beswick, and his answer thereto? Is not the situation to which both apply that Manchester has received capital receipts for the sale of property which is was required to sell under government legislation and that it has declined to use them in the redemption of debt because it wishes to hang on to such money for other purposes? If that is not the case, what other reason is there for Manchester not paying off the debt when it is in a position to pay some of it?

The Earl of Lindsay
My Lords, it is hard to know why cities such as Manchester do not use all their set aside funds to redeem debt. There is no other purpose to which they can put those funds. Therefore, such moneys are simply sitting there, frozen and earning interest; but they are not being used to reduce the local authority debt.

§ Baroness Fisher of Rednal
My Lords, is it not a fact that all the borrowing of local authorities, including that of Birmingham which I know better than most, has all been authorised under government-allowed borrowing costs? In other words, the Government have said, "Yes, you can borrow the money". Therefore, the responsibility is equal. Does the noble Earl know that the transport Minister was in Birmingham yesterday and said that, these days, it has become just about the most attractive city in the country? Indeed, it is a credit to the people involved and 10 years of Labour control.

The Earl of Lindsay
My Lords, it is also 15 years of Conservative Government. I can also tell the House that it took the Birmingham Labour-controlled authority only eight years to increase its payroll by 10,000 jobs. However, I return to the main point. Local authority borrowing is, indeed, approved by central government. Central government approve that borrowing on the basis of need. The most important point behind my noble friend's question is the fact that the Government have introduced both rules and incentives to reduce debts which are costing the country nearly £4 billion a year.

§ Lord Ezra
My Lords, may I suggest to the noble Earl that other factors should be taken into account in discussing the success or failure of local authorities? I believe that Sheffield, for example—where I am much involved as chairman of a company which distributes heat from the city incinerator to heat that city—has 918 contributed a great deal to environmental improvement and those factors should also be taken into account quite apart from indebtedness.

The Earl of Lindsay
My Lords, the Government certainly applaud all the CHP schemes which are currently being run in certain cities. I think this matter is a little wide of the Question but the record of the noble Lord, Lord Ezra, in the CHP field is much admired.

§ Lord Glenamara
My Lords, would the noble Earl care to give the national figure for debt per head after 15 years of Tory rule compared with the first year of this Government?

The Earl of Lindsay
My Lords, I told the House that our total local authority debt in England is £37 billion and that the total cost of servicing that debt is £4 billion. That is equivalent to £110 in servicing debt for every adult in this country.

§ Baroness Hollis of Heigham
My Lords, will the Minister confirm that Manchester's £1 billion of debt is still, after the sale of assets, covered by £6 billion of assets; that Birmingham's £1.2 billion of debt is covered by £3.5 billion of assets; and that, in the case of Sheffield and Leeds, £750 million of debt is covered by £3 billion of assets? Does not the Minister agree that any houseowner would, in these days of negative equity, be happy to have a debt—a mortgage—that is only one-third or one-sixth of the asset value of his house?

The Earl of Lindsay
My Lords, I am grateful to the noble Baroness for pointing out the mathematics involved. When the service charges of local authority debts reach a figure of £4 billion a year and local authorities are sitting on assets of considerable value, it makes sense that those local authorities clear their debt by using their assets.