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					Local Government Financial Statistics England No.13 2002




                     CHAPTER 5
                     Assets and liabilities
         5.0.1       This chapter looks at the assets and liabilities of local authorities. It is divided into
                     the following sections:

                     •     Local authority fixed assets                                                     section 5.1

                     •     Outstanding debt and holdings of investments section 5.2

                     •     Borrowing and investment transactions                                            section 5.3

                     •     Debt free authorities                                                            section 5.4


        5.1 Local authority fixed assets
         5.1.1       The following tables provide the value of local authority fixed assets at 31 March
                     2001 in total and by type, and:

                     •     by class of authority

                     •     by region

         Table 5.1A: Value of fixed assets(a) by class of authority: 31 March 2001

                                                                                                                          £ million       £ million

                                        London Metropolitan               Unitary            Shire            Shire          Other               All
                                       boroughs    districts           authorities        counties         districts     authorities    authorities
         Operational assets:
         i) Council dwellings              20,473          14,476          10,037                 4         22,208                 4        67,203
         ii) Other land &
             buildings – education          6,531           8,062            6,579          17,522              179                2        38,876
         iii) Other land &
              buildings – other             3,780           4,237            3,890           3,979            5,105           3,221         24,211
         iv) Vehicles, plant &
             equipment                        161              293             164             363              233             607          1,820
         v) Infrastructure                  1,509           2,591            1,923           4,330              551           3,127         14,031
         vi) Community                        149              112             238               31             221               23           773
         Total operational assets          32,603          29,771          22,832           26,229          28,497            6,984       146,914

         Non operational:
         i) Investment properties           1,370           1,716            1,431             105            2,227             108          6,958
         ii) Other                            383              898             562             691              821             174          3,529
         Total non-operational
         assets                             1,753           2,614            1,994             797            3,048             282         10,486
         Total value of fixed assets       34,356          32,385          24,825           27,025          31,544            7,266       157,401

         Source: COR returns
         (a) Infrastructure assets and community assets are included in the balance sheet at historical cost, net of depreciation.
             Other assets are included in the balance sheet at the lower of the net current replacement cost or net realisable value.
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Table 5.1B: Value of fixed assets(a) by government office regions: 31 March 2001

                                                                                                                  £ million          £ million
                                             Yorkshire
                           North       North     & the East     West                 East of                   South       South
                            East       West Humber Midlands Midlands                England      London         East        West     England

Operational assets:
i) Council dwellings       3,544       6,708       6,156       4,709       5,442       8,071     20,473        8,449       3,651      67,203
ii) Other land &
    buildings –
    education              1,751       4,317       3,847       2,140       4,409       4,494       6,531       8,145       3,240      38,876
iii) Other land &
     buildings – other     1,398       2,778       2,323       2,135       2,489       2,301       4,404       4,077       2,305      24,211
iv) Vehicles, plant &
    equipment                  91        307         140         176         137         161         390         284           134      1,820
v) Infrastructure            961       1,680       1,143         762       1,315         964       4,228       2,076           902    14,031
vi) Community                  45          88          53         65          76          64         149         125           110        773
Total operational
assets                     7,790      15,878     13,663        9,986     13,869      16,054      36,175      23,157      10,343 146,914

Non operational:
i) Investment properties 390             752         471         597         817         720       1,470       1,249           491      6,958
ii) Other                    198         601         381         273         201         377         496         598           404      3,529
Total non-operational
assets                       587       1,353         853         870       1,018       1,097       1,966       1,847           896    10,486
Total value of
fixed assets               8,377      17,231     14,515      10,856      14,886      17,151      38,141      25,004      11,238 157,401
£ per head of
population                 3,250       2,499       2,870       2,580       2,790       3,141       5,172       3,081       2,259        3,148

Source: COR returns
(a) Infrastructure assets and community assets are included in the balance sheet at historical cost, net of depreciation.
    Other assets are included in the balance sheet at the lower of the net current replacement cost or net realisable value.




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Local Government Financial Statistics England No.13 2002




        5.2 Outstanding debt and holdings of
            investments
         5.2.1    Outstanding debt includes long term loans taken out to finance capital projects, and
                  short term loans for management of cash flow.


                   The vast majority of outstanding debt is long term and by far the largest
                   proportion of that is owed to the Public Works Loan Board.



                    Chart 5.2A: Outstanding debt as at 31 March 2002

                                                         Other      Short term
                                                      (Long term)      2%
                                                          4%
                                           Banks
                                        (Long term)
                                            4%




                                                                                 Public Works Loan Board
                                                                                        (Long term)
                                                                                           90%




         5.2.2    The stock of local authority investments is the financial representation of local
                  authorities reserves, unused capital receipts and short term deposits for management
                  of cash flows. The ‘other’ section includes investments with public corporations,
                  other financial institutions and British Government securities.




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                                                                                                                               Assets and liabilities




Two thirds of local authority investments are in deposits with banks or building societies.



Chart 5.2B: Investments as at 31 March 2002

                                                               Other
                                                                3%



                 Building societies deposits
                            24%
                                                                                                  Bank deposits
                                                                                                      42%




                                Externally managed funds
                                           31%




5.3 Borrowing and investment transactions
5.3.1      New borrowing, and drawing down of investments are ways of raising new funds.
           New borrowing is particularly used to finance capital expenditure. Funds which are
           received as income but are not going to be spent have to be invested in financial
           assets or used to redeem borrowing. Increases in financial assets and reductions in
           borrowing may be related to large capital receipts.


In the period 1996-97 to 2001-02 local authorities have seen the increases in
investments exceeding the increases in temporary and long term borrowing.


Table 5.3A: Local government net cash requirement and net borrowing – England

                                                                                                                £ million         £ million
                                                          1996-97       1997-98        1998-99       1999-00       2000-01        2001-02
Change in borrowing
Total temporary borrowing                                     -100            -78           -93            61             17           -93
Total long term borrowing                                      654           130            533           246           498           -104
Total borrowing                                                554             52           440           307           515           -197
less Total investments                                       1,279         1,044            896           347         1,245            835
                          (a)
Net Cash Requirement                                          -725          -992           -456           -40          -730         -1,032

Sources: ODPM borrowing and lending inquiries; Public Works Loan Board
(a) The local authority net cash requirement (previously known as the local authority borrowing requirement) is the external borrowing by
    local authorities less changes in the level of their investments.




                                                                                                                                                  95
Local Government Financial Statistics England No.13 2002




        Total outstanding debt at 31 March 2002 for England is just over £38 billion.
        New borrowing was more than repayments from 1996-97 to 2000-01, but was less than
        repayments in 2001-02. This pattern was also evident for Public Works Loan Board
        borrowing.
        However this pattern was reversed in the case of long term borrowing from banks,
        repayments exceeded new borrowing from 1996-97 to 2000-01, but were less than new
        borrowing in 2001-02.


         Table 5.3B: Local authority borrowing – England

                                                                                                             £ million    £ million
                                                 Change in borrowing                                                   Outstanding
                                                                                                                            debt at
                                                                                                                         31 March
                                                 1996-97      1997-98       1998-99      1999-00   2000-01     2001-02        2002
         Temporary borrowing:
          Revenue bills                                 0             2             -2        0         0            0           0
          Banks                                       -21          -44             31        50        -27          28         129
          Building societies                            8          -59             10        -12        -3           1          28
          Other financial institutions                 59          122           -136        -56       45          -62         387
          Public corporations                         -41           14             -24       32        -23         -12          50
          Private non-financial corporations           -7          -12              0         2         4           -4           8
          Central government                          -93          -84             41        61        17          -44         183
          Household sector                             -4            -6            -13        -1        5            0          41
          Other sources                                -1          -11              0        -15        -1           0           4
         Total                                       -100          -78            -93        61        17          -93         830

         Longer term borrowing:
          Negotiable bonds                              6          -15              -5        0        12          -10         185
          Listed securities other than bonds           76           30             30         0        -14           6         553
          Public Works Loan Board                    736           400           1,175      985       740         -452      34,360
          Banks                                       -79         -186           -506       -551      -121         252       1,410
          Building societies                         -105          -60             -52       -76       -50         -12          54
          Other financial institutions                -29          -14             -53       -23       -18          33         324
          Public corporations                          13             6            -21        1         -5          -6           1
          Private non-financial corporations           -2            -7             7         -1        -1           0           3
          Central government                            1            -9            -11        -5        1           -2          19
          Household sector                             -6          -12              -2        1         -5          -5          15
          Rest of the World                            52             7            -32       -84       -50         116         518
          Other sources                                -9          -10              3         -1        9          -24          18
         Total                                       654           130            533       246       498         -104      37,460
         Total borrowing                             554            52            440       307       515         -197      38,290

         Source: ODPM borrowing and lending inquiries; Public Works Loan Board




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                                                                                                            Assets and liabilities




Outstanding investments at 31 March 2002 for England are just under £17 billion.
Local authorities have continued through the period to increase their investments. The
amounts in externally managed funds have increased every year since 1996-97.



Table 5.3C: Local authority investments – England

                                                                                                £ million      £ million
                                          Net investments                                                 Outstanding
                                                                                                           amount at
                                                                                                            31 March
                                         1996-97      1997-98     1998-99   1999-00   2000-01     2001-02        2002
Deposits and loans: banks                      737      1,371        -194      -666     1,107          95         7,024
Deposits and loans: building societies         190       -656        159       464       -195         376         4,061
Treasury bills                                   0           0        65        -22       -43           0             0
Certificates of deposit: banks                   3           -5        5         -2        8           -2             6
Certificates of deposit: building societies      0           0         0         0         0            0             0
British Government (Gilt-edge) securities        2          15        38        -19        -4          -3            27
Other financial institutions                     4          -13       54         -5       15          -35            52
Public corporations                              1           -1        4         -3        -1          -1           121
Externally managed funds                       354          316      657       510       207          376         5,230
Other investments                               -12         17       108        90       151           29           296
Total investments                             1,279     1,044        896       347      1,245         835       16,817

Source: ODPM borrowing and lending inquiries




5.4 Debt-free authorities
5.4.1      Authorities with debt must set aside an amount from their revenue resources every
           year. This ensures that at least some of their revenue income is kept back as
           provision to repay debt. At present, authorities must make minimum revenue
           provision (MRP) of 2% of their borrowing arising from council housing and 4% of
           all other debt.

5.4.2      However, debt-free authorities are exempt from having to set aside most capital
           receipts as PCL or revenue sums as PCL to make MRP. They may, like other
           authorities, voluntarily set aside money to provide credit cover for credit
           arrangements.

5.4.3      To become debt-free an authority must meet two conditions. They must have no
           long term borrowing and the amount they have set-aside as provision to meet their
           debt (mainly reserved capital receipts and MRP) must be more than their
           outstanding liabilities.

5.4.4      Not every authority with the potential to become debt-free will choose to do so.
           But there are benefits to an authority in becoming debt-free: they do not have to
           set aside any of their capital receipts from the sale of assets; and they can use
           previously set aside amounts.


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Local Government Financial Statistics England No.13 2002




        The number of authorities with debt-free status has more than doubled since 1995-96.
        Most (104) of the 120 debt-free authorities in 2002-03 were housing authorities, of which
        67 had completed a Large Scale Voluntary Transfer (LSVT) of some or all of their housing
        stock since 1988.
        The vast majority of debt-free authorities are shire districts.



         Table 5.4A: Debt-free local authorities by class of authority: as at start of financial year

                                                                                                                         £ million       of which
                                                            1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03                 LSVT
         London boroughs                                           2          2       2        3         3         3      3          3              1
         Metropolitan districts                                    0          0       0        0         0         0      0          0              0
         Unitary authorities                                       1          0       0        2         3         4      4          4              3
         Shire districts                                           39     52         59       55        58        62     80         97         63
         Total housing authorities                                 42     54         61       60        64        69     87       104          67
         Shire counties                                            2          2       2        2        2          2      1          0              0
         Other authorities                                         5          8      21       26        18        16     15         16              0
         All authorities                                           49     64         84       88        84        87    103       120          67

         Other includes Police, Fire , & Waste Authorities and National Parks
         Notes
         1. For this purpose, an authority is defined as debt free at 1 April if:
             a) at 31 March of the previous financial year, it had a nil or negative credit ceiling, and;
             b) as at 1 April of the current financial year, the authority had no money oustanding by way of external borrowing other than short-
                term borrowing or hard to redeem debt, as defined in Regulations 154 of the Local Authorities (Capital Finance) Regulations 1997.




         Chart 5.4B: Debt-free authorities by class of authority



                                         140

                                         120

                                         100
                 Number of authorities




                                         80


                                         60

                                         40

                                         20

                                           0
                                          1995-96     1996-97       1997-98       1998-99     1999-00        2000-01   2001-02       2002-03

                                               Other authorities        Housing authorities




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