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The UK's local authority airports were cleared for take-off today as ...
The UK's local authority airports were cleared for take-off today as

transport minister John Reid relaxed government borrowing restrictions.

The move, subject to parliamentary approval, will allow local

authorities to raise development capital on the money markets from 1

April, enabling them to bring forward expansion plans to cater for

growing demand.

Outlining the details, Dr Reid said it paved the way for local

authority-owned airports to meet the challenges of the new


'We want to maximise the contribution these airports make to their

local economies, and to relieve congestion at airports in the South


'Giving financially sound local authority airports the power to

raise private finance for development work will help us do that,' he


Dr Reid emphasised that local authority airports would have to meet

strict financial criteria before being set free from existing

borrowing controls.

Launching a consultation exercise into the qualifying criteria, he


'Local airports and the regions they serve have pressed us to relax

our controls on airport investment. I am delighted that we have been

able to respond positively.

'The early implementation of the new arrangements will allow the

airports that qualify to bring forward their plans for development

and for improved public transport access.

'But economic benefits have to be balanced with environmental

safeguards and - as we promised in our Integrated Transport White

Paper - we will continue to press with our international partners

for tighter worldwide standards for aircraft noise and emissions. We

will ensure that appropriate standards are set and enforced at UK

airports, including all local authority airports.'

The minimum criteria which will have to be met before a local

authority airport can be excluded from public sector borrowing

controls are:

- it will not be permissible for any local authority or

other public sector body to provide any guarantees or letters of

comfort in support of new borrowing;

- the new borrowing must be subordinate to both (a) all

existing public sector debt and (b) all existing debt guaranteed or

supported in any way by any public sector body, though where new

borrowing is carried out for a specific project (eg an aircraft

hangar), it will be permissible for the lender to make a claim on the

asset if the airport defaults on the loan; and

- the purpose of the new borrowing must be to finance

airport-related investment (ie capital expenditure) in the United

Kingdom; where shareholders consider that it would be advantageous to

change the structure of an airport company's debt in order to make

best use of the new ability to borrow from the private sector,

private borrowing may be used for the purpose of paying off existing

local authority debt related to the airport in question.


1. The government announced on 11 June 1998 that it intended to give

soundly-based local authority airport companies the freedom to borrow

without being subject to public sector borrowing controls.

2. Local authority airport companies that wish to be removed from

public sector borrowing controls have been invited to apply to the

department by the end of December.

3. Copies of the consulation paper are available from the DETR,

telephone 0171 890 3339.

4. Responses to the consultation should be sent by 11 December 1998

to Alan Nafzger, Zone 2/29, Great Minster House, 76 Marsham Street,

London SW1P 4DR.

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