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Local Government Act 2003

Section 4: Imposition of borrowing limits

16.The Government, or the National Assembly for Wales will have reserve power to impose ‘longstop’ limits for national economic reasons on all authorities’ borrowing and these would override authorities’ self-determined prudential limits (set under section 3). Such limits (implemented by regulations) would only be imposed if authorities’ total borrowing, albeit locally prudent, was increasing to a level which threatened the country’s overall economic interests.

17.If an individual authority did not wish to undertake the full amount of borrowing permitted to it under a national limit, it would have power to transfer the spare ‘headroom’ to another authority, which would thereby have its borrowing capacity increased (subject to still complying with its own prudential limit).

18.There would be a similar power to impose a borrowing limit (by direction in this case) on an individual authority, to prevent it acting imprudently and borrowing more than it could afford.

19.Breach of the limits set under this section is prohibited by section 2(1)(b).

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