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Capital Receipts

Volume 163: debated on Monday 4 December 1989

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To ask the Secretary of State for the Environment if he will list in detail what the new rules governing councils' expenditure from capital receipts will be from 1 April 1990; and if he will make a statement.

Section 59 of the Local Government and Housing Act 1989 provides that any capital receipt realised by a local authority on or after 1 April 1990, other than a receipt received by them as trustee of a charitable fund, must be divided into a reserved part, which must be set aside as provision for credit liabilities, and a usable balance which the authority may apply to expenditure for capital purposes or as voluntary provision for credit liabilities. The usable balance of capital receipts may be applied in the financial year in which they are received or later, at the authority's discretion. Expenditure for capital purposes is defined in section 40 of the 1989 Act. The reserved part is calculated by reference to the amount of the receipt reduced by the amounts (if any) which out of the receipt are paid to the Exchequer by way of clawback of Exchequer grant or assistance or (in the case of certain receipts from housing disposals) are applied to meet the administrative costs of disposal. Except insofar as is otherwise provided by regulations made by the Secretary of State or, in cases where receipts arise from disposals which required his consent, by directions given by him, the amount of the reserved part is a percentage of the amount of the receipt thus reduced. The percentage specified in the Act is 75 per cent. in the case of disposals of dwelling-houses held for the purposes of Part II of the Housing Act 1985 and 50 per cent. in other cases. It has already been announced that it is the intention to make regulations which would provide for a percentage of 75 per cent. for receipts from the disposal of share and loan capital (other than certain holdings in public transport and airport companies) and from disposals of property held in connection with the police, probation, magistrates courts, and civil defence services. My Department is currently consulting the local authority associations on proposals for regulations which would (a) specify percentages other than 50 per cent. for certain other categories of receipts, (b) provide that in certain cases the reserved part would be calculated by references to the authority's net receipt rather than the gross amount realised, and (c) specify a percentage of 0 per cent. for most receipts realised by authorities who had paid off all their captial borrowings and had made full provision for their other credit liabilities.A credit received by a local authority as trustee of a charitable trust fund must be applied in accordance with any directions given by the Charity Commissioners or, in the absence of such directions, for the purposes of the charity concerned.