Clause 13 - Security for money borrowed etc
Local Government Bill
10:30 am
Mr Philip Hammond (Runnymede and Weybridge, Conservative)
The clause asserts that
''a local authority may not mortgage or charge any of its property'',
thus continuing the principle that all local authority debt is deemed to be secured on the totality of the assets and revenue streams of the local authority. I am not suggesting that that is necessarily wrong, but we should challenge the thinking that lies behind the decision to perpetuate that system. I am sure that the Minister will say that that is the way that it has always been, but the fact that something has always been done in a certain way is not necessarily a good reason for continuing to do it in that way.
What analysis has the Minister's Department carried out of the impact on the total cost of borrowing of any change in the arrangements? For example, have proper studies been done to confirm that allowing local authorities to secure debt on specific assets would not reduce—indeed, would increase—the overall costs of borrowing to that authority?
The issue is the overall cost of borrowing. If local authorities go into the marketplace when they are in debt, rather than borrowing from the Public Works Loan Board, it is important to explore ways of making that debt less expensive. On the face of it, being able to
secure debt against real estate assets might make that debt less expensive. The freedom that the Government like to say they are giving local authorities to explore novel sources of lending is significantly curtailed by the inability to charge specific assets as security. Will the Minister therefore explain the logic behind the proposal?
The explanatory notes say that the clause enshrines the ''vital principle'' that local authority debts are secured by all their assets. It might have its uses and be convenient or expedient but it is not clear to me that it is a vital principle; the Minister must explain why it is.
Will the Minister confirm that the power in the clause to appoint receivers is the same power as in the current legislation with the exception of the threshold limit, which is raised, and rightly so? Will he also confirm that the powers of a receiver over the revenues and affairs of a local authority exactly reflect the existing legislation? If there are any changes, will he please tell the Committee?