These measures are set out in the Local Government White Paper, Strong Local Leadership - Quality Public Services, and are due to take effect in the next financial year. At the same time the minister announced that the national borrowing limit would be removed now instead of in the next financial year.
'As the present national borrowing limit is exhausted we decided to end it now rather than wait until the new financial year. This will save time for parish and town councils by allowing them to borrow the finance that they need now for their capital projects rather than having to wait until the start of the new financial year when further resources become available.
'This is another important measure in our modernising agenda for local councils giving them greater freedom to plan out their capital expenditure projects in the knowledge that their applications for borrowing will be approved when they need them, subject to our criteria being fulfilled.'
John Findlay, chief executive of the National Association of Local Councils, welcomed the change and said that the minister's decision was very helpful to those local councils who were waiting in the queue for borrowing sanction. These councils could actively get on with their capital projects now.
In the department's recent White Paper, Strong Local Leadership - Quality Public Services, a number of measures are planned for improving and streamlining the borrowing application process for parish and town councils. These are, a standard application form for use by all local councils (that can be completed electronically if required); the removal of one of the tiers involved in the handling of applications; to clarify and advertise the assessment criteria more widely; and most importantly, the removal of the national fixed limit on local council borrowing.
All of these changes were scheduled to take effect in the next financial year. However, as there were a number of parish and town councils waiting for their applications to be approved, and the national limit had been fully utilised with little or no reserves left, it would not have been in the best interests of those councils to delay their applications until the next financial year.
Under paragraph 1(b) of Schedule 13 to the Local Government Act 1972, parish and town councils in England wishing to borrow have first to obtain the approval of the secretary of state for transport, local government and the regions, except in the case of certain temporary borrowings. Before the start of each year a fixed national limit on local council borrowing is agreed with HM treasury.
Applications are forwarded to the department via the National Association of Local Councils which adds its recommendations. Applications are assessed against a set criteria. Approvals are issued in the form of a letter. Once approvals have been issued up to the total of the limit no further issue can be made.
Until now the department has relied on some councils not using the approvals they have as these can be recycled for use by other councils waiting in the queue. The changes announced today will remove the need to delay borrowing approvals once the annual limit is reached. Safeguards built into the system will continue to apply. In particular the Department will retain the£500,000 maximum limit that any one council can borrow in one financial year.