PART GREVENUE ACCOUNTS AND CAPITAL FINANCE OF THE AUTHORITY

Application of Part G

G1.—(1) For financial years beginning on or after 1st April 1998, this Part has effect with respect of the finances of the Authority.

Capital purposes

G2.—(1) References in this Part to expenditure for capital purposes shall be construed in accordance with this article.

(2) Subject to paragraphs (5) and (6) below, the following expenditure (relating to tangible assets) is expenditure for capital purposes, namely, expenditure on—

(a)the acquisition, reclamation, enhancement or laying out of land, exclusive of roads, buildings and other structures;

(b)the acquisition, construction, preparation, enhancement or replacement of roads, buildings and other structures; and

(c)the acquisition, installation or replacement of moveable or immoveable plant, machinery and apparatus and vehicles and vessels.

(3) For the purposes of paragraph (2) above, “enhancement”, in relation to any asset, means the carrying out of works which are intended—

(a)to lengthen substantially the useful life of the asset; or

(b)to increase substantially the open market value of the asset; or

(c)to increase substantially the extent to which the asset can or will be used for the purposes of or in connection with the functions of the Authority;

but expenditure on the enhancement of an asset shall not be regarded as expenditure for capital purposes unless it should be so regarded in accordance with proper practices.

(4) Subject to paragraph (5) below, the following expenditure, in so far as it is not expenditure on approved investments, is expenditure for capital purposes, namely, expenditure on—

(a)the making of advances, grants or other financial assistance to any person towards expenditure incurred or to to be incurred by him on the matters mentioned in paragraphs (a) to (c) of paragraph (2) above or on the aquisition of investments; and

(b)the aquisition of share capital or loan capital in any body corporate.

(5) Where the Secretary of State has provided, by regulations made under section 40 of the 1989 Act, that expenditure by a local authority which, apart from the provision made by the regulations would not be expenditure for capital purposes shall be such expenditure; or that expenditure which, apart from the provision made by the regulations, would be expenditure for capital purposes shall not be such expenditure, then, for the purposes of the application of this Part, any such expenditure by the Authority shall, or as the case may be, shall not be treated as expenditure for capital purposes.

(6) Notwithstanding anything in the preceding provisions of this article, if the Secretary of State so directs, expenditure which—

(a)is of a description or for a purpose specified in the direction, and

(b)has been or is to be incurred by the Authority, and

(c)does not exceed such amount as is specified in the direction, and

(d)was or will be incurred during a period specified in the direction,

may be treated by the Authority as expenditure for capital purposes.

Expenditure to be charged to revenue account

G3.—(1) All expenditure incurred by the Authority, other than expenditure excluded by article G4 below, must be charged to a revenue account of the Authority and unless, in accordance with proper practices (exclusive of this paragraph), it is appropriate to charge some or all of any particular item of expenditure to a revenue account for an earlier or a later financial year, the expenditure shall be charged to a revenue account of the Authority for the year in which it is incurred.

(2) Any reference to a revenue account is a reference to one of the following accounts for a financial year of the Authority, namely—

(a)a revenue account which the Authority is required to keep by virtue of any enactment;

(b)a revenue account which the Authority is required to keep in order to comply with proper practices; or

(c)any other revenue account which the Authority decide to keep in accordance with proper practices.

(3) The reference in paragraph (1) above to expenditure incurred by the Authority in any financial year includes the following (whether or not giving rise to actual payments)—

(a)any amount which does not form part of the Authority’s capital receipts and which is set aside for the year by the Authority as provision to meet credit liabilities, otherwise than by virtue of paragraphs (1) and (2) of article G24 below; and

(b)any other amount which is set aside for the year by the Authority as reasonably necessary for the purpose of providing for any liability or loss which is likely or certain to be incurred but is uncertain as to the amount or the date on which it will arise (or both);

and the reference in paragraph (4) below to expenditure incurred by the Authority shall be construed in accordance with this paragraph.

(4) Nothing in this article or the following provisions of this Part shall permit the Authority to charge to a revenue account which it is required to keep by virtue of any enactment any expenditure incurred by the Authority which could not otherwise be so charged.

Expenditure excluded from article G3(1)

G4.—(1) Expenditure falling within paragraph (2) below is excluded from the obligation in article G3(1) above but, if it is consistent with proper practices and the Authority so wish, any such expenditure may be charged to a revenue account of the Authority for the financial year in which it is incurred or an earlier or later financial year.

(2) Subject to paragraph (4) below, the expenditure referred to in paragraph (1) above is as follows—

(a)expenditure arising from the discharge of any liability of the Authority under a credit arrangement, other than an arrangement excluded from paragraph 2(1) of Schedule 3 to this Order by virtue of the application of paragraph 2(2) of Schedule 3 to this Order;

(b)expenditure arising from the discharge of any liability of the Authority in respect of money borrowed by the Authority, other than a liability in respect of interest;

(c)expenditure which, in reliance on a credit approval, the Authority has determined under article G17(a) below is not to be chargeable to a revenue account of the Authority;

(d)expenditure on making approved investments;

(e)expenditure consisting of the application or payment of capital receipts as mentioned in paragraphs (6) and (7) of article G20 below;

(f)expenditure which is met out of the usable part of capital receipts, in accordance with article G21(2) below;

(g)expenditure for capital purposes which the Authority determines is, or is to be, reimbursed or met out of money provided, or to be provided, by any other person, excluding grants from a Community institution; and

(h)expenditure in respect of payments out of a trust fund which is held for charitable purposes and of which the Authority is a trustee.

(3) A determination under paragraph (2)(g) above may not be made later than 30th September in the financial year following that in which the expenditure in question is incurred.

(4) Where regulations made under section 42(4) of the 1989 Act amend subsection (2) of that section, paragraph (2) above shall be deemed to have been amended to the like effect.

(5) Where, by virtue of paragraph (1) above, expenditure of any description is excluded from the obligation in article G3(1) above, it shall also be excluded from any requirement arising under this Order or any other enactment under which the expenditure is required to be charged to a revenue account or any particular account; but if—

(a)the Authority decides that expenditure of that description should be charged to a revenue account as mentioned in paragraph (1) above, and

(b)under any such requirement that expenditure (apart from this paragraph) would have to be charged to a particular revenue account,

that expenditure may be charged only to that revenue account.

Borrowing powers

G5.—(1) Subject to the following provisions of this Part, as part of the proper management of its affairs, the Authority may borrow money for any purpose relevant to its functions under any enactment.

(2) Except with the approval of the Secretary of State given with the consent of the Treasury, the 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 Banking Act 1987(1); or

(b)from the National Debt Commissioners or from the Public Works Loan Commissioners; or

(c)by means of a loan instrument;

and in sub-paragraph (a) above borrowing “short term” shall be construed in accordance with article G7(5) below.

(3) In the exercise of the powers conferred by sub-paragraphs (a) to (c) of paragraph (2) above, the 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 which applies by virtue of paragraph (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 acknowledgement (by the borrower, the lender or both) that a loan has been made to the Authority 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 is 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;

(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) Regulations made under section 43(5) of the 1989 Act shall apply to a loan instrument issued under this Part as they would apply if it was a loan instrument issued by the NCS Service Authority under Part IV of the 1989 Act and any document which, at the time it comes into being, does not comply with any provision which applies by virtue of this paragraph is not a loan instrument for the purposes of this Part; and in the application of those regulations references in those regulations to provisions in local government enactments shall be interpreted as references to the equivalent provisions of this Order.

(6) Any approval given by the Secretary of State under paragraph (2) above and any consent given by the Treasury under paragraph (3) above may be given generally or in a particular case or by reference to borrowing or securities of a particular description and may be given subject to conditions.

(7) Paragraphs (2) to (6) above apply to all borrowing powers for the time being available to the Authority under any enactment, whenever passed.

Borrowing limits etc.

G6.—(1) The 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 virtue of the application of paragraph 2(2) of Schedule 3 to this Order,

to exceed the aggregate credit limit for the time being applicable to the Authority by virtue of article G23 below.

(2) Where the Secretary of State makes provision by regulations under section 44(2) of the 1989 Act, regulating borrowing by local authorities, then borrowing by the Authority shall be regulated to like extent as borrowing by the NCS Service Authority is regulated by those regulations and in the application of those regulations under this paragraph references in those regulations to provisions in local government enactments shall be interpreted as references to be equivalent provisions of this Order; and the Authority may not borrow to any extent or in any manner which would contravene those regulations as applied by this paragraph.

(3) The Authority may not borrow any amount which would cause any limit for the time being determined by the Authority under article G7 below to be exceeded.

(4) References in this article and articles G7 to G9 below to borrowing by the Authority are references to borrowing not only under article G5 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 paragraph (1) above the temporary use by the Authority for a purpose other than that of the fund in question of money forming part of a trust fund as is referred to in subparagraph (h) of paragraph (2) of article G4 above shall be treated as borrowing.

(6) A person lending money to the Authority shall not be bound to enquire whether the Authority has power to borrow the money and shall not be prejudiced by the absence of any such power.

The Authority’s own limits

G7.—(1) For the purposes of this Part, for each financial year the 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 paragraph (3) below, the duty to determine the limits referred to in paragraph (1) above shall be performed before the beginning of the financial year to which the limits are to relate.

(3) Where the Authority has determined a limit for a financial year under paragraph (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) Article D1 above (arrangements for discharge of functions of the Authority by committees, officers etc) shall not apply to the duty to make a determination under paragraph (1) above of any limit or to the power to vary a limit under paragraph (3) above.

(5) For the purposes of paragraph (1)(b) above, the Authority may 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.

Register of loan instruments and certain existing loans

G8.—(1) The 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 1998 and, if it thinks it appropriate, the 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) Subject to the following provisions of this article, a register required to be maintained under this article shall be in such form as the Authority considers appropriate; but that form must be such that the register is, or is capable of being reproduced, in legible form.

(3) A register maintained under this article 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.

(4) The Authority may remove from a register maintained under this article particulars of any loan in respect of which no more payments or repayments fall to be made.

(5) Where provision is made in regulations under section 46(6) of the 1989 Act with respect to a register maintained by an authority under that section those provisions shall apply to a register maintained by the Authority under this article as they apply to a register maintained under that section; and in the application of those provisions under this paragraph references in those regulations to provisions in local government enactments shall be interpreted as references to the equivalent provisions in this Order.

(6) A copy of an entry in a register maintained under this article which is certified by a registrar of the register and purports to show particulars entered pursuant to paragraph (3) or paragraph (5) above shall be prima facie evidence of the matters specified in the entry.

(7) A certification by a registrar of a register maintained under this article 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.

(8) If—

(a)the name of any person is, without sufficient cause, entered in or omitted from a register maintained under this article, 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.

(9) Where an application is made under paragraph (8) 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.

Security for money borrowed etc.

G9.—(1) All money borrowed by the Authority together with any interest thereon, shall be charged indifferently on all the revenues of the Authority.

(2) All securities created by the Authority shall rank equally without any priority.

(3) If at any time any principal or interest due in respect of any borrowing by the Authority remains unpaid for a period of two months after demand in writing, then, subject to paragraph (4) 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.

(4) No application may be made under paragraph (3) above unless the sum due in respect of the borrowing concerned amounts to not less than 25,000 or such other amount as may from time to time be prescribed by the Secretary of State for the purposes of subsection (5) of section 47 of the 1989 Act.

(5) The court to whom an application is made under paragraph (3) above may confer upon the receiver any such powers of collecting, receiving and recovering the revenues of the Authority and of issuing levies as are possessed by the Authority.

(6) Except as provided by paragraph (1) above, the Authority may not mortgage or charge any of its property as security for money borrowed or otherwise owing by it; and any security purporting to be given in contravention of this paragraph shall be unenforceable.

Credit arrangements

G10.—(1) Subject to the following provisions of this article the Authority shall be taken for the purposes of this Part to have entered into a credit arrangement—

(a)in any case where it becomes the lessee of any property (whether land or goods); and

(b)in any case (not falling within sub-paragraph (a) above) where, under a single contract or two or more contracts taken together, it is estimated by the Authority that the value of the consideration which the Authority has still to give at the end of a relevant financial year for or in connection with the provision to the Authority of any land, goods or services or any other kind of benefit is greater than the value of the consideration (if any) which the Authority were still to receive immediately before the beginning of that financial year; and

(c)in any case where the Authority enters into a transaction of the same description as a transaction of a description for the time being prescribed for the purposes of section 48 of the 1989 Act by regulations made by the Secretary of State

and, in any such case, the “credit arrangement” is the lease, the single contract or, as the case may be, the two or more contracts taken together.

(2) The estimate required to be made under sub-paragraph (b) of paragraph (1) above shall be made at the time the contract or, as the case may be, the later or last of the contracts constituting the credit arrangement is entered into; and the reference in that sub-paragraph to a relevant financial year is a reference to a financial year which begins after the contract or, as the case may be, the first of the contracts constituting the arrangement was entered into.

(3) For the purpose of this Part a credit arrangement comes into being—

(a)where paragraph (1)(a) above applies, at the time the Authority become the lessees;

(b)where paragraph (1)(b) above applies, at the time the contract or, as the case may be, the later or latest of the contracts constituting the arrangement is entered into; and

(c)where paragraph (1)(c) above applies, at the time the Authority enter into the transaction concerned or such other time as may be specified in the regulations concerned.

(4) Where a contract constitutes, or two or more contracts taken together constitute, a credit arrangement, no account shall be taken under this article of any later contract which has the effect of varying the effect of the contract or, as the case may be, of the two or more contracts taken together.

(5) A contract is not a credit arrangement to the extent that it is a contract under which the Authority borrows money; and a lease or contract of the Authority which is of the same description as a lease or contract of an authority which is excluded from section 48 of the 1989 Act by regulations made by the Secretary of State under that Act is not a credit arrangement for the purposes of this article.

(6) It is immaterial for the purposes of this article whether the consideration given or received by the Authority under any contract is given to or received from the person by whom the land, goods, services or other benefit are in fact provided to the Authority; and for the purposes of this article, and any of the following provisions of this Part relating to credit arrangements, in any case where the consideration under a contract consists, in whole or in part,—

(a)of an undertaking to do or to refrain from doing something at a future time (whether specified or not), or

(b)of a right to do or to refrain from doing something at such a future time,

that consideration shall be regarded as neither given nor received until the undertaking is performed or, as the case may be, the right is exercised.

(7) Where the consideration under a contract consists, in whole or in part, of an option, the estimate required to be made under paragraph (1)(b) above shall be made—

(a)on the assumption that the option will be exercised or, if the option could be exercised in different ways, on the assumption that it will be exercised in each of those ways, and

(b)on the assumption that the option will not be exercised, and if, on any of those assumptions, the contract would on those estimates constitute, alone or together with one or more other contracts, a credit arrangement, it shall be regarded as doing so regardless of whether the option is or is not in fact exercised; and in this paragraph “option” includes any right which is exercisable or not at the discretion of a party to the contract.

(8) If an existing contract is varied and the variation does not in law itself constitute a contract, it shall be regarded as such for ,the purposes of this article and, accordingly, subject to paragraph (4) above, the existing contract and the variation shall be regarded as two contracts to be taken together.

(9) A lease of any property is excluded from paragraph (1)(a) above if the Authority becomes the lessee by virtue of article 5 of the Police Act 1997 (Commencement No. 5 and Transitional Provisions) Order 1998(2).

Initial and subsequent cost of credit arrangements

G11.—(1) Subject to paragraph (3) below, for the purposes of this Part the initial cost of a credit arrangement is the amount which, at the time the arrangement comes into being, the Authority estimates will be the aggregate of—

(a)any consideration which falls to be given by the Authority under the arrangement in the financial year in which it comes into being; and

(b)the value of the consideration falling to be given by the Authority under the arrangement in any subsequent financial year, determined in accordance with paragraph (2) below.

(2) For each subsequent financial year referred to in paragraph (1)(b) above, the value of the consideration falling to be given in that year shall be determined by the formula—

(3) Paragraph (2) above does not apply to a credit arrangement of the Authority which is of the same description as a credit arrangement of an authority excluded from subsection (2) of section 49 of the 1989 Act by regulations made by the Secretary of State and, in relation to a credit arrangement which is so excluded, for the purposes of the application of this Part, the provision made in those regulations for the method of calculating the initial cost and the cost of the arrangement at any time shall apply.

(4) Subject to paragraph (3) above and articles G13 below, the cost of a credit arrangement at any time after it has come into being shall be determined in accordance with paragraphs (1) and (2) above (in like manner as the determination of the initial cost) but on the basis of an estimate made at the time in question and leaving out of account any consideration which has been given by the Authority under the arrangement before that time.

(5) In the application of this article to a credit arrangement which consists, in whole or in part, of a contract, the consideration under which falls within paragraph (7) of article G10 above,

(a)if the credit arrangement exists only on the basis of one of the assumptions in that paragraph, the Authority shall make that assumption for the purposes of this article; and

(b)if the credit arrangement would exist on the basis of any two or more of those assumptions, the Authority shall for the purposes of this article make whichever of those assumptions seems to it most likely.

Limits on powers to enter into credit arrangements

G12.—(1) The Authority may not enter into a credit arrangement for any purposeunless, if it incurred expenditure for that purpose, it would be expenditure for capital purposes, and any reference in the following provisions of this Part to “capital purposes”, in relation to a credit arrangement, shall be construed accordingly.

(2) The Authority may not enter into a credit arrangement unless, at the time the arrangement comes into being, there is available to the Authority an amount of credit cover equal to the initial cost of the arrangement.

(3) For the purposes of this article, each of the following amounts constitutes, in relation to a credit arrangement, an amount of credit cover available to the Authority,

(a)an amount for the time being authorised by a credit approval issued to the Authority;

(b)an amount of the usable part of capital receipts which, in accordance with a determination under article G21(2) below referring to the arrangement, is applied by the Authority as provision to meet credit liabilities; and

(c)an amount which, in accordance with a determination of the Authority referring to the arrangement, is set aside from a revenue account by the Authority as provision to meet credit liabilities (being an amount over and above what they are required so to set aside by virtue of any other provision of this Part).

(4) The Authority may not enter into a credit arrangement at any time if to do so would at that time cause the total referred to in article G6(1) above to exceed the aggregate credit limit for the time being applicable to the Authority by virtue of article G23 below.

(5) A determination under paragraph (3)(c) above may not be made later than 30th September in the financial year following that in which falls the time when there comes into being the credit arrangement for which the credit cover is made available.

Variation of credit arrangements

G13.—(1) This article (other than paragraph (10) below) applies where the terms of a credit arrangement entered into by the Authority are varied (whether by the making of a new contract or otherwise) in such a way that, if the effect of the variation had been part of the arrangement at the time it came into being, the initial cost would have been greater than it was.

(2) If, in the case of a credit arrangement falling within paragraph (5) of article G11 above,

(a)the option in question is exercised in a way different from that which was assumed for the purposes of that article, or

(b)it was assumed for the purposes of that article that the option in question would not be exercised but it is in fact exercised,

the exercise of the option shall be regarded for the purposes of this article as a variation of the terms of the credit arrangement; and if, in such a case, it was assumed for the purposes of article G11 above that the option would be exercised (or would be exercised in a particular way) and it subsequently appears to the Authority that it will not in fact be exercised, the option shall be assumed to have been abandoned and that abandonment shall be regarded for the purposes of this article as a variation of the terms of the credit arrangement.

(3) The Authority may not at any time agree to such a variation as is mentioned in paragraph (1) above if to do so would mean that, immediately after the variation, the total referred to in article G6(1) above would exceed the aggregate credit limit for the time being applicable to the Authority by virtue of article G23 below.

(4) Where a credit arrangement is varied as mentioned in paragraph (1) above, the Authority shall secure that there is available to it an amount of credit cover equal to whichever is the less of—

(a)the difference between the total amount of consideration paid and payable under the arrangement disregarding the variation and the total amount of the consideration paid and payable under the arrangement as varied; and

(b)the difference between the adjusted cost of the arrangement and the credit cover already made available in connection with the arrangement in accordance with article G12 above; and paragraphs (3) and (5) of article G12 above apply for the purposes of this article as they apply for the purposes of that article, except that, in paragraph (5), the reference to the time when the arrangement comes into being shall be construed as a reference to the time when it is varied.

(5) Subject to paragraph (7) below, the adjusted cost of the arrangement referred to in paragraph (4)(b) above is the aggregate of—

(a)the consideration which, in the financial year in which the arrangement is varied and in any earlier financial year, has been or falls to be given by the Authority; and

(b)the amount which, at the time of the variation, the Authority estimates will be the cost of the arrangement, as varied, in each subsequent financial year determined as follows.

(6) Subject to paragraph (7) below, for any subsequent financial year the cost of the arrangement as varied shall be determined by the formula in article G11(2) above but, for this purpose,

• “x” is the amount of the consideration which the Authority estimates will be given by it in that financial year under the arrangement as varied;

• “r” is the percentage rate of discount for the financial year in which the arrangement is varied, as prescribed for the purposes of article G11 above;

• “n” is the financial year in which the consideration falls to be given, expressed as a year subsequent to the financial year in which the arrangement is varied (so that the first of the subsequent financial years is 1, the next is 2, and so on).

(7) Paragraph (5) and (6) above do not apply in relation to a credit arrangement as to which the method of calculating the initial cost and the cost at any time is provided for by virtue of article G11(3) above; and any adjusted cost or cost which would otherwise fall to be determined in accordance with those paragraphs shall be determined in accordance with the provisions applied by virtue of article G11(3) above.

(8) Where a credit arrangement is varied as mentioned in paragraph (1) above, the cost of the arrangement at any time after the variation shall be determined in accordance with paragraphs (5) and (6) above (in like manner as the determination of the adjusted cost) but on the basis of an estimate made at the time in question and leaving out of account any consideration which has been given by the Authority under the arrangement before that time.

(9) If, at any time after the terms of a credit arrangement have been varied as mentioned in paragraph (1) above, the terms of the arrangement are again varied, the preceding provisions of this article shall have effect with any necessary modifications and, in particular, as if,

(a)the reference in paragraph (1) above to the time the arrangement came into being were a reference to the time at which the arrangement was varied (or, as the case may be, last varied) as mentioned in that paragraph;

(b)the reference in that paragraph to the initial cost were a reference to the adjusted cost of the arrangement as so varied (or last varied); and

(c)the reference in sub-paragraph (b) of paragraph (4) above to the credit cover already made available in accordance with article G12 above included a reference to any additional credit cover made available under that paragraph at the time of an earlier variation.

(10) If at any time the terms of a credit arrangement are varied otherwise than as mentioned in paragraph (1) above, then, so far as the variation affects the consideration falling to be paid by the Authority in any year, account shall be taken of the variation in determining the cost of the arrangement at any subsequent time (under paragraph (8) above or paragraph (3) or paragraph (4) of article G11 above) but for other purposes the variation shall be disregarded.

Basic credit approvals

G14.—(1) Subject to paragraph (5) below, before the beginning of each financial year, the Secretary of State shall issue to the Authority, in the form of a notice in writing, a credit approval with respect to the Authority’s credit arrangements and expenditure for capital purposes during that year.

(2) A credit approval issued under this article (in this Part referred to as a “basic credit approval”) may be nil but, subject to that, shall be expressed as an amount of money.

(3) A basic credit approval shall have effect only for the financial year in respect of which it is issued and may be limited by excluding from the purposes for which the approval may be used capital purposes of a description specified in the approval.

(4) Where by regulations made under section 53 of the 1989 Act the Secretary of State requires a basic credit approval to specify, directly or by reference to tables or other documents specified in the regulations, a period (referred to as the “amortisation period”) during which a local authority is required to set aside, from a revenue account, as provision to meet credit liabilities, amounts determined in accordance with the requirement then the like requirement shall apply to the Authority in relation to basic credit approvals issued under this article.

(5) In relation to the financial year beginning 1st April 1998 the Secretary of State shall issue a basic credit approval in respect of that year before 7th April 1998.

Supplementary credit approvals

G15.—(1) Any Minister of the Crown may at any time issue to the Authority, in the form of a notice in writing, a credit approval (in this Part referred to as a “supplementary credit approval”).

(2) A supplementary credit approval shall be expressed as an amount of money and shall be limited to credit arrangements and expenditure for capital purposes of a description specified in the approval (but, if the Minister concerned considers appropriate, all capital purposes may be so specified).

(3) A supplementary credit approval shall have effect for such period as is specified in the approval; and where such an approval is issued not more than six months after the end of a financial year, it may specify a period which begins or begins and ends at any time during that financial year.

(4) Subject to paragraph (5) below, paragraph (4) of article G14 applies in relation to a supplementary credit approval as it applies in relation to a basic credit approval.

(5) In the case of a supplementary credit approval issued in respect of expenditure which is treated by the Authority as expenditure for capital purposes by virtue only of directions under article G2(6) above, the approval must specify an amortisation period and the maximum amortisation period which may be specified shall be seven years.

Criteria for issuing credit approvals

G16.—(1) In determining the amount of a basic credit approval or a supplementary credit approval to be issued by the Authority, the Secretary of State or other Minister may have regard, subject to the following provisions of this article, to such factors as appear to him to be appropriate.

(2) Without prejudice to the generality of paragraph (1) above, the Secretary of State or other Minister may, in particular, have regard—

(a)to the amount of any grants or contribution which it appears to him that the Authority has received and is likely to receive from any person in respect of expenditure incurred by the Authority or to be incurred by it before the expiry of the period for which the credit approval is to have effect; and

(b)subject to paragraph (3) below, to the amount of capital receipts which it appears to him that the Authority has received, might reasonably be expected to have received or to receive or is likely to receive before the expiry of the period for which the credit approval is to have effect.

(3) In determining the amount of credit approval, the Secretary of State or other Minister shall not take account of capital receipts—

(a)to the extent that the Authority is required to set aside the receipts as provision for credit liabilities; or

(b)to the extent that they are applied or paid as mentioned in paragraphs (6) and (7) of article G20 below.

(4) In determining the amount of the basic credit approval or of a supplementary credit approval to be issued to the Authority in any financial year, the Secretary of State or other Minister shall not take account of the extent to which it appears to him that the Authority is or is likely to be in a position to finance expenditure for capital purposes from a revenue account.

Use of credit approvals by the Authority

G17.  Where the Authority has received a basic credit approval or a supplementary credit approval, then, if it so determines the approval may be treated wholly or partly—

(a)as authority not to charge to a revenue account an amount of expenditure which is defrayed during the period for which the approval has effect and which is for capital purposes to which the approval applies; or

(b)as authority, within the period for which the approval has effect, to enter into or agree to a variation of a credit arrangement for purposes to which the approval applies.

Effect of certain capital grants on credit approvals

G18.—(1) In this article “specified capital grants” means grants, contributions and subsidies—

(a)which are paid to the Authority in aid of its expenditure for capital purposes;

(b)which are payments of the same type as payments specified for the purposes of section 57 of the 1989 Act by regulations made by the Secretary of State under that Act, in which case such payments shall be specified, to the same extent, for the purposes of this article.

(2) If at any time the Authority receives a specified capital grant, such, if any, of the Authority’s credit approvals as are relevant to that grant shall, in accordance with the following provisions of this article, be reduced or, as the case may be, extinguished by deducting therefrom an amount equal to the grant.

(3) For the purpose of this article, a credit approval is relevant to a specified capital grant i f —

(a)the approval has effect at the time the grant is received or at any time thereafter; and

(b)the purposes for which the approval may be used are or include the purposes towards expenditure on which the grant is made.

(4) Subject to paragraph (5) below, where, by virtue of paragraph (2) above, a deduction is required in respect of a specified capital grant,—

(a)the deduction shall be applied to the credit approvals which are relevant to the grant in the order in which those approvals were received;

(b)subject to sub-paragraph (d) below, the reduction or extinguishment of any such approval shall be regarded as taking place when the grant is received;

(c)if the amount of the deduction exceeds the total of the credit approvals which are relevant to the grant and were received before the grant, the excess shall be applied in reduction (or extinguishment) of credit approvals which are so relevant and are received later; and

(d)any such reduction or extinguishment of a later credit approval as is referred to in sub-paragraph (c) above shall be regarded as taking place when the approval is received.

(5) In any case where before the time when a specified capital grant is received by the Authority, the Authority has made a determination under article G17 above with respect to a credit approval which is relevant to that grant the credit approval shall not, to that extent, be taken into account under paragraphs (2) and (4) above; but, subject to that, the making of determination under article G17 above with respect to a credit approval shall not affect the operation of those paragraphs in relation to it.

Capital receipts

G19.—(1) For the purposes of this Part, the capital receipts of the Authority are, subject to the following provisions of this article those sums received by the Authority in respect of—

(a)the disposal of any interest in an asset if, at the time of disposal, expenditure on the acquisition of the asset would be expenditure for capital purposes;

(b)the disposal of any investment other than an investment which, at the time of disposal, is an approved investment;

(c)the repayment of, or a payment in respect of, any grants or other financial assistance of such a description that, if the expenditure on the grant or assistance had been incurred at the time of the repayment or payment, it would have constituted expenditure for capital purposes; or

(d)the repayment of the principal of an advance (not being an approved investment) made by the Authority for such a purpose that, if the advance had been made at the time of the repayment, expenditure incurred on it would have constituted expenditure for capital purposes;

and those sums become capital receipts at the time they are in fact received.

(2) When an asset or investment falling within sub-paragraph (a) or sub-paragraph (b) of paragraph (1) above is disposed of and the whole or part of the purchase price is not received by the Authority at the time of the disposal, then, subject to paragraph (4) below, any interest payable to the Authority in respect of the whole or any part of the price shall not be regarded as a capital receipt.

(3) Subject to paragraph (4) below, in the case of a disposal of an asset which consists of the grant, assignment or surrender of a leasehold interest in any land or the lease of any other asset, only the following are capital receipts,

(a)any premium paid on the grant or assignment;

(b)any consideration received in respect of the surrender;

(c)any sum paid by way of rent more than three months before the beginning of the rental period to which it relates;

(d)any sum paid by way of rent in respect of a rental period which exceeds one year; and

(e)so much of any other sum paid by way of rent as, in accordance with directions given by the Secretary of State, falls to be treated as a capital receipt.

(4) Where the Secretary of State has provided, by regulations made under section 58 of the 1989 Act, that the whole or such part as may be determined under the regulations of a sum received by a local authority and which apart from that section, would not be a capital receipt shall be such a receipt and the whole or such part as may be so determined of a sum which, apart from that section, would be a capital receipt shall not be such a receipt, then, for the purposes of the application of this Part, any such sum received by the Authority shall, or as the case may be, shall not be treated as a capital receipt; and references in those Regulations to local government enactments shall be interpreted as references to the equivalent provisions of, or as applied by, this Order.

The reserved part of capital receipts

G20.—(1) At the time when the Authority receives a capital receipt, a part of that receipt (in this Part referred to as “the reserved part”) shall be set aside by the Authority as provision to meet credit liabilities.

(2) Subject to the following provisions of this article, the reserved part of a capital receipt shall be 50 per cent.

(3) Where the Secretary of State by regulations under section 59 of the 1989 Act alters the percentage which is for the time being the reserved part of any capital receipt of an authority or provides that the amount which is the reserved part of any capital receipt of an authority shall be determined in accordance with the regulations for the purposes of that section then for the purposes of the application of this article the reserved part of a capital receipt shall be as provided by those regulations or determined in accordance with those regulations; and references in those regulations to local government enactments shall be interpreted as references to the equivalent provisions of, or as applied by, this Order.

(4) Where the Secretary of State by regulation provides that capital receipts of a description specified in the regulations shall be treated for the purposes of section 59 of the 1989 Act as reduced by an amount determined in accordance with the regulations then for the purposes of this article capital receipts of the specified description of the Authority shall be treated as reduced by such amount as they would be if they were captial receipts of an authority determined in accordance with the regulations; and references in those regulations to local government enactments shall be interpreted as references to the equivalent provisions of, or as applied by, this Order.

(5) Without prejudice to subsection (3) above, in any case where—

(a)the consent of the Secretary of State is required for a disposal of a dwelling-house or any other property, and

(b)the Secretary of State gives a direction under this sub-paragraph with respect to a capital receipt in respect of that disposal,

subsection (2) above shall have effect in relation to that capital receipt as if it provided that the reserved part of the receipt were a percentage thereof specified in the direction or, according as the direction provides, an amount determined in accordance with the direction.

(6) Paragraph (1) above does not apply to a capital receipt received by the Authority as trustee of a trust fund which is held for charitable purposes.

(7) Where the Authority receives a capital receipt in respect of an asset, investment, grant or other financial assistance which was originally acquired or made by the Authority wholly or partly out of moneys provided by Parliament on terms which require, or enable a Minister of the Crown to require, the payment of any sum to such a Minister on or by reference to the disposal of the asset or investment or the repayment of the grant or assistance, the amount of the capital receipt shall be treated for the purposes of the preceding provisions of this article as reduced by the sum which appears to the Authority to be so payable.

The usable balance of capital receipts

G21.—(1) This article applies to the balance of any capital receipts received by the Authority after deducting—

(a)the reserved part of each such receipt; and

(b)any sum which, by virtue of paragraph (7) of article G20 above falls to be deducted in determining the amount of any receipt for the purposes of the preceding provisions of that paragraph;

but nothing in this article applies to a capital receipt which falls within article G20(6) above.

(2) The balance referred to in paragraph (1) above (in this Part referred to as “the usable part” of the Authority’s capital receipts) shall be applied by the Authority, accordingly as it determines, in one of the following ways, or partly in one way and partly in the other,—

(a)to meet expenditure incurred for capital purposes; or

(b)as provision to meet credit liabilities;

and, subject to paragraph (3) below, may be so applied in the financial year in which the receipts are received or in any later financial year.

(3) A determination by the Authority under paragraph (2) above as to the manner in which the usable part of its capital receipts are to be applied may not be made later than 30th September in the financial year following that in which, in accordance with the determination, the receipts are to be applied.

(4) For the purposes of this Part, to the extent that the usable part of the Authority’s capital receipts are applied as mentioned in paragraph (2)(a) above, it shall be taken to be so applied at the time when the expenditure in question is defrayed.

(5) For the purposes of this Part, to the extent that the usable part of the Authority’s capital receipts are applied as mentioned in paragraph (2)(b) above, it shall be taken to be so applied—

(a)if it is used as an amount of credit cover as mentioned in article G12(3)(b) above, when the credit arrangement in question is entered into or varied; and

(b)in any other case, on the last day of the financial year in which (pursuant to the Authority’s determination) it is so applied.

Capital receipts not wholly in money paid to the Authority

G22.—(1) This paragraph applies where—

(a)the whole or part of the consideration received by the Authority for a disposal falling within article G19(1) above either is not in money or consists of money which, at the request or with the agreement of the Authority concerned, is paid otherwise than to the Authority; or

(b)the right of the Authority to receive such a repayment or payment as is referred to in article G19(1) above is assigned or waived for a consideration which, in whole or in part, is not in money or which, at the request or with the agreement of the Authority, is paid otherwise than to the Authority; or

(c)on a disposal falling within article G19(3) above, if it had been in money paid to the Authority, it would have been a capital receipt.

(2) Where this article applies in relation to any consideration, there shall be determined the amount which would have been the capital receipt if the consideration had been wholly in money paid to the Authority; and subject to paragraph (3) below, the amount so determined is in this article referred to as “the notional capital receipt”.

(3) From the amount which, apart from this paragraph, would be the notional capital receipt in relation to a disposal, repayment or payment there shall be deducted any amount of money that was paid or is payable to the Authority in respect of that disposal, repayment or payment and in respect of which article G20 above actually applies or will actually apply when the payment is received.

(4) Where consideration to which this article applies is received in respect of a disposal, repayment or payment, the Authority shall set aside, at the time of the disposal or the assignment or waiver of the repayment or payment, and as provision to meet credit liabilities, an amount which, except in so far as directions given by the Secretary of State otherwise provide, shall be equal to that which, under article G20 above, would be the reserved part of the notional capital receipt.

(5) The amount falling to be set aside by the Authority under paragraph (4) above shall be so set aside—

(a)from the usable part of the Authority’s capital receipts; or

(b)from a revenue account of the Authority.

(6) Where the Secretary of State provides by regulations made under section 61 of the 1989 Act that—

(a)consideration which is not in money, which is received by a local authority and which is of a description specified in the regulations, or

(b)consideration which is in money, which is paid otherwise than to a local authority and which is of a description specified in the regulations,

shall be treated for the purposes of subsections (2), (4) and (5) of that section as consideration to which that section applies, then consideration which is not in money which is received by the Authority and is of the description specified in the regulations and consideration which is not in money which is paid otherwise than to the Authority and is of the description specified in the regulations shall be treated for the purposes of paragraphs (2), (4) and (5) above as consideration to which this article applies and, in relation to any such consideration, paragraph (4) above shall apply with such modifications as are specified in the regulations, and references in those regulations to local government enactments shall be interpreted as references to the equivalent provision of, or as applied by, this Order.

Aggregate credit limit

G23.—(1) There shall be an aggregate credit limit for the Authority which, subject to paragraph (2) below, at any time shall be the total at that time of—

(a)the Authority’s temporary revenue borrowing limit;

(b)the Authority’s temporary capital borrowing limit;

(c)the Authority’s credit ceiling, as determined under Schedule 3 to this Order; and

(d)the excess of the Authority’s approved investments and cash over its usable capital receipts;

but the reference in sub-paragraph (d) above to approved investments and cash does not include investments or cash held for the purposes of such a trust fund as is referred to in sub-paragraph (h) of paragraph (2) of article G4 above.

(2) On an application made by the Authority, the Secretary of State may direct that, for any period specified in the direction, the amount which, apart from the direction, would be the Authority’s aggregate credit limit at any time during that period shall be increased by an amount specified in the direction with respect to that period; and any increase specified in a direction under this paragraph may be expressed to have effect subject to compliance with such terms and conditions as may be so specified.

(3) Subject to paragraph (4) below, the Authority’s temporary revenue borrowing limit at any time is whichever is the less of—

(a)the total sums which at that time remain to be received by the Authority and which, as income, fall or will fall to be credited to a revenue account of the Authority for the current financial year; and

(b)the aggregate of—

(i)the total sums which, up to and including that time (whether in the current or a previous financial year), the Authority has disbursed in respect of expenditure which falls to be charged to a revenue account of the Authority for the current financial year; and

(ii)any relevant arrears in respect of which provision has been or is to be charged to such a revenue account or which have been or are to be written off and charged to such a revenue account;

and for the purposes of sub-paragraph (b) (ii) above “relevant arrears” are amounts in respect) b of income which remain to be received by the Authority and which, as income, fall to be credited to a revenue account of the Authority for the financial year beginning two years before the beginning of the current financial year.

(4) At any time in a financial year the amount which, apart from this paragraph, would be an Authority’s temporary revenue borrowing limit shall be increased by the addition of any amount in respect of the immediately preceding financial year, being whichever is the less of—

(a)the excess (if any) of the total sums which, up to and including that time, the Authority have disbursed in respect of expenditure falling to be charged to a revenue account of the Authority for that preceding year over the total sums which, up to and including that time, the Authority have received in respect of income falling to be credited to such a revenue account; and

(b)the total sums which at that time remain to be received by the Authority and which, as income, fall or will fall to be credited to a revenue account of the Authority for that preceding year.

(5) The Authority’s temporary capital borrowing limit at any time is so much of the expenditure defrayed by the Authority for capital purposes in the eighteeen months ending at that time as is due to be, but at that time has not been, re-imbursed by any other person, excluding expenditure which is to be re-imbursed or met out of grants from a Community institution; and for the purpose it is immaterial whether the re-imbursement is due as a result of an obligation arising by statute, contract or otherwise or is to take the form of a grant or other obligation voluntarily undertaken.

(6) If at any time the Authority’s usable capital receipts exceed its approved investments and cash referred to in subparagraph (d) of paragraph (1) above, the amount taken into account under that sub-paragraph shall be a negative amount.

(7) Where an amount taken into account under sub-paragraph (c) or sub-paragraph (d) of paragraph (1) above is a negative amount, it shall be a deduction in determining the total referred to in the sub-paragraph.

(8) Any reference in this article to the Authority’s usable capital receipts at any time is a reference to the usable part of the Authority’s capital receipts so far as they have not been applied before that time.

Duty to set certain amounts aside as provision to meet credit liabilities

G24.—(1) Without prejudice to any other provision of this Part under which the Authority is required or authorised to set aside any amount as provision to meet credit liabilities, in each financial year the Authority shall, by virtue of this article, set aside, from such revenue account or accounts as the Authority thinks fit, as provision to meet credit liabilities, an amount determined by the Authority, being not less than the minimum revenue provision for that year referred to in Part II of Schedule 3 to this Order.

(2) Where the Authority receives any sum by way of grant from a Community insitution towards the Authority’s expenditure on capital purposes, it shall at the time the sum is received, set aside an amount equal to that sum as provision to meet credit liabilities.

(3) A determination under paragraph (1) above shall be made not later than 30th September in the financial year following that to which the determination relates.

Use of amounts set aside to meet credit liabilities

G25.—(1) Amounts for the time being set aside by the Authority (whether voluntarily or pursuant to a requirement under this Part) as provision to meet credit liabilities may, subject to paragraph (2) below, be applied only for one or more of the following purposes—

(a)to meet any liability of the Authority in respect of money borrowed by the Authority, other than a liability in respect of interest;

(b)to meet any liability of the Authority in respect of credit arrangements, other than those excluded under paragraph 2(2) of Schedule 3 to this Order; and

(c)where a credit approval has been used as authority not to charge particular expenditure to a revenue account, to meet that expenditure.

(2) Subject to the following provisions of this article if, on the date which is the relevant date for any financial year, the Authority’s credit ceiling as determined under Part I of Schedule 3 is a negative amount, any such amount as is referred to in paragraph (1) above in that financial year may be applied by the Authority for the same purposes as the purposes it may be applied by an authority by virtue of regulations made by the Secretary of State under section 64 of the 1989 Act, so long as any conditions specified in those regulations are complied with.

(3) The aggregate of the amounts which may be applied by the Authority in accordance with paragraph (2) above in any financial year shall not exceed the amount by which the Authority’s credit ceiling on the relevant date is less than nil.

(4) References in paragraphs (2) and (3) above to the relevant date shall be construed as follows—

(a)for the financial year beginning on 1st April 1998, the relevant date is that date; and

(b)for any subsequent financial year, the relevant date is the last day of the preceding financial year.

Information

G26.—(1) The Secretary of State may serve on the Authority a notice requiring the Authority to supply to him such information as is specified in the notice and is required by him—

(a)for the purpose of deciding whether to exercise his powers, and how to perform his functions, under this Part; or

(b)for the purpose of ascertaining whether the Authority have acted, or are likely to act, in accordance with this Part; or

(c)for the purpose of assisting the formulation of government economic policies;

but no information shall be required for the purpose specified in paragraph (c) above unless it relates to, or to plans or proposals about, the finances and expenditure of the Authority or of any company in which the Authority has an interest.

(2) If the information specified in a notice under this article is in the possession or under the control of the Authority, the Authority shall supply the information required in such form and manner, and at such time, as is specified in the notice and, if the notice so requires, the information shall be certified (according as is specified in the notice) in one or both of the following ways,

(a)by the chief finance officer of the Authority, within the meaning of article F3 above, or by such other person as may be specified in the notice; and

(b)under arrangements made by the Audit Commission for Local Authorities in England and Wales.

(3) If the Authority fails to comply with paragraph (2) above, the Secretary of State may decide—

(a)whether to exercise his powers, and how to perform his functions, under this Part, or

(b)whether the Authority have acted, or are likely to act, in accordance with this Part,

on the basis of such assumptions and estimates as he thinks fit.

(4) In deciding—

(a)whether to exercise his powers, and how to perform his functions, under this Part, or

(b)whether the Authority has acted, or is likely to act, in accordance with this Part,

the Secretary of State may also take into account any other information available to him, whatever its source and whether or not obtained under a provision contained in or made under this or any other enactment.

Interpretation of Part G

G27.—(1) In this Part—

(a)“approved investments” means investments approved for the purposes of Part IV of the 1989 Act by regulations made by the Secretary of State;

(b)“local government enactment” means an enactment listed in Schedule 6 to the Police Act 1997 and regulations made under those enactments; and

(c)“Minister of the Crown” has the same meaning as in the Ministers of the Crown Act 1975(3).

(2) For the purposes of this Part, the Authority—

(a)incurs a liability in respect of a payment at the time when it becomes unconditionally liable to make the payment; and

(b)discharges a liability in respect of a payment at the time when it makes the actual payment, whether or not it has at that time become unconditionally liable to do so.

(3) In relation to a credit arrangement,—

(a)any reference in this Part to consideration given or to be given by the Authority under the arrangement does not include a reference to any consideration which is given before the time and arrangement comes into being (as defined in article G10(3) above); and

(b)any reference in this Part to a liability of the Authority under the arrangement does not include a reference to a liability which is met by the making of a payment before that time.

(4) In relation to the Authority, references in this Part to proper practices are references to those accounting practices—

(a)which the Authority is required to follow by virtue of any enactment; or

(b)which, whether by reference to any generally recognised published code or otherwise, are regarded as proper accounting practices to be followed in the keeping of the accounts of the Authority;

but, in the event of any conflict in any respect between the practices falling within sub-paragraph (a) above and those falling within sub-paragraph (b) above, only those falling within sub-paragraph (a) above are to be regarded as proper practices.

(5) For the avoidance of doubt, any reference in this Part to borrowing by the Authority does not include a reference to the temporary use by the Authority of money forming part of a particular fund of the Authority for a purpose other than that of the fund.