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Local Government Finance

Volume 475: debated on Tuesday 13 May 2008

To ask the Secretary of State for Communities and Local Government what information her Department holds on local authorities’ equity to debt ratios; and what guidance her Department provides to local authorities on appropriate levels for those ratios. (204641)

Communities and Local Government collects data on the amount and nature of local authority borrowing, lending and investments to varying levels. Analyses of these data are published. The Department is also currently collecting data that could be used to calculate local authority equity (the difference between their assets and liabilities) as part of the Whole of Government Accounts exercise, but this exercise is still in its experimental phase.

By statute local authorities’ debt is secured on their revenues and not their assets. The Department does not therefore provide guidance on equity to debt ratios for local authorities. We have, however, given statutory backing to the Prudential Code issued by the Chartered Institute of Public Finance and Accountancy on the affordability of borrowing by local authorities, and to the Institute’s code of practice on treasury management as it applies to local authorities.