03 December 2004
More than a third of all local authorities and three-quarters of county councils are using their new prudential borrowing powers, reveals a survey by the Local Government Association.
Around £900m of investment by authorities is being facilitated by prudential borrowing in its first year. Decisions are supported by a code developed by CIPFA.
But the survey shows a sharp disparity in practices between different types of councils. While 74% of county councils are using the powers, the figure is just 14% for districts. Around 65% of metropolitan and unitary authorities have taken up prudential borrowing, as have half of London boroughs. The level of prudential borrowing is planned to fall slightly in the next financial year, to £742m.
The most common use of prudential borrowing has been for transport schemes, with a third of money going on new-build projects. But as the powers bed in, investment is shifting, with education becoming the largest recipient in future years.
Leisure services and housing are also set to overtake transport.
Councils told the LGA that the main reason for not using their new powers was to avoid council tax increases.
LGA chair Sir Sandy Bruce-Lockhart welcomed the findings. 'This demonstrates the impact that just a limited loosening of the Whitehall reins can have in delivering better and more efficient decision-making,' he said.
Local authorities' use of prudential borrowing was also endorsed by Halifax Bank of Scotland, a major participant in local government Private Finance Initiative schemes. A spokesman said that prudential borrowing could be an important means of providing funds for schemes that are not large enough for PFI, or not suited to its inflexibilities.
But the LGA survey showed a very different picture in the use of local authorities' powers to trade.
Although three-quarters of survey respondents had obtained the power to trade after favourable Comprehensive Performance Assessments, just 2% were using them, with another 18% intending to do so.
Only 3% of authorities have used their power to charge for discretionary services.
All three powers were introduced by the Local Government Act 2003.
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