Local Government and Housing Act 1989

Borrowing

43 Borrowing powers

(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.

44 Borrowing limits etc

(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.

45 The authority’s own limits

(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.

46 Register of loan instruments and certain existing loans

(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.

47 Security for money borrowed etc

(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.