Local authority financing at risk, says panel
Saturday 01 June 1996
The panel urged ministers to set up a new tribunal to vet bank deals with local authorities in advance, which would remove the risk that the deals would later be declared illegal.
If the Government failed to do anything, an extension of the Treasury's private finance initiative to local authorities was unlikely to succeed, said the panel.
The PFI uses private money to fund what would otherwise count as public spending and it is a key part of the Chancellor's strategy to reduce his borrowing requirement. Other new types of financing for councils were also at risk, the panel said.
The problem arises from a series of legal cases going back to the Hammersmith and Fulham swaps deals a decade ago, which the courts found to be outside the council's powers.
But the panel, which has been pressing the Government to act for a year, believes court of appeals judgments this month involving Credit Suisse, have increased the urgency.
The judgments confirmed earlier decisions in the lower court that a much wider range of off-balance sheet financing by councils was potentially illegal. These include leasing deals for capital equipment and other direct expenditure, rather than the speculation involved in the swaps deals.
Estimates of the value of existing finance at risk are as high as pounds 3bn, though the panel's chief executive, Colin Bamford, said the highest figure he had heard was pounds 1bn.
But he made it clear the priority was to set up a system to allay City fears that any new deal a bank does with a local authority could similarly be declared ultra vires.
Mr Bamford said "It is pie in the sky to think the private finance initiative will attract banks when they are unable to get legal opinions saying the deal is not going to be void."
The proposed tribunal, would be run by the Audit Commission and would certify that specific deals would not be ultra vires.
- 1 Al Pacino on suffering from depression: 'It can last and it's terrifying'
- 2 Half of young women unable to ‘locate vagina’ and 65% find it difficult to say the word
- 3 Saudis risk new Muslim division with proposal to move Mohamed’s tomb
- 4 A teacher speaks out: 'I'm effectively being forced out of a career that I wanted to love'
- 5 Mexican woman becomes world’s 'oldest person' at 127
Perez Hilton apologises for publishing Jennifer Lawrence naked photo leak
Jennifer Lawrence 'nude photo hacker' claims there are hundreds more celebrity images to come
Victoria Justice on naked photo leak: 'Let me nip this in the bud right now – pun intended'
Saudis risk new Muslim division with proposal to move Mohamed’s tomb
Ariana Grande nude photos leak: Pictures are completely fake, say representatives
Rotherham child sex abuse scandal: Labour Home Office to be probed over what Tony Blair's government knew - and when
What do immigrants really think of Britain? Polish immigrant's Reddit post goes viral
Ashya King: Parents of five-year-old boy refused permission to visit him in hospital and denied bail at Spanish court
With Douglas Carswell joining Ukip, my party has taken another giant step forward
When elitism grips the top of British society to this extent, there is only one answer: abolish private schools
Ashya King: 'Cruel NHS has not given us the treatment we need', says father of five-year-old with brain tumour who fled to Spain
iJobs Money & Business
£30000 - £32000 per annum: Ashdown Group: HR Generalist (standalone) - Tunbrid...
£600 - £800 per day: Harrington Starr: Derivatives Risk Commodities Business A...
£600 - £800 per day: Harrington Starr: Power & Gas Business Analyst/Subject Ma...
£600 - £900 per day: Harrington Starr: Infrastructure Lead, (Trading infrastru...