12 July 2002
They are not, however, expressing belated concern over the Labour Party ditching its commitment to nationalisation. Instead, MPs are worried about clauses in the draft Local Government Bill that undermine the government's claim that wide-ranging financial freedoms will soon be granted to town halls.
Clause four of the draft – which allows the secretary of state to set limits to local authority borrowing – has emerged as the most contentious. Members of the Commons' urban affairs sub-committee, meeting on July 8, said that far from granting councils freedoms, the draft bill would extend government control.
When the bill was published on June 12, the Office of the Deputy Prime Minister, the department now responsible for local government, said it would provide councils with new freedoms to borrow cash without first seeking approval from Whitehall.
Clive Betts, Labour MP for Sheffield Attercliffe, told Public Finance: 'The clause is there to prevent councils' misuse of proposed prudential borrowing rules. But there are serious concerns about how this power could be used in practice.
'The difficulty the committee has in assessing the suitability of a reserve power is that the clause could be re-worded after the bill becomes law. There is an inherent danger in that.'
Witnesses called to provide feedback to the committee agreed. Maureen Wellen, policy and technical manager at CIPFA, which is drawing up the borrowing guidelines that councils must follow, said: 'We agree that the government should hold reserve powers, but would like to see the wording of the clause clarified. We favour the wording published in the white paper last year, which stipulated that such powers would be used only in specific circumstances.'
Committee members also raised concerns over clause ten of the draft bill, which could commit councils to the pooling of capital receipts for housing sales. Sir Paul Beresford, Conservative member for Mole Valley, said that it would 'end up punishing councils that manage their assets efficiently.'
The new bill could be included in the Queen's Speech later this year, although committee members and representatives of the Local Government Association said the timetable was 'very tight' and that it was more likely to form part of the 2003/04 Parliamentary session.
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