Local Government Finance (Supplementary Credit Approvals) Bill — Local authority debt reduction strategies — 8 Jul 1997

I beg to move, That the clause be read a Second time.

The new clause is designed to be helpful to the Government, because its purpose is to ensure that local authorities have the chance to participate in the Chancellor's five-year deficit reduction strategy. In essence, the new clause would require local authorities seeking supplementary credit approvals to submit a five-year debt reduction plan to the Secretary of State.

Debt is a massive problem for local authorities. The "Financial Statement and Budget Report" produced by the Government shows in table 4A.3 on page 115 that local authority interest payments amount to £4.4 billion a year. That compares with some £6.7 billion of gross capital expenditure before depreciation. In other words, interest payments are almost as great as the capital expenditure or investment each year. We have tabled the new clause to try to get local authorities to concentrate their minds on the need to reduce that debt burden.

The latest figures which I have for the total of local authority debt, which were published in the Bank of England Quarterly Bulletin for November last year, show that at the end of March 1996 it was some £49,563 million, or £49.5 billion. That is a very high figure indeed.

Table 1.1 on page 12 of the Red Book shows the projected change to the public sector borrowing requirement forecast for this year as a result of the latest Budget compared with the November 1996 Budget. It puts the issues in context, because it shows the extent to which the Government have been generous by giving £200 million extra under the local authority capital receipts initiative. The table shows that there is, indeed, a £200 million increase in the PSBR forecast as a result of that initiative, but, as a result of everything else, it is reduced by £8.3 billion.

At a time when the total PSBR is falling by £8 billion because of the previous Government's prudent budgeting, the Government find only £200 million extra for local

Question put, That the clause be read a Second time:--

The House divided: Ayes 142, Noes 355.

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