21 September 2001
There have been clear commitments from ministers to abolish the current credit approvals regime and replace it with a more 'prudential' system. This would allow councils to decide themselves what they can afford to borrow to support local capital projects. But councils are now concerned about how long they will have to wait for the new freedom.
Speaking at CIPFA's Quality Forum conference in London on September 18, Brian Briscoe, chief executive of the Local Government Association, called for the swift introduction of legislation.
'We are all agreed about changing the capital system,' he said. 'A prudential capital system will enhance the way we manage capital and make us more responsive to our local communities. We hope the white paper will provide the opportunity for draft legislation in this Parliamentary term.'
The local government white paper, which will build on the earlier local government finance green paper, is due to be published later this year.
The concern was echoed by Unison general secretary Dave Prentis. 'It hasn't been put into the Parliamentary timetable for this year,' he said. 'It is not deemed important enough. That worries us. It could mean that the benefits are three to four years away, so we are trying to get it moved up the timetable.'
Prentis said that the current borrowing rules were driving the privatisation agenda in local government, forcing councils into use of the Private Finance Initiative.
'Giving councils the power to borrow is essential to creating a level playing field if we want to end the present "only show in town" approach to public investment,' he said.
Local government minister Alan Whitehead promised only that legislation for the changes would be forthcoming 'as soon as Parliamentary time is available'.
But he reaffirmed the government's commitment to change the system. 'Instead of coming cap-in-hand to government for permission to borrow, each local authority will decide for itself how much it can prudently afford to borrow to support the capital projects important to its local community,' he said.
Whitehead also accepted that there were increasing concerns about the growth in ringfencing and specific grants. 'I think an important element of the white paper will be an indication about the government's general policy about ringfencing,' he said.
PFsep2001
