COMMENT
Local Government Act 2003 c.26

Local Government Act 2003 c.26 (Note)

THESE NOTES REFER TO THE LOCAL GOVERNMENT ACT 2003 (C.26) WHICH RECEIVED ROYAL ASSENT ON 18TH SEPTEMBER 2003

LOCAL GOVERNMENT ACT 2003

EXPLANATORY NOTES

INTRODUCTION

1. These explanatory notes relate to the Local Government Act 2003 which received Royal Assent on 18th September. They have been produced by the Office of the Deputy Prime Minister, with the Wales Office, in order to assist the reader in understanding the Act. They do not form part of the Act and have not been endorsed by Parliament.

2. The notes are to be read in conjunction with the Act. They are not, and are not meant to be, a comprehensive description of the Act. So where a section or part of a section does not seem to require any explanation or comment, none is given.

3. With certain exceptions, the Act extends only to England and Wales. Section 129 governs the extent of the Act's provisions.

SUMMARY

4. The Act covers various aspects of local authorities and is in eight Parts:

capital finance etc and accounts (Part 1)

financial administration (Part 2)

grants etc (Part 3)

business improvement districts (Part 4)

non-domestic rates (Part 5)

council tax (Part 6)

housing finance etc (Part 7)

miscellaneous and general provisions (Part 8).

TERRITORIAL APPLICATION: WALES

5. The Act has been drafted in liaison and agreement with the National Assembly for Wales and the Wales Office so that, where appropriate, it applies to both England and Wales.

6. All provisions apply to both England and Wales with the following exceptions:

section 34 (grants for parishes) applies to England only, while section 35 (grants for community councils) makes similar provision for Wales and applies to Wales only

section 40 and Schedule 2, taken with paragraphs 5, 12 to 17 and 22 of Schedule 7, have effect to alter the system of local government finance reports in Wales only

sections 61 to 65 with the related provisions in Schedule 7, introduce differences between the operation of non-domestic rates in England and their operation in Wales

section 75 (council tax: second and empty homes) applies only to billing authorities in England as Welsh billing authorities already have similar powers under section 12 of the Local Government Finance Act 1992

section 83(1) (council tax: major precepting authorities: combined fire authorities), and paragraph 1 of Schedule 7, apply only to fire authorities in England, while section 83(2) and (3) confer power on the National Assembly for Wales in relation to Welsh fire authorities

section 92(1) amends section 24(3) of the Housing Act 1985 so as to cause it to apply only to Wales, and section 92(2) confers power on the National Assembly for Wales to make an order repealing section 24(3) of that Act as amended by section 92(1)

sections 99 and 100 (performance categories for local authorities), except section 100(3), apply only to England

sections 105 and 106 (and Schedules 4 and 5) provide for a Valuation Tribunal Service which will operate only in England

section 112 makes provision about the Standards Board for England and so does not apply to Wales

section 115 (voting rights for co-opted members of overview and scrutiny committees) applies only in England

COMMENTARY ON SECTIONS

PART 1: CAPITAL FINANCE ETC AND ACCOUNTS

Summary

7. The new capital finance system (like the one it replaces) sets the legal framework within which local government may undertake capital expenditure and central Government may regulate that activity.

8. The innovative feature of the new system, however, is that local authorities will be free to raise finance for capital expenditure - without Government consent - where they can afford to service the debt without Government support. There will be reserve powers for Government to set limits on borrowing and credit, but it is envisaged that these would be used only in exceptional circumstances.

Section 1: Power to borrow

9. The present wide-ranging power of an authority to borrow for purposes relevant to its functions is preserved. But the new legislation goes further and clarifies that there is power to borrow for normal treasury management purposes - for example, to refinance existing debt.

Sections 2, 6 and 13: Control of borrowing

10. The main borrowing control section 2(1) will be the duty not to breach the prudential and national limits set under sections 3 and 4.

11. Authorities will be free to seek loans from any source, but will, as now, be prohibited from borrowing in foreign currencies without the consent of Treasury, since adverse exchange rate movements could leave them owing more than they had borrowed. Various provisions in the present legislation protecting lenders to authorities will be preserved. These include the long established 'safe harbour' (section 6): this ensures that debts can still be enforced even if it turns out that the authority borrowed unlawfully and means that potential lenders do not need to make detailed enquiries about authorities' borrowing powers. Section 13(3) maintains the ...

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