Office of Public Sector Information
(1) For financial years beginning on or after 1st April 1990, this Part has effect with respect to the finances of the following authorities (in this Part referred to as “local authorities”)—
(a) a county council;
(b) a district council;
(c) a London borough council;
(d) the Common Council of the City of London;
(e) the Council of the Isles of Scilly;
(f) an authority established under section 10 of the [1985 c. 51.] Local Government Act 1985 (waste disposal authorities);
(g) a joint authority established by Part IV of that Act (police, fire services, civil defence and transport);
(h) a joint or special planning board constituted for a National Park by an order under paragraph 1 or paragraph 3 of Schedule 17 to the Local Government Act 1972;
(i) the Broads Authority;
(j) a combined police authority established by an amalgamation scheme under the [1964 c. 48.] Police Act 1964; and
(k) any other body prescribed by regulations under subsection (3) below.
(2) The reference in subsection (1)(d) above to the Common Council of the City of London is a reference to that Council in their capacity as a local authority, a police authority or a port health authority.
(3) The Secretary of State may by regulations prescribe for the purposes of subsection (1)(k) above any body which is (or any class of bodies each of which is)—
(a) a levying body, within the meaning of section 74 of the [1988 c. 41.] Local Government Finance Act 1988;
(b) a body to which section 75 of that Act applies (bodies having power to issue special levies);
(c) a body to which section 118 of that Act applies; or
(d) a precepting authority, as defined in section 144(2) of that Act.
(4) Regulations under subsection (3) above may provide that, in relation to a body prescribed by the regulations, the following provisions of this Part shall have effect subject to such modifications as may be specified in the regulations.
(5) For the purposes of the application of this Part, the Secretary of State may by order make provision for treating things done by or to—
(a) a company which, in accordance with Part V of this Act, is under the control of a local authority, or
(b) a company which, in accordance with that Part, is for the time being subject to the influence of an authority, or
(c) a trust to which, by virtue of an order under section 72 below, the provisions of section 69 below are applicable, or
(d) a Passenger Transport Executive and any company which, in accordance with that Part, is either under the control or for the time being subject to the influence of such an Executive,
in such cases and to such extent as may be provided in the order as if they were done by or to the local authority specified or determined in accordance with the order; and, where an order so provides in relation to a local authority, that authority together with any companies and Executive concerned are in subsection (6) below referred to as members of a local authority group.
(6) Without prejudice to the generality of subsection (5) above, an order under that subsection—
(a) may provide for the application of the provisions of this Part to the members of a local authority group subject to such modifications as may be specified in the order;
(b) may make provision as to the way in which dealings between members of a local authority group and changes in the capitalisation or capital structure of any company in a local authority group are to be brought into account for the purposes of this Part; and
(c) may contain such incidental, supplementary and transitional provisions as the Secretary of State considers appropriate.
(7) The power to make an order under subsection (5) above—
(a) shall be exercisable by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament; and
(b) may make different provision in relation to different cases or descriptions of case.
(8) This Part has effect in place of the provisions of Part VIII of the [1980 c. 65.] Local Government, Planning and Land Act 1980.
(1) References in this Part to expenditure for capital purposes shall be construed in accordance with this section.
(2) Subject to subsections (5) and (6) below, the following expenditure (relating to tangible assets) is expenditure for capital purposes, namely, expenditure on—
(a) the acquisition, reclamation, enhancement or laying out of land, exclusive of roads, buildings and other structures;
(b) the acquisition, construction, preparation, enhancement or replacement of roads, buildings and other structures; and
(c) the acquisition, installation or replacement of movable or immovable plant, machinery and apparatus and vehicles and vessels.
(3) For the purposes of subsection (2) above, “enhancement”, in relation to any asset, means the carrying out of works which are intended—
(a) to lengthen substantially the useful life of the asset; or
(b) to increase substantially the open market value of the asset; or
(c) to increase substantially the extent to which the asset can or will be used for the purposes of or in connection with the functions of the local authority concerned;
but expenditure on the enhancement of an asset shall not be regarded as expenditure for capital purposes unless it should be so regarded in accordance with proper practices.
(4) Subject to subsection (5) below, the following expenditure, in so far as it is not expenditure on approved investments, is expenditure for capital purposes, namely, expenditure on—
(a) the making of advances, grants or other financial assistance to any person towards expenditure incurred or to be incurred by him on the matters mentioned in paragraphs (a) to (c) of subsection (2) above or on the acquisition of investments; and
(b) the acquisition of share capital or loan capital in any body corporate.
(5) The Secretary of State may by regulations provide—
(a) that expenditure which, apart from the provision made by the regulations, would not be expenditure for capital purposes shall be such expenditure; or
(b) that expenditure which, apart from the provision made by the regulations, would be expenditure for capital purposes shall not be such expenditure.
(6) Notwithstanding anything in the preceding provisions of this section, if the Secretary of State so directs, expenditure which—
(a) is of a description or for a purpose specified in the direction, and
(b) has been or is to be incurred by a particular local authority, and
(c) does not exceed such amount as is specified in the direction, and
(d) was or will be incurred during a period specified in the direction,
may be treated by the authority concerned as expenditure for capital purposes.
(1) All expenditure incurred by a local authority, other than expenditure excluded by section 42 below, must be charged to a revenue account of the authority and unless, in accordance with proper practices (exclusive of this subsection), it is appropriate to charge some or all of any particular item of expenditure to a revenue account for an earlier or a later financial year, the expenditure shall be charged to a revenue account of the authority for the year in which it is incurred.
(2) In relation to a local authority, any reference to a revenue account is a reference to one of the following accounts for a financial year of the authority, namely—
(a) a revenue account which the authority are required to keep by virtue of any enactment;
(b) a revenue account which the authority are required to keep in order to comply with proper practices; or
(c) any other revenue account which the authority decide to keep in accordance with proper practices.
(3) The reference in subsection (1) above to expenditure incurred by a local authority in any financial year includes the following (whether or not giving rise to actual payments)—
(a) any amount which does not form part of the authority’s capital receipts and which is set aside for the year by the authority as provision to meet credit liabilities, otherwise than by virtue of any of subsections (2) to (4) of section 63 below; and
(b) any other amount which is set aside for the year by the authority as reasonably necessary for the purpose of providing for any liability or loss which is likely or certain to be incurred but is uncertain as to the amount or the date on which it will arise (or both);
and the reference in subsection (5) below to expenditure incurred by a local authority shall be construed in accordance with this subsection.
(4) Subsection (2) above has effect not only for the purposes of this Act but also for the purposes of—
(a) any enactment passed after or in the same Session as this Act; and
(b) any earlier enactment which is amended by this Act or by any such enactment as is referred to in paragraph (a) above.
(5) Nothing in this section or the following provisions of this Part shall permit an authority to charge to a revenue account which they are required to keep by virtue of Part VI of this Act or any other enactment any expenditure incurred by a local authority which could not otherwise be so charged.
(1) Expenditure falling within subsection (2) below is excluded from the obligation in section 41(1) above but, if it is consistent with proper practices and the authority so wish, any such expenditure may be charged to a revenue account of the authority for the financial year in which it is incurred or an earlier or later financial year.
(2) Subject to subsection (4) below, the expenditure referred to in subsection (1) above is as follows—
(a) expenditure arising from the discharge of any liability of the authority under a credit arrangement, other than an arrangement excluded by regulations under paragraph 11 of Schedule 3 to this Act;
(b) expenditure arising from the discharge of any liability of the authority in respect of money borrowed by the authority, other than a liability in respect of interest;
(c) expenditure which, in reliance on a credit approval, the authority have determined under section 56(1)(a) below is not to be chargeable to a revenue account of the authority;
(d) expenditure on making approved investments;
(e) expenditure consisting of the application or payment of capital receipts as mentioned in subsections (7) to (9) of section 59 below;
(f) expenditure which is met out of the usable part of capital receipts, in accordance with section 60(2) below;
(g) expenditure for capital purposes which the authority determine is, or is to be, reimbursed or met out of money provided, or to be provided, by any other person, excluding grants from a Community institution;
(h) expenditure in respect of payments out of a superannuation fund which the authority are required to keep by virtue of the [1972 c. 11.] Superannuation Act 1972; and
(i) expenditure in respect of payments out of a trust fund which is held for charitable purposes and of which the authority are a trustee.
(3) A determination under subsection (2)(g) above may not be made later than 30th September in the financial year following that in which the expenditure in question is incurred.
(4) Regulations made by the Secretary of State may amend subsection (2) above—
(a) by adding a description of expenditure specified in the regulations to the expenditure falling within that subsection; or
(b) by removing a description of expenditure specified in the regulations from the expenditure falling within that subsection (whether the expenditure so specified was within that subsection as originally enacted or was added by virtue of this subsection).
(5) Where, by virtue of subsection (1) above, expenditure of any description is excluded from the obligation in section 41(1) above, it shall also be excluded from any requirement arising under any enactment (including an enactment in Part VI of this Act) under which the expenditure is required to be charged to a revenue account or any particular revenue account; but if—
(a) an authority decide that expenditure of that description should be charged to a revenue account as mentioned in subsection (1) above, and
(b) under any such requirement that expenditure (apart from this subsection) would have to be charged to a particular revenue account,
that expenditure may be charged only to that revenue account.
(1) Subject to the following provisions of this Part, as part of the proper management of their affairs, a local authority may borrow money for any purpose relevant to their functions under any enactment.
(2) Except with the approval of the Secretary of State given with the consent of the Treasury, a local authority may not borrow money in any manner other than—
(a) by overdraft or short term from the Bank of England or from a body or partnership which, at the time the borrowing is undertaken, is an authorised institution within the meaning of the [1987 c. 22.] Banking Act 1987; or
(b) from the National Debt Commissioners or from the Public Works Loan Commissioners; or
(c) by means of a loan instrument;
and in paragraph (a) above borrowing “short term” shall be construed in accordance with section 45(6) below.
(3) In the exercise of the powers conferred by paragraphs (a) to (c) of subsection (2) above, a local authority may not, without the consent of the Treasury, borrow from a lender outside the United Kingdom or otherwise than in sterling.
(4) Subject to any provision made by regulations under subsection (5) below, for the purposes of this Part, a loan instrument is any document which, directly or by reference to any other document,—
(a) contains an acknowledgment (by the borrower, the lender or both) that a loan has been made to the local authority concerned or that, in connection with the provision of funds to the authority, a payment or repayment is due from the authority; and
(b) states the dates on which the authority are to make payments or repayments; and
(c) states the amount of each of those payments or repayments or the method by which that amount is to be calculated; and
(d) specifies the means, if any, by which the rights or obligations under the instrument are transferable; and
(e) except in the case of an instrument which is transferable by delivery, specifies the name or description of the person to whom payments or repayments are due; and
(f) in the case of an instrument issued by two or more local authorities acting jointly, states what proportion of the payments or repayments due are the responsibility of each of the authorities concerned.
(5) With the consent of the Treasury, the Secretary of State may make regulations—
(a) regulating the terms of loan instruments and the manner of their issue, transfer or redemption;
(b) restricting the issue of instruments which are transferable by delivery;
(c) regulating the manner in which any payments or repayments are to be made to the holder of the instrument; and
(d) making provision for the custody and, where appropriate, eventual destruction of documents relating to loan instruments;
and any document which, at the time it comes into being, does not comply with any provision then made under paragraphs (a) to (c) above is not a loan instrument for the purposes of this Part.
(6) Any approval given by the Secretary of State under subsection (2) above and any consent given by the Treasury under subsection (3) above may be given generally or in a particular case or to authorities of a particular description or by reference to borrowing or securities of a particular description and may be given subject to conditions.
(7) In so far as any local authority have power under any private or local Act to borrow money (whether for general or specific purposes), any such power shall cease to have effect for financial years beginning on or after 1st April 1990.
(8) Subject to subsection (7) above, subsections (2) to (6) above apply to all borrowing powers for the time being available to a local authority under any enactment, whenever passed.
(1) A local authority may not at any time borrow an amount which would cause the total of—
(a) the amount outstanding at that time by way of principal of money borrowed by the authority, and
(b) the aggregate cost (as determined below) at that time of the credit arrangements entered into by the authority, other than arrangements excluded by regulations under paragraph 11 of Schedule 3 to this Act,
to exceed the aggregate credit limit for the time being applicable to the authority by virtue of section 62 below.
(2) The Secretary of State may by regulations make provision, in the interests of prudent financial management, regulating borrowing by local authorities; and a local authority may not borrow to any extent or in any manner which would contravene any provision of the regulations.
(3) A local authority may not borrow any amount which would cause any limit for the time being determined by the authority under section 45 below to be exceeded.
(4) References in this section and sections 45 to 47 below to borrowing by an authority are references to borrowing not only under section 43 above but also under any other power for the time being available to the authority under any enactment, whenever passed.
(5) For the purposes of subsection (1) above, the temporary use by a local authority for a purpose other than that of the fund in question of money forming part of such a superannuation fund or trust fund as is referred to in paragraph (h) or paragraph (i) of subsection (2) of section 42 above shall be treated as borrowing.
(6) A person lending money to a local authority shall not be bound to enquire whether the authority have power to borrow the money and shall not be prejudiced by the absence of any such power.
(1) For the purposes of this Part, for each financial year every local authority shall determine—
(a) an amount of money (in this Part referred to as “the overall borrowing limit”) which is for the time being the maximum amount which the authority may have outstanding by way of borrowing;
(b) an amount of money (in this Part referred to as “the short-term borrowing limit”), being a part of the overall borrowing limit, which is for the time being the maximum amount which the authority may have outstanding by way of short term borrowing; and
(c) a limit on the proportion of the total amount of interest payable by the authority which is at a rate or rates which can be varied by the person to whom it is payable or which vary by reference to any external factors.
(2) Subject to subsection (3) below, the duty to determine the limits referred to in subsection (1) above shall be performed before the beginning of the financial year to which the limits are to relate.
(3) Where a local authority have determined a limit for a financial year under subsection (1) above, the authority may at any time (whether before or after the beginning of that year) vary that limit by making a new determination thereof.
(4) Section 101 of the [1972 c. 70.] Local Government Act 1972 (arrangements for discharge of functions of local authorities by committees, officers etc.) shall not apply to the duty to make a determination under subsection (1) above of any limit or to the power to vary a limit under subsection (3) above.
(5) Without prejudice to subsection (4) above, in section 101(6) of the Local Government Act 1972 (which provides that certain functions, including borrowing, shall be discharged only by the authority) the words “or borrowing money” shall be omitted.
(6) For the purposes of subsection (1)(b) above, a local authority borrow money short term if the sum borrowed is repayable—
(a) without notice; or
(b) at less than twelve months notice; or
(c) within twelve months of the date of the borrowing.
(1) Every local authority shall maintain a register giving particulars of all the loans in respect of which loan instruments are issued by or to the authority on or after 1st April 1990 and, if they think it appropriate, a local authority may appoint as a registrar for some or all of the purposes of such a register a person who is neither an officer nor any other employee of the authority.
(2) In the register required to be maintained by a local authority under this section, the authority shall, not later than 30th September 1990, enter particulars of all outstanding loans in respect of which any payment or repayment falls to be made by the authority (whether or not any loan instruments have been issued), other than those resulting from borrowing as mentioned in paragraph (a) or paragraph (b) of subsection (2) of section 43 above; and, for this purpose, an “outstanding loan” is one which was made before 1st April 1990 and in respect of which any payment or repayment falls to be made on or after that date.
(3) Subject to the following provisions of this section, a register required to be maintained under this section shall be in such form as the authority concerned consider appropriate; but that form must be such that the register is, or is capable of being reproduced, in legible form.
(4) A register maintained under this section shall contain, with respect to each loan of which particulars are required to be registered,—
(a) except in the case of a loan in respect of which there has been issued an instrument (whether or not being a loan instrument) transferable by delivery, the name or description, and the address, of the person to whom payments or repayments are due;
(b) the dates on which the payments or repayments are to be made; and
(c) the amount of each of those payments or repayments or the method by which that amount is to be calculated.
(5) A local authority may remove from a register maintained under this section particulars of any loan in respect of which no more payments or repayments fall to be made.
(6) With the consent of the Treasury, the Secretary of State may make regulations—
(a) generally with respect to the keeping of a register required to be maintained under this section;
(b) modifying all or any of the particulars specified in paragraphs (a) to (c) of subsection (4) above; and
(c) specifying additional particulars which are to be entered in a register maintained under this section.
(7) A copy of an entry in a register maintained under this section which is certified by a registrar of the register and purports to show particulars entered pursuant to subsection (4) or subsection (6) above shall be prima facie evidence of the matters specified in the entry.
(8) A certification by a registrar of a register maintained under this section of any instrument of transfer of a loan instrument is to be taken as a representation by him to any person acting on the faith of the certification that there have been produced to the registrar such documents as on their face show a prima facie title to the loan instrument in the transferor named in the instrument of transfer; but such a certification shall not be taken as a representation that the transferor has any title to the loan instrument.
(9) If—
(a) the name of any person is, without sufficient cause, entered in or omitted from a register maintained under this section, or
(b) default is made or unnecessary delay takes place in making any entry required to be made in such a register,
the person aggrieved may apply to the High Court or a county court for rectification of the register.
(10) Where an application is made under subsection (9) above, the court—
(a) may refuse the application or order rectification of the register;
(b) may decide any question relating to the title of a person who is a party to the application to have his name entered in or omitted from the register; and
(c) generally may decide any question necessary or expedient to be decided for rectification of the register.
(1) All money borrowed by a local authority (whether before or after the coming into force of this section), together with any interest thereon, shall be charged indifferently on all the revenues of the authority.
(2) Subject to subsection (3) below, all securities created by a local authority shall rank equally without any priority.
(3) Subsection (2) above does not affect any priority existing at, or any right to priority conferred by a security created before, 1st June 1934.
(4) If at any time any principal or interest due in respect of any borrowing by a local authority remains unpaid for a period of two months after demand in writing, then, subject to subsection (5) below, the person entitled to the sum due may, without prejudice to any other remedy, apply to any court having jurisdiction in respect of a claim for that sum for the appointment of a receiver; and, if it thinks fit, the court may appoint a receiver on such terms and with such powers as the court thinks fit.
(5) No application may be made under subsection (4) above unless the sum due in respect of the borrowing concerned amounts to not less than £5,000 or such other amount as may from time to time be prescribed for the purposes of this subsection by regulations made by the Secretary of State.
(6) The court to whom an application is made under subsection (4) above may confer upon the receiver any such powers of collecting, receiving and recovering the revenues of the local authority and of issuing levies and precepts and setting, collecting and recovering community charges as are possessed by the local authority.
(7) Except as provided by subsection (1) above, a local authority may not mortgage or charge any of their property as security for money borrowed or otherwise owing by them; and any security purporting to be given in contravention of this subsection shall be unenforceable.
(1) Subject to the following provisions of this section, a local authority shall be taken for the purposes of this Part to have entered into a credit arrangement—
(a) in any case where they become the lessees of any property (whether land or goods); and
(b) in any case (not falling within paragraph (a) above) where, under a single contract or two or more contracts taken together, it is estimated by the authority that the value of the consideration which the authority have still to give at the end of a relevant financial year for or in connection with the provision to the authority of any land, goods or services or any other kind of benefit is greater than the value of the consideration (if any) which the authority were still to receive immediately before the beginning of that financial year; and
(c) in any case where the authority enter into a transaction of a description for the time being prescribed for the purposes of this section by regulations made by the Secretary of State;
and, in any such case, the “credit arrangement” is the lease, the single contract or, as the case may be, the two or more contracts taken together.
(2) The estimate required to be made under paragraph (b) of subsection (1) above shall be made at the time the contract or, as the case may be, the later or last of the contracts constituting the credit arrangement is entered into; and the reference in that paragraph to a relevant financial year is a reference to a financial year which begins after the contract or, as the case may be, the first of the contracts constituting the arrangement was entered into.
(3) Subject to section 52 below, references in this Part, other than this section, to a credit arrangement do not apply to a credit arrangement which comes into being before 1st April 1990; and for the purpose of this Part a credit arrangement comes into being—
(a) where subsection (1)(a) above applies, at the time the local authority become the lessees;
(b) where subsection (1)(b) above applies, at the time the contract or, as the case may be, the later or latest of the contracts constituting the arrangement is entered into; and
(c) where subsection (1)(c) above applies, at the time the authority enter into the transaction concerned or such other time as may be specified in the regulations concerned.
(4) Where a contract constitutes, or two or more contracts taken together constitute, a credit arrangement, no account shall be taken under this section of any later contract which has the effect of varying the effect of the contract or, as the case may be, of the two or more contracts taken together.
(5) A contract is not a credit arrangement to the extent that it is a contract under which a local authority borrows money; and a lease or contract which is excluded from this section by regulations made by the Secretary of State is not a credit arrangement.
(6) It is immaterial for the purposes of this section whether the consideration given or received by a local authority under any contract is given to or received from the person by whom the land, goods, services or other benefit are in fact provided to the authority; and for the purposes of this section, and any of the following provisions of this Part relating to credit arrangements, in any case where the consideration under a contract consists, in whole or in part,—
(a) of an undertaking to do or to refrain from doing something at a future time (whether specified or not), or
(b) of a right to do or to refrain from doing something at such a future time,
that consideration shall be regarded as neither given nor received until the undertaking is performed or, as the case may be, the right is exercised.
(7) Where the consideration under a contract consists, in whole or in part, of an option, the estimate required to be made under subsection (1)(b) above shall be made—
(a) on the assumption that the option will be exercised or, if the option could be exercised in different ways, on the assumption that it will be exercised in each of those ways, and
(b) on the assumption that the option will not be exercised,
and if, on any of those assumptions, the contract would on those estimates constitute, alone or together with one or more other contracts, a credit arrangement, it shall be regarded as doing so regardless of whether the option is or is not in fact exercised; and in this subsection “option” includes any right which is exercisable or not at the discretion of a party to the contract.
(8) If an existing contract is varied and the variation does not in law itself constitute a contract, it shall be regarded as such for the purposes of this section and, accordingly, subject to subsection (4) above, the existing contract and the variation shall be regarded as two contracts to be taken together.
(1) Subject to subsection (3) and section 52 below, for the purposes of this Part the initial cost of a credit arrangement is the amount which, at the time the arrangement comes into being, the local authority estimate will be the aggregate of—
(a) any consideration which falls to be given by the authority under the arrangement in the financial year in which it comes into being; and
(b) the value of the consideration falling to be given by the authority under the arrangement in any subsequent financial year, determined in accordance with subsection (2) below.
(2) For each subsequent financial year referred to in subsection (1)(b) above, the value of the consideration falling to be given in that year shall be determined by the formula—
where—
“x” is the amount of the consideration which the authority estimate will be given by them under the arrangement in that financial year;
“r” is the percentage rate of discount prescribed for the financial year in which the arrangement came into being by regulations made by the Secretary of State for the purposes of this section; and
“n” is the financial year in which the consideration falls to be given expressed as a year subsequent to the financial year in which the arrangement came into being (so that the first of the subsequent financial years is 1, the next financial year is 2, and so on).
(3) Subsection (2) above does not apply to a credit arrangement of a description excluded from that subsection by regulations made by the Secretary of State; and, in relation to a credit arrangement which is so excluded, regulations so made shall make provision for the method of calculating the initial cost and the cost of the arrangement at any time.
(4) Subject to subsection (3) above and sections 51 and 52 below, the cost of a credit arrangement at any time after it has come into being shall be determined in accordance with subsections (1) and (2) above (in like manner as the determination of the initial cost) but on the basis of an estimate made at the time in question and leaving out of account any consideration which has been given by the authority under the arrangement before that time.
(5) In the application of this section to a credit arrangement which consists, in whole or in part, of a contract, the consideration under which falls within subsection (7) of section 48 above,—
(a) if the credit arrangement exists only on the basis of one of the assumptions in that subsection, the local authority shall make that assumption for the purposes of this section; and
(b) if the credit arrangement would exist on the basis of any two or more of those assumptions, the authority shall for the purposes of this section make whichever of those assumptions seems to them most likely.
Local Government and Housing Act 1989 (C. 42)