Clause 5 - Temporary borrowing
Local Government Bill
9:45 am
Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich and Woolwich, Labour)
Clause 5 is a welcome and flexible provision to enable authorities to borrow temporarily when faced with deficits in income due to late payment of items including council tax, for example. To meet urgent commitments such as salaries, local authorities need to borrow short-term. The clause ensures that the authorities' borrowing limits in clauses 3 or 4 are increased by payments due to them in the financial year that have not yet been received.
The amendment would add an unwelcome restriction. To increase the borrowing limit, the payment would not only have to be due but reasonably expected to be received in the current year. That would create two problems: first, the expression ''reasonably expected'' is vague and would add speculation to the process, possibly exposing the authority to a risk of litigation, particularly if litigious members of the public wanted to challenge the authority's financial management.
Secondly, there are timing difficulties. A payment becoming due in late March but not expected until early April, in the next financial year, would fall outside the provision, yet it is precisely in such a situation that the temporary borrowing capacity is crucial. The amendment is not helpful and it would not be welcomed by local government.
The hon. Member for Runnymede and Weybridge referred to local authorities having a lamentable record on council tax collection. However, the evidence is that local authorities are improving their collection rate, and we are seeing significant improvement throughout the country, even in the authority that, by universal agreement, had the most lamentable record. One and a half years ago, the London borough of Hackney had a collection rate of about 66 per cent., but I am told that it is now at 80 per cent. That is still far too low, but it is going in the right direction, which is a general trend in local government. I hope that the hon. Gentleman will give credit to local authorities for improving their collection rate.