Review Group – Paper 8
REVIEW OF THE LEGISLATIVE PROVISIONS FOR LOCAL AUTHORITY BORROWING
REGULATIONS TO BE MADE UNDER SECTION 165 OF THE LOCAL GOVERNMENT
ETC. (SCOTLAND) ACT 1994
PURPOSE AND APPLICATION OF THE REGULATIONS
1.
Section 165(1) of the 1994 Act provides Scottish Ministers with the power to “make
provision with respect to the powers of authorities – (a) to borrow and lend money; and (b) to
establish and operate loans funds”. There Regulations therefore make provision about
borrowing powers rather than directly conferring those powers, that is, the Regulations are
about limits rather than conferring power to borrow.
2.
Section 165(6) defines “authority” and means “a local authority, a joint board, a river
purification board or the Strathclyde Passenger Transport Authority”. The new Regulations
will only apply to these bodies.
3.
An exercise has been undertaken to identify each type of local government body, their
power to borrow and whether the Regulations apply to that body.
Councils:
Legislation
Section 69(1) and
69(2) Local
Government
(Scotland) Act 1973
Section 235 Local
Government
(Scotland) Act 1973
Section 16 Local
Government
(Scotland) Act 1975
Section 37(2) Local
Government
(Scotland) Act 1975
Section 183(2) Local
Government etc.
(Scotland) Act 1994
Provision
Section 69(1) “A local authority shall have power to do anything (whether or not
involving the expenditure, borrowing or lending of money…)… discharge of their
functions.
Section 69(2) “a local authority shall not by virtue of this section raise money,
whether by means of rates or borrowing, or lend money except in accordance with
the enactments relating to those matters respectively.”
“Local authority means a regional, islands or district council”
“Schedule 3 to this Act shall have effect with respect to the powers of local
authorities, joint boards, water development boards and river purification boards to
borrow and lend money...”
“Expressions used in this Act and in the Act of 1973 shall have the same
meanings in this Act as in that Act.”
“Subject to section 59 of this Act …(a) any reference in any enactment to a local
authority within the meaning of the 1973 Act (whether expressed as a reference to
such an authority, or to a regional, islands or district council, or otherwise).. shall
be construed as a reference to a council constituted under section 2 of this Act”.
“for the purposes of this section “authority” means a local authority, a joint board, a
river purification board or the Strathclyde Passenger Transport Authority.”
Section 165(6) LG etc.
(Scotland) Act 1994
Summary:
Section 69 provides the 32 councils with a power to borrow.
This power to borrow is exercisable in accordance with Schedule 3 of the LG(S) Act 1975.
Section 165 Regulations will apply to the 32 councils which make provision in respect of their power to
borrow.
Joint boards
Legislation
Section 235 Local
Government
(Scotland) Act 1973
Section 62A and 62B
Local Government
(Scotland) Act 1973
Section 16 Local
Government
(Scotland) Act 1975
Section 27(7) Local
Government etc.
(Scotland) Act 1994
Section 165(6) Local
Government etc.
(Scotland) Act 1994
The Valuation Joint
Boards (Scotland)
Order 1995
Provision
“joint board” means a body corporate, constituted for the purposes of a
combination of authorities under this Act or by or under any other enactment,
consisting exclusively of persons appointed by the local authorities.
S.62A – Relevant authorities may apply to Scottish Ministers to incorporate a joint
committee into a joint board. If agreeing that application Scottish Ministers may, by
Order, establish a joint board.
S.62B - Scottish Ministers may, by Order, establish a joint board. An order shall
delegate such functions of the relevant authorities as may be specified in the
Order.
“Schedule 3 to this Act shall have effect with respect to the powers of local
authorities, joint boards, water development boards and river purification boards to
borrow and lend money...”
(7) If it appears to Scottish Ministers that any functions, or any functions in any
area, of two or more valuation authorities should be discharged jointly by those
authorities, he may by order establish a joint board in accordance with this
section.
“for the purposes of this section “authority” means a local authority, a joint board, a
river purification board or the Strathclyde Passenger Transport Authority.”
Order issued using powers in section 27(7) of the 1994 Act
Powers of boards
 7. A board shall have power to—
(a) hold land;
(b) borrow money.
Summary:
An Order will contain any powers to borrow.
Any power to borrow conferred by an Order is exercisable in accordance with Schedule 3 of the LG(S) Act
1975.
Section 165 Regulations will apply to any joint board in respect of any general power to borrow conferred
on them by Order.
Joint committees.
Legislation
Section 56(5) and
56(6)(d) Local
Government
(Scotland) Act 1973
Provision
s.56(5) “Two or more local authorities may discharge any of their functions
jointly..”
Section 57 Local
Government
(Scotland) Act 1973
s56(6)(d) “A local authority's functions with respect to borrowing money shall be
discharged only by the authority”.
(1) For the purpose of discharging any functions of a local authority in pursuance
of arrangements made under section 56 this Act—
(a) the authority may appoint a committee of the authority; or
(b) two or more local authorities may appoint a joint committee of those
authorities; or …
Section 235 Local
Government
(Scotland) Act 1973
“joint committee” means a body, not being a body corporate, constituted for the
purpose of a combination of local authorities under this Act or by or under any
other enactment, consisting exclusively of persons appointed by the local
authorities
Summary:
A local authority cannot delegate its borrowing powers to a joint committee.
The functions acquired under s.57 cannot therefore include a power to borrow.
Being unincorporated (s.235) it cannot be the recipient of a loan.
Regional Transport Partnerships (RTPs)
Legislation
Section 3 Transport
(Scotland) Act 2005
Section 16 Local
Government
(Scotland) Act 1975
Provision
“Regional Transport Partnerships: funding and borrowing
(7) A Transport Partnership may borrow money for the purpose of its capital
expenditure”.
“Schedule 3 to this Act shall have effect with respect to the powers of local
authorities, joint boards, water development boards and river purification boards to
borrow and lend money...”
Section 165(6) LG etc.
(Scotland) Act 1994
The Transport (Scotland) Act 2005 did not amend section 16 of the 1975 Act to
include regional transport partnerships.
“for the purposes of this section “authority” means a local authority, a joint board, a
river purification board or the Strathclyde Passenger Transport Authority.”
The Transport (Scotland) Act 2005 did not amend section 165 of the 1994 Act to
include regional transport partnerships.
Summary:
Under Section 3 of the Transport Act a transport partnership has the power to borrow for the purpose of its
capital expenditure.
Schedule 3 of the 1975 Act does not apply to transport partnerships.
Regulations made under section 165 of the 1994 Act will not apply to transport partnerships.
There is an outstanding query as to the application of legislation to the Strathclyde Partnership for
Transport. Further discussion with SPT will be required.
Strategic Development Planning Authorities
Legislation
Planning etc. (Scotland) Act 2006 and
The Strategic Development Planning Authority
Designation (Scotland) Order 2008
Provision
PLANNING CIRCULAR 2/08: Statutory Guidance on
Strategic Development Planning Authorities
“Strategic development planning authorities should form
a joint committee of members representing the
constituent planning authorities.”
Summary:
A joint committee and therefore has no power to borrow.
1.
Tay Road Bridge Joint Board. This Board was not created by the 1973 Act, but by its
own Act. This Act provides a power to request an advance from constituent councils to fund
capital expenditure. The Act references the powers of councils under Schedule 3 of the
1975 Act. Section s165(4) of the 1994 Act gives the power to amend a reference to Schedule
3 and the new Regulations will vary the 1991 Act to reference the new regulations.
Legislation
Section 235 Local
Government
(Scotland) Act 1973
Tay
Road
Bridge
Order
Confirmation
Act 1991
Provision
“joint board” means a body corporate, constituted for the purposes of a
combination of authorities under this Act or by or under any other enactment,
consisting exclusively of persons appointed by the local authorities.
Section 3 Establishment and constitution of Joint Board, etc
(1) A Joint Board, to be called “the Tay Road Bridge Joint Board”, shall be and is
hereby established for the purpose of exercising, subject to the provisions of this
Order, the powers conferred on the Joint Board by this Order or, on the former
Joint Board, or by any other enactment and such powers shall be exercised by the
Joint Board accordingly.
This Act sets out that a council, using their powers under Schedule 3 of the 1975
Act, will advance to the Tay Road Bridge Joint Board such sums for the purposes
of capital expenditure as may from time to time be requested by the Board.
The Act sets out provisions for temporary borrowing by the Board – these
provisions do not tie the Board to borrowing from the constituent councils.
The Act sets out how the Board is to repay the Councils for the money they have
advanced.
Summary:
The Tay Road Bridge Board has a power to borrow but the Act itself sets out how that power is to be
exercised.
The Board meets the definition of a joint board under the 1973 Act but the 1991 Act is clear as to how the
Board must borrow and repay money borrowed.
Specific provision has been made in the new Regulations to provide a council with the power to lend to the
Board but excludes the Board from the definition of local authority to avoid any conflict with the 1991 Act.
Integration Joint Boards.
Legislation
Section 16 Local
Government
(Scotland) Act 1975
Provision
“12.— Integration joint boards: further provision
(1) The Scottish Ministers may by order make provision—
(a) about the membership of integration joint boards,
(b) about the proceedings of integration joint boards,
(c) giving integration joint boards general powers (such as powers to contract,
acquire or dispose of property or rights or borrow money or incur other
liabilities) in connection with the carrying out of functions conferred on them
by or by virtue of this Act.”
“Schedule 3 to this Act shall have effect with respect to the powers of local
authorities, joint boards, water development boards and river purification boards to
borrow and lend money...”
Section 165(6) LG etc.
(Scotland) Act 1994
The Public Bodies (Joint Working) (Scotland) Act 2014 did not amend section 16
of the 1975 Act to include integration joint boards.
“for the purposes of this section “authority” means a local authority, a joint board, a
river purification board or the Strathclyde Passenger Transport Authority.”
Section 12 of The
Public Bodies
(Joint Working)
(Scotland) Act
2014
The Public Bodies (Joint Working) (Scotland) Act 2014 did not amend section
165 of the 1994 Act to include integration joint boards.
Summary:
An Order will contain any powers to borrow.
An Order will either contain its own terms or require the power to borrow to be exercised in accordance with
Schedule 3 of the LG(S) Act 1975.
An Order will either contain its own terms or require the power to borrow to be exercised in accordance with
Regulations made under Section 165 of the 1994 Act.
4.
In terms of the new Regulations this analysis has resulted in the definition of “local
authority” being defined in Regulation 1 as
“local authority” means a council constituted under section 2 of the Local Government etc. (Scotland) Act 1994,
a joint board [and the Strathclyde Passenger Transport Authority], but does not include an integration joint
board or the Tay Road Bridge Joint Board,
5.
The Scottish Government would welcome a discussion on transport partnerships as the
lack of application of Schedule 3/new Regulations raises questions on the statutory adjustments
which arise from the application of loans fund accounting.
Hazel Black
Local Government Division
19 August 2015