HC Deb 02 February 1989 vol 146 cc357-8W
Mr. Squire

To ask the Secretary of State for the Environment what responses he received to his consultation paper on local authority capital finance; and if he will make a statement.

Mr. Gummer

The consultation paper "Capital Expenditure and Finance" was published on 7 July 1988. Four hundred and fifty two responses were received by my right hon. Friend and a further 17 by my right hon. Friend the Secretary of State for Wales. My right hon. Friends are grateful to all those who set out their views.

The consultation paper proposed, in light of the accountability that will be brought about by the community charge, a switch from controlling capital expenditure as such to controlling the use of credit to pay for it. That proposal appears to have generally been welcomed and the majority of the responses related to individual features of the new system as outlined in the consultation paper, and in particular the method of equal instalments of principal by which it was proposed that provision should be made from revenue accounts to meet existing and future credit liabilities.

Part IV of the Local Government and Housing Bill provides for a new local authority capital finance system broadly on the lines set out in the consultation paper. But, in light of the comments made by respondents, the Bill specifies that revenue account provision for credit liabilities should normally be made by the reducing balance method, though it will be possible for other methods to be specified in regulations.

Under the Bill, local authorities would be able to finance capital expenditure:

  1. a. by credit up to the level specified in credit approvals to be issued by Government departments;
  2. b. without restriction from the usable balance of their capital receipts after part has been set aside to reduce their indebtedness; and
  3. c. without restriction from revenue contributions.

To assist them with their planning, a letter setting out details of part IV is being sent to the local authorities to which it will apply. I am placing a copy of this letter in the Library of the House.