Birmingham council reacted with dismay to the draft Local Government Bill's failure to extend the borrowing rules to underperforming councils.
Former DTLR secretary Stephen Byers had hinted that the government would relax the prudential borrowing rules for councils with large debts. But the draft bill contained no changes in this respect from December's white paper. Byers even claimed changes would be made when he was on a special visit to Birmingham after tenants rejected stock transfer – seen as the only viable option for the council's housing.

But the draft bill does not give councils such as Birmingham, which are unable to transfer or qualify for arm's-length management, the extra borrowing clout they need.

Birmingham housing director David Thompson told Housing Today: "We would seek a more realistic interpretation of the borrowing rules whereby councils that are striving to improve their services are allowed to borrow.

"This has been done with regards to arm's-length management organisations whereby local authorities that do not achieve the three-star best value rating can still become an ALMO if they can show signs of improvement."

He warned: "It's clearly in nobody's interests to give borrowing approval to ineffective councils. But there should be more openness from the government towards those that are striving for a better future."

Thompson has previously accused Byers' comments on expanded council borrowing powers of playing a part in the tenants' rejection of the proposed transfer of Birmingham's 83,000 council homes. He said: "'Wait til 2004 and there will be new funds' is a powerful message – [the tenants] don't have to worry about new legislation" (30 May, page 30).

Source

Housing Today