§ Mr. Kenneth Baker
I announced some of my decisions during the rate support grant debate on 20 January. This reply confirms what I said then and deals with other issues raised by the consultation process.
The residuary bodies will be able to use the cash balances of the outgoing authorities to close the accounts of those authorities and to make compensation payments falling due to staff in the first year after abolition.
The remaining balances, including unapplied capital receipts, will in general be distributed by the residuary bodies to the boroughs or districts in each area. In the light of the views expressed during the consultation. I have concluded that the distribution should be carried out pro rata to population. In the consultation paper I proposed that as an exception to the general rule any balances attributable to the Inner London education authority, the Northumbria police authority and the Tyne and Mersey tunnels should pass to the successor authorities responsible for those operations. I have now accepted that there should be one further exception: in accordance with the wishes of interested parties locally, balances attributable to Birmingham international airport will remain with the airport undertaking.
I look to the residuary bodies, with the assistance of the outgoing authorities, to give successor authorities their best estimate of the amount of balances likely to be distributed to each successor very shortly now, to assist the rating and precepting process. The timing of the actual 399W distribution during 1986–87 may be settled between the residuary bodies and the recipient authorities in the light of local circumstances.
Where the outgoing authorities have accumulated capital receipts which have not been used to justify additional capital expenditure under part VIII of the Local Government, Planning and Land Act 1980, the unused spending permission will be passed on to the boroughs or districts pro rata to population, or where appropriate to the other authorities referred to above, whether or not the receipts form part of the cash balances. Further consideration is being given to the mechanics of this.
Capital receipts accruing to the residuary bodies after abolition will in general be distributed to the boroughs or districts, pro rata to housing investment programme capital allocations in the case of housing receipts and pro rata to population in other cases.
But in three cases the cash from receipts will be differently treated. Mortgage principal repayments will be retained by residuary bodies to redeem debt, in accordance with normal local authority practice. I have also decided to allow residuary bodies to use receipts from asset sales to pay for any capital expenditure needed to prepare the assets for sale, and I have so far announced that in London at least £10 million will be available from receipts to endow a new charitable trust. Boroughs and districts will still receive the spending permission associated with the receipts.