Local Government Act 2003
2003 c. 26
An Act to make provision about finance, and other provision, in connection with local and certain other authorities; to provide for changing the dates of local elections in 2004; to amend the Audit Commission Act 1998; and for connected purposes.
[18th September 2003]
Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—
A local authority may borrow money—
(a) for any purpose relevant to its functions under any enactment, or
(b) for the purposes of the prudent management of its financial affairs.
(1) A local authority may not borrow money if doing so would result in a breach of—
(a) the limit for the time being determined by or for it under section 3, or
(b) any limit for the time being applicable to it under section 4 , or
(c) any limit for the time being applicable to it under section 12A.
(2) The Secretary of State may, in relation to specific borrowing by a particular local authority, by direction disapply subsection (1)(b), so far as relating to any limit for the time being applicable under section 4(1).
(3) A local authority may not, without the consent of the Treasury, borrow otherwise than in sterling.
(4) This section applies to borrowing under any power for the time being available to a local authority under any enactment, whenever passed.
(1) A local authority shall determine and keep under review how much money it can afford to borrow.
(2) In the case of the following authorities, namely—
(a) the Greater London Authority, and
(b) a functional body,
the Mayor shall determine and keep under review how much money the authority can afford to borrow.
(3) Before making any determination under subsection (2), the Mayor shall consult the London Assembly.
(4) Before making a determination under subsection (2) for a functional body, the Mayor shall consult that body.
(5) The Secretary of State may by regulations make provision about the performance of the duty under subsection (1) or (2).
(6) Regulations under subsection (5) may, in particular—
(a) make provision about—
(i) when a determination under subsection (1) or (2) is to be made,
(ii) how such a determination is to be made, and
(iii) the period for which such a determination is to be made;
(b) make provision about the monitoring of an amount determined under subsection (1) or (2);
(c) make provision about factors to which regard may be had in making a determination under subsection (1) or (2) or in monitoring an amount determined under that subsection.
(7) Regulations under subsection (5) may include provision requiring a person making a determination under subsection (1) or (2) to have regard to one or more specified codes of practice, whether issued by the Secretary of State or another.
(8) A local authority’s function under subsection (1) shall be discharged only by the authority.
(9) Section 38(1) of the Greater London Authority Act 1999 (c. 29) (delegation by Mayor) does not apply in relation to functions under subsection (2).
(10) The power under subsection (7) is not to be read as limited to the specification of an existing document.
(11) In this section—
“functional body” has the same meaning as in the Greater London Authority Act 1999 (c. 29);
“local authority” does not include the Greater London Authority or a functional body;
“Mayor” means Mayor of London.
(1) The Secretary of State may for national economic reasons by regulations set limits in relation to the borrowing of money by local authorities.
(2) The Secretary of State may by direction set limits in relation to the borrowing of money by a particular local authority for the purpose of ensuring that the authority does not borrow more than it can afford.
(3) Different limits may be set under subsection (1) or (2) in relation to different kinds of borrowing.
(4) A local authority subject to a limit set under subsection (1) may transfer any headroom it has in relation to the limit to another local authority subject to a corresponding limit.
(5) The Secretary of State may by regulations make provision about the exercise of the right under subsection (4) and may, in particular, make provision about—
(a) the circumstances in which a local authority is to be regarded as having headroom for the purposes of that subsection, and
(b) the amount of headroom which it has for those purposes.
(6) Where an amount is transferred under subsection (4), this Chapter shall have effect—
(a) in relation to the transferor, as if the limit in relation to which the headroom exists were reduced by that amount, and
(b) in relation to the transferee, as if the corresponding limit to which it is subject were increased by that amount.
(1) Subject to subsection (2), any limit for the time being determined by or for a local authority under section 3, or applicable to it under section 4 or 12A, shall be treated for the purposes of this Chapter as increased by the amount of any payment which—
(a) is due to the authority in the period to which the limit relates, but
(b) has not yet been received by it.
(2) In the case of a limit determined under section 3, or set under section 4(2) or 12A, subsection (1) shall not apply to any payment whose delayed receipt was taken into account in arriving at the limit.
A person lending money to a local 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.
(1) For the purposes of this Chapter, a local authority shall be taken to have entered into a credit arrangement where—
(a) it enters into a transaction which gives rise to a liability on its part, and
(b) the liability is a qualifying liability.
(2) A transaction entered into by a local authority is to be taken for the purposes of subsection (1) as giving rise to a liability on the part of the authority if—
(a) it falls in accordance with proper practices to be treated for the purposes of the authority’s accounts as giving rise to such a liability, or
(b) it falls in accordance with regulations made by the Secretary of State to be treated as falling within paragraph (a).
(3) The reference in subsection (1)(b) to a qualifying liability is to any liability other than—
(a) a liability to repay money,
(b) a liability in respect of which the date for performance is less than 12 months after the date on which the transaction giving rise to the liability is entered into, and
(c) a liability of a description specified for the purposes of this provision by regulations made by the Secretary of State.
(1) A local authority may not enter into, or vary, a credit arrangement if doing so would result in a breach of—
(a) the limit for the time being determined by or for it under section 3, or
(b) any limit for the time being applicable to it under section 4 , or
(c) any limit for the time being applicable to it under section 12A.
(2) In applying those limits for the purposes of subsection (1)—
(a) entry into a credit arrangement shall be treated as the borrowing of an amount of money equal to the cost of the arrangement, and
(b) variation of a credit arrangement shall be treated as the borrowing of an amount of money equal to the cost of the variation.
(3) The Secretary of State may by regulations make provision about the calculation for the purposes of subsection (2) of the cost of a credit arrangement or a variation and may, in particular, make provision about the treatment of options.
(1) Subject to subsection (3), references in this Chapter to a capital receipt, in relation to a local authority, are to a sum received by the authority in respect of the disposal by it of an interest in a capital asset.
(2) An asset is a capital asset for the purposes of subsection (1) if, at the time of the disposal, expenditure on the acquisition of the asset would be capital expenditure.
(3) The Secretary of State may by regulations—
(a) make provision for the whole of a sum received by a local authority in respect of the disposal by it of an interest in a capital asset, or such part of such a sum as may be determined under the regulations, to be treated as not being a capital receipt for the purposes of this Chapter;
(b) make provision for the whole of a sum received by a local authority otherwise than in respect of the disposal by it of an interest in a capital asset, or such part of such a sum as may be determined under the regulations, to be treated as being a capital receipt for the purposes of this Chapter.
(4) Where a sum becomes payable to a local authority before it is actually received by the authority, it shall be treated for the purposes of this section as received by the authority when it becomes payable to it.
(1) The Secretary of State may by regulations apply section 9 to cases where—
(a) a local authority makes a disposal of the kind mentioned in subsection (1) of that section and the consideration for the disposal does not consist wholly of money payable to the authority, or
(b) a local authority receives otherwise than in the form of money anything which, if received in that form, would be a capital receipt under that section.
(2) Regulations under subsection (1) may, in particular—
(a) make provision for a local authority to be treated as receiving a sum of such an amount as may be determined under the regulations;
(b) make provision about when the deemed receipt is to be treated as taking place.
(1) The Secretary of State may by regulations make provision about the use of capital receipts by a local authority.
(2) Regulations under subsection (1) may, in particular—
(a) make provision requiring an amount equal to the whole or any part of a capital receipt to be used only to meet—
(i) capital expenditure, or
(ii) debts or other liabilities;
(b) make provision requiring an amount equal to the whole or any part of a capital receipt to be paid to the Secretary of State.
(3) The power under subsection (1), so far as relating to provision of the kind mentioned in subsection (2)(b), shall only apply to receipts which a local authority derives from the disposal of an interest in housing land.
(4) The reference in subsection (3) to housing land is to any land, house or other building in relation to which the local authority is, or has been, subject to the duty under section 74 of the Local Government and Housing Act 1989 (c. 42) (duty to keep Housing Revenue Account).
(5) Regulations under subsection (1) may include provision authorising the Secretary of State to set off any amount which an authority in Wales is liable to pay to him under this section against any amount which he is liable to pay to it.
(5A) Where the Secretary of State is liable to repay an amount that has been overpaid by a local housing authority in England under this section, the Secretary of State may set off against the amount of the repayment any amount that the authority is liable to pay the Secretary of State under—
(a) this section, or
(b) section 69 of the Housing and Planning Act 2016 (payments in respect of vacant higher value housing).
(6) The Secretary of State and a local authority in England may enter into an agreement with the effect that a requirement imposed under subsection (2)(b) does not apply to, or is modified in its application to, capital receipts of the authority that are specified or described in the agreement.
A local authority may invest—
(a) for any purpose relevant to its functions under any enactment, or
(b) for the purposes of the prudent management of its financial affairs.
This is subject to a direction under section 12A (risk-mitigation directions).
(1) The Secretary of State may give one or more risk-mitigation directions to a local authority in England, for the purpose of reducing or mitigating the financial risk to the authority, if—
(a) a trigger event has occurred in relation to the local authority, and
(b) the Secretary of State is satisfied that the direction is, or (as the case may be) directions are, appropriate and proportionate to the level of that financial risk.
(2) A “trigger event” occurs if (and when)—
(a) a risk threshold is breached by the local authority (see section 12B);
(b) a report is made by the chief finance officer of the local authority under section 114(3) of the Local Government Finance Act 1988 (report to effect that authority’s expenditure is likely to exceed available resources); or
(c) the Secretary of State—
(i) gives a direction under section 16(2)(b) (request for expenditure to be, or not be, treated as capital) in respect of the local authority, or
(ii) makes a grant to the local authority under an enactment,
for the purpose of preventing circumstances arising that would require such a report to be made.
(3) The following are “risk-mitigation directions”—
(a) a direction that sets limits in relation to the borrowing of money by the local authority;
(b) a direction that requires the local authority to take action specified in the direction.
(4) A direction under subsection (3)(a)—
(a) may set different limits in relation to different kinds of borrowing;
(b) must specify the period for which any limit has effect.
(5) A direction under subsection (3)(b)—
(a) may (amongst other things) require the local authority to take action to divest itself of a specified asset;
(b) must specify the time by which any specified action must be taken.
(6) In deciding whether or not to exercise a power to give a direction under this section, the Secretary of State must have regard to—
(a) the likely impact of the direction on the provision of services to the public by or on behalf of the local authority;
(b) the duty imposed on the local authority by section 3(1) of the Local Government Act 1999 (best value duty).
(7) In deciding whether or not to exercise a power to give a direction under this section, the Secretary of State may, in particular, take account of the likely impact of that decision on the implementation of any central government policy, project or programme.
(8) The Secretary of State may not give a risk-mitigation direction unless the Secretary of State—
(a) has given the local authority notice of the proposed direction, and of the right of the local authority to make written representations to the Secretary of State about it within the period specified in the notice, and
(b) has considered any representations made by the local authority to the Secretary of State within that period.
(9) In this section, “financial risk”, in relation to a local authority, means the risk that the expenditure of the local authority (including expenditure it proposes to incur) in the current or any future financial year is likely to exceed, or further exceed, the resources (including sums borrowed) available to it to meet that expenditure.
(10) This section is subject to section 12C (restriction of power to give risk-mitigation directions).
(1) For the purposes of section 12A(2)(a), a risk threshold is breached by a local authority in England if (and when) a capital risk metric for the local authority breaches the specified threshold for that metric.
(2) Each of the following is a “capital risk metric”—
(a) the total of a local authority’s debt (including credit arrangements) as compared to the financial resources at the disposal of the authority;
(b) the proportion of the total of a local authority’s capital assets which is investments made, or held, wholly or mainly in order to generate financial return;
(c) the proportion of the total of a local authority’s debt (including credit arrangements) in relation to which the counter-party is not central government or a local authority;
(d) the amount of minimum revenue provision charged by a local authority to a revenue account for a financial year;
(e) any other metric specified by regulations made by the Secretary of State.
(3) The Secretary of State may, by regulations, make further provision—
(a) specifying whether the specified threshold for a particular metric is breached by a failure to reach that threshold or by that threshold being exceeded;
(b) about how the metrics specified in, or under, subsection (2) are to be calculated for the purpose of determining whether the specified threshold for that metric has been breached.
(4) Before making regulations under subsection (2)(e), the Secretary of State must consult all local authorities in England.
(5) In this section—
“capital asset” has the meaning given by section 9;
“minimum revenue provision” has the meaning given by regulation 27 of the Local Authorities (Capital Finance and Accounting)(England) Regulations 2003 (S.I. 2003/3146);
“specified” means specified, or determined in a manner specified, in regulations made by the Secretary of State.
(6) Regulations may require a specified threshold to be determined having regard to guidance issued under section 21(1A) (accounting practices).
12C Restriction of power to give risk-mitigation directions
(1) If, after the power to give risk-mitigation directions becomes exercisable under section 12A(1) in relation to a local authority—
(a) at least 12 months have elapsed since the Secretary of State last became aware of a trigger event having occurred in relation to the authority,
(b) any risk-mitigation direction given to the authority has been complied with or revoked, and
(c) the Secretary of State is satisfied no further risk-mitigation direction is likely to be required in the foreseeable future for the purpose of reducing or mitigating the financial risk to the authority,
the Secretary of State must give the local authority a notice to that effect (“a cessation notice”).
(2) Where a cessation notice is given, the power conferred by section 12A(1) is no longer exercisable, in relation to that authority, by reason of any trigger event of which the Secretary of State was aware at the time that notice was given.
(3) In this section “risk-mitigation direction”, “trigger event” and “financial risk” have the same meaning as in section 12A.
(1) This section applies where—
(a) a trigger event has occurred in relation to a local authority in England,
(b) section 12C (2) does not apply to prevent the power conferred by section 12A(1) being exercisable, in relation to that authority, by reason of that event, and
(c) the Secretary of State has appointed an independent expert to review the level of the financial risk to the local authority.
(2) The local authority must, so far as reasonably practicable, co-operate with the independent expert in any way that the independent expert considers necessary or expedient for the purposes of the conduct of the review.
(3) In this section—
“financial risk” has the same meaning as in section 12A;
“independent expert” means a person—
who is independent of the local authority and the Secretary of State, and
who has relevant experience or knowledge which is relevant to the matter in question;
“trigger event” has the same meaning as in section 12A.
(1) Except as provided by subsection (3), a local authority may not mortgage or charge any of its property as security for money which it has borrowed or which it otherwise owes.
(2) Security given in breach of subsection (1) shall be unenforceable.
(3) All money borrowed by a local authority (whether before or after the coming into force of this section), together with any interest on the money borrowed, shall be charged indifferently on all the revenues of the authority.
(4) All securities created by a local authority shall rank equally without any priority.
(5) The High Court may appoint a receiver on application by a person entitled to principal or interest due in respect of any borrowing by a local authority if the amount due remains unpaid for a period of two months after demand in writing.
(6) The High Court may appoint a receiver under subsection (5) on such terms, and confer on him such powers, as it thinks fit.
(7) The High Court may confer on a receiver appointed under subsection (5) any powers which the local authority has in relation to—
(a) collecting, receiving or recovering the revenues of the local authority,
(b) issuing levies or precepts, or
(c) setting, collecting or recovering council tax.
(8) No application under subsection (5) may be made unless the sum due in respect of the borrowing concerned amounts to not less than £10,000.
(9) The Secretary of State may by order substitute a different sum for the one for the time being specified in subsection (8).
A local authority shall supply the Secretary of State with such information relating to any of the matters dealt with in this Chapter, and at such time, as he may request.
(1) In carrying out its functions under this Chapter, a local authority shall have regard—
(a) to such guidance as the Secretary of State may issue, and
(b) to such other guidance as the Secretary of State may by regulations specify for the purposes of this provision.
(2) The power under subsection (1)(b) is not to be read as limited to the specification of existing guidance.
(1) Subject to subsection (2), references in this Chapter to capital expenditure, in relation to a local authority, are to expenditure of the authority which falls to be capitalised in accordance with proper practices.
(2) The Secretary of State may—
(a) by regulations provide that expenditure of local authorities shall be treated for the purposes of this Chapter as being, or as not being, capital expenditure;
(b) by direction provide that expenditure of a particular local authority shall be treated for the purposes of this Chapter as being, or as not being, capital expenditure.
(1) For the purposes of this Chapter—
(a) borrowing of money by a local authority for the purposes of an external fund shall be treated as not being borrowing by the authority;
(b) the temporary use by a local authority of money forming part of an external fund, if not for a purpose of the fund, shall be treated as borrowing by the authority;
(c) entry into a credit arrangement by a local authority for the purposes of an external fund shall be treated as not being entry into a credit arrangement by the authority;
(d) a disposal by a local authority of—
(i) an interest in an asset which, at the time of the disposal, is an asset of an external fund, or
(ii) an investment held for the purposes of such a fund,
shall be treated as not being a disposal by the authority;
(e) the making of an investment by a local authority for the purposes of an external fund shall be treated as not being the making of an investment by the authority;
(f) expenditure incurred by a local authority in respect of payments out of an external fund shall be treated as not being expenditure of the authority.
(2) In this section, references to an external fund, in relation to a local authority, are to—
(a) a superannuation fund which the authority is required to keep by virtue of the Superannuation Act 1972 (c. 11), or
(b) a trust fund of which the authority is a trustee.
(1) The Secretary of State may, for the purposes of this Chapter, by regulations make provision for things done by or to a body mentioned in subsection (2) to be treated, in such cases and to such extent as the regulations may provide, as done by or to a local authority specified in, or determined in accordance with, the regulations.
(2) Those bodies are—
(a) a Passenger Transport Executive,
(b) a company which, in accordance with Part 5 of the Local Government and Housing Act 1989 (c. 42) (companies in which local authorities have interests), is under the control, or for the time being subject to the influence, of a local authority or a Passenger Transport Executive, and
(c) a trust to which the provisions of section 69 of that Act (companies subject to local authority influence) are applicable because of an order under section 72 of that Act (trusts influenced by local authorities).
(3) A local authority to which regulations under this section apply and any body or bodies falling within subsection (2)(a) or (b) with which the regulations link the authority are referred to in this section as the members of a local authority group.
(4) Regulations under this section may include—
(a) provision for the application of any of the provisions of this Chapter to members of a local authority group subject to such modifications as the regulations may specify;
(b) provision as to the way in which—
(i) dealings between members of a local authority group, or
(ii) changes in the capitalisation or capital structure of a company in a local authority group,
are to be brought into account for the purposes of this Chapter.
(1) In sections 2(3) and (4), 6, 9 to 12, 13, 15, 16, 17(1)(a), (b) and (d) to (f) and (2) and 18, references to a local authority include a parish council, a community council and charter trustees.
(2) Schedule 1 (which makes provision about capital finance in relation to parish and community councils and charter trustees) has effect.
(3) The appropriate person may by regulations—
(a) apply any of the other provisions of this Chapter to parish or community councils or charter trustees, or parish or community councils or charter trustees of any description, with or without modifications, and
(b) make any corresponding disapplication of any of the provisions of Schedule 1.
(1) Directions under this Chapter shall be in writing.
(2) Directions under this Chapter may be expressed to have effect in specified circumstances or subject to specified conditions.
(3) Any power to give a direction under this Chapter includes power to give a direction varying or revoking a previous direction given in exercise of the power.
(1) The Secretary of State may by regulations make provision about the accounting practices to be followed by a local authority, in particular with respect to the charging of expenditure to a revenue account.
(1A) The Secretary of State may issue guidance about the accounting practices to be followed by a local authority, in particular with respect to the charging of expenditure to a revenue account.
(1B) A local authority must have regard to any guidance issued to it under subsection (1A).
(2) In any enactment to which this subsection applies, reference to proper practices, in relation to accounts of a local authority, is to those accounting practices—
(a) which the authority is required to follow by virtue of any enactment, or
(b) which are contained in a code of practice or other document which is identified for the purposes of this provision by regulations made by the Secretary of State.
(3) In the event of conflict between practices falling within paragraph (a) of subsection (2) and practices falling within paragraph (b) of that subsection, only those falling within paragraph (a) are to be regarded as proper practices.
(4) Subsections (2) and (3) apply to any enactment contained in—
(a) this Act,
(b) any Act passed after or in the same Session as this Act,
(c) the Local Government and Housing Act 1989 (c. 42),
(ca) the Local Government Finance Act 1992 (c. 14),
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(da) the Greater London Authority Act 1999 (c. 29), and
(e) subordinate legislation (within the meaning of the Interpretation Act 1978 (c. 30)) whenever made.
(5) The power under subsection (2)(b) is not to be read as limited to the identification of an existing document.
(6) In this section, “local authority” includes—
(a) a parish council,
(b) a parish meeting of a parish which does not have a separate parish council,
(c) a community council,
(d) a Passenger Transport Executive,
(e) the London Waste and Recycling Board,
(f) charter trustees (within the meaning of the Local Audit and Accountability Act 2014),
(g) a port health authority for a port health district that is wholly in England,
(h) a conservation board established by order of the Secretary of State under section 86 of the Countryside and Rights of Way Act 2000,
(i) a chief constable for a police force for a police area in England,
(j) the Commissioner of Police of the Metropolis,
(k) an internal drainage board for an internal drainage district—
(i) wholly in England, or
(ii) partly in England and partly in Wales, and
(l) any other person or body which for the time being is a relevant authority for the purposes of the Local Audit and Accountability Act 2014 and—
(i) is not listed in paragraphs (a) to (k) or section 23(1),
(ii) is not a health service body (within the meaning of that Act),
(iii) is not specified in regulations under section 23(2), and
(iv) does not fall within a class of bodies so specified.
(1) References to a revenue account, in relation to a local authority, are to one of the following accounts for a financial year of the authority—
(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;
(c) any other revenue account which the authority decides to keep in accordance with proper practices.
(2) This section has effect for the purposes of—
(a) the Local Government and Housing Act 1989 (c. 42),
(b) any enactment passed after or in the same Session as that Act, and
(c) any earlier enactment amended by that Act or an enactment falling within paragraph (b).
(3) In this section, “local authority” includes—
(a) a parish council,
(b) a parish meeting of a parish which does not have a separate parish council,
(c) a community council,
(d) a Passenger Transport Executive,
(e) the London Waste and Recycling Board,
(f) charter trustees (within the meaning of the Local Audit and Accountability Act 2014),
(g) a port health authority for a port health district that is wholly in England,
(h) a conservation board established by order of the Secretary of State under section 86 of the Countryside and Rights of Way Act 2000,
(i) a chief constable for a police force for a police area in England,
(j) the Commissioner of Police of the Metropolis,
(k) an internal drainage board for an internal drainage district—
(i) wholly in England, or
(ii) partly in England and partly in Wales, and
(l) any other person or body which for the time being is a relevant authority for the purposes of the Local Audit and Accountability Act 2014 and—
(i) is not listed in paragraphs (a) to (k) or section 23(1),
(ii) is not a health service body (within the meaning of that Act),
(iii) is not specified in regulations under section 23(2), and
(iv) does not fall within a class of bodies so specified.
(1) The following are local authorities for the purposes of this Part—
(a) a county council;
(b) a county borough council;
(c) a district council;
(d) the Greater London Authority;
(e) a functional body, within the meaning of the Greater London Authority Act 1999 (c. 29);
(f) a London borough council;
(g) the Common Council of the City of London, in its capacity as a local authority, police authority or port health authority;
(h) the Council of the Isles of Scilly;
(i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(j) an authority established under section 10 of the Local Government Act 1985 (c. 51) (waste disposal authorities);
(k) a joint authority established by Part 4 of that Act (fire and rescue services and transport);
(ka) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(l) a joint planning board constituted for an area in Wales outside a National Park by an order under section 2(1B) of the Town and Country Planning Act 1990 (c. 8);
(m) a fire and rescue authority constituted by a scheme under section 2 of the Fire and Rescue Services Act 2004 or a scheme to which section 4 of that Act applies;
(ma) a fire and rescue authority created by an order under section 4A of that Act;
(n) a police and crime commissioner;
(o) any other body specified for the purposes of this subsection by regulations under subsection (2).
(2) The Secretary of State may by regulations specify for the purposes of subsection (1) any body which is (or any class of bodies each of which is)—
(a) a levying body, within the meaning of section 74 of the Local Government Finance Act 1988 (c. 41),
(b) a body to which section 75 of that Act applies (bodies with power to issue special levies),
(c) a body to which section 118 of that Act applies (other bodies with levying powers),
(d) a local precepting authority as defined in section 69 of the Local Government Finance Act 1992 (c. 14).
(3) Regulations under subsection (2) may provide for this Part to have effect, in relation to a body specified under that subsection, subject to exceptions or modifications.
(4) This Part, other than sections 1 to 8, 12A to 12D, 13 and 17 (borrowing etc), applies in relation to an economic prosperity board established under section 88 of the Local Democracy, Economic Development and Construction Act 2009 as it applies in relation to a local authority.
(5) This Part applies in relation to a combined authority established under section 103 of that Act as it applies in relation to a local authority, except that—
(a) the power conferred by section 1 on a mayoral combined authority is subject to the requirements in subsection (9A) to obtain consent from the Secretary of State, and
(b) section 1 confers power on a non-mayoral combined authority to borrow money for a purpose relevant to its transport functions only or in relation to any other functions of the authority that are specified for the purposes of this subsection in regulations made by the Secretary of State.
(6) A function of a combined authority may be specified in regulations under subsection (5) only with the consent of—
(a) each county council the whole or any part of whose area is within the area of the authority,
(b) each district council whose area is within the area of the authority, and
(c) in the case of regulations in relation to an existing combined authority, the combined authority.
(7) Subsection (6) is subject to section 106A of the Local Democracy, Economic Development and Construction Act 2009 (which enables regulations to be made without the consent of every authority within paragraphs (a) and (b) of that subsection in certain circumstances).
(8) A reference in subsection (5) or (9A) to functions of the authority includes, in the case of a mayoral combined authority, mayoral functions.
(8A) This Part applies in relation to a combined county authority (a “CCA”) established under section 9(1) of the Levelling-up and Regeneration Act 2023 as it applies in relation to a local authority, except that—
(a) the power conferred by section 1 on a mayoral CCA is subject to the requirements in subsection (9A) to obtain consent from the Secretary of State, and
(b) section 1 confers power on a non-mayoral CCA to borrow money in relation only to functions of the CCA that are specified for the purposes of this subsection in regulations made by the Secretary of State.
(8B) A function of a CCA may be specified in regulations under subsection (8A) only with the consent of—
(a) each county council for an area within the CCA’s area or proposed area,
(b) each unitary district council for an area within the CCA’s area or proposed area, and
(c) in the case of regulations in relation to an existing CCA, the CCA.
In this subsection “unitary district council” means a district council whose area does not form part of the area of a county council.
(8C) A reference in subsection (8A) or (9A) to functions of the authority includes, in the case of a mayoral CCA, mayoral functions.
(8D) In subsection (8C)—
“mayoral CCA” has the meaning given by section 27(8) of the Levelling-up and Regeneration Act 2023;
“mayoral functions” has the meaning given by section 41(8) of that Act.
(9) In subsection (8)—
“mayoral combined authority” has the meaning given by section 107A(8) of the Local Democracy, Economic Development and Construction Act 2009;
“mayoral functions” has the meaning given by section 107G(7) of that Act.
(9A) These are the requirements to obtain consent from the Secretary of State which apply to the exercise of the power conferred by section 1 on a mayoral combined authority or mayoral CCA—
(a) if the combined authority or CCA had the power to borrow under section 1 before the applicable commencement day, it does not need to obtain consent from the Secretary of State before any exercise of the power to borrow;
(b) if the combined authority or CCA did not have the power to borrow under section 1 before the applicable commencement day—
(i) it does not need to obtain consent from the Secretary of State before any exercise of the power to borrow money for a purpose relevant to its transport, police or fire and rescue functions;
(ii) it must obtain consent from the Secretary of State before the first exercise of the power to borrow money for a purpose relevant to a function other than its transport, police or fire and rescue functions;
(iii) once it has obtained consent in accordance with sub-paragraph (ii) (in relation to any kind of function), it does not need to obtain any further consent under that sub-paragraph (whether in relation to the same kind, or a different kind, of function).
(9B) In this section—
“applicable commencement day” means the day on which section 13 of the English Devolution and Community Empowerment Act 2026 comes into force;
“non-mayoral CCA” means a CCA other than a mayoral CCA;
“non-mayoral combined authority” means a combined authority other than a mayoral combined authority;
“transport, police or fire and rescue functions”, in relation to a mayoral combined authority or mayoral CCA, means—
transport functions of the combined authority or CCA,
functions of a police and crime commissioner exercisable by the mayor for the area of the combined authority or CCA, and
functions of a fire and rescue authority exercisable by the mayor for the area of the combined authority or CCA.
(10) No regulations under subsection (5) or (8A) may be made unless a draft of the statutory instrument containing the regulations (whether containing them alone or with other provisions) has been laid before, and approved by a resolution of, each House of Parliament.
(10A) If a draft of a statutory instrument containing regulations under subsection (5) or (8A) would, apart from this subsection, be treated for the purposes of the standing orders of either House of Parliament as a hybrid instrument, it is to proceed in that House as if it were not such an instrument.
(11) This Part applies in relation to a corporate joint committee established by regulations made under Part 5 of the Local Government and Elections (Wales) Act 2021 as it applies in relation to a local authority.
In its application to Wales, this Part, except section 19 and Schedule 1, has effect as if for any reference to the Secretary of State there were substituted a reference to the Welsh Ministers.
(1A) Subsection (1) does not apply to section 21 to the extent that it confers functions on the Secretary of State in relation to a person or body that—
(a) is a relevant authority for the purposes of the Local Audit and Accountability Act 2014, and
(b) exercises functions in relation to an area that is partly in England and partly in Wales.
25 Budget calculations: report on robustness of estimates etc
(1) Where an authority to which section 31A, 32, 42A or 43 of the Local Government Finance Act 1992 (billing or major precepting authority) or section 85 of the Greater London Authority Act 1999 (c. 29) (Greater London Authority) applies is making calculations in accordance with that section, the chief finance officer of the authority must report to it on the following matters—
(a) the robustness of the estimates made for the purposes of the calculations, and
(b) the adequacy of the proposed financial reserves.
(2) An authority to which a report under this section is made shall have regard to the report when making decisions about the calculations in connection with which it is made.
(3) In this section, “chief finance officer”, in relation to an authority, means the officer having responsibility for the administration of the authority’s financial affairs for the purposes of—
(a) section 151 of the Local Government Act 1972 (c. 70),
(b) section 73 of the Local Government Act 1985 (c. 51),
(c) section 112 of the Local Government Finance Act 1988 (c. 41),
(d) section 6 of the Local Government and Housing Act 1989 (c. 42), ...
(e) section 127(2) of the Greater London Authority Act 1999, or
(f) Schedule 1, 2 or 4 to the Police Reform and Social Responsibility Act 2011
(1) This section has effect in relation to the estimation of financial reserves for the purpose of calculations in accordance with—
(a) section 31A or 32 of the Local Government Finance Act 1992 (calculation by billing authority of council tax or budget requirement for financial year),
(b) section 42A or 43 of that Act (corresponding provision for major precepting authority), or
(c) section 85 of the Greater London Authority Act 1999 (calculation by Greater London Authority of component and consolidated budget requirements for financial year).
(2) In the case of a controlled reserve, it shall not be regarded as appropriate for the balance of the reserve at the end of the financial year under consideration to be less than the minimum amount determined in accordance with regulations made by the appropriate person.
(3) In subsection (2), “controlled reserve” means a financial reserve of a description specified for the purposes of this section by regulations made by the appropriate person.
(4) Different provision may be made under subsection (2) for different descriptions of financial reserve.
27 Budget calculations: report on inadequacy of controlled reserve
(1) This section applies where an authority to which section 31A, 32, 42A or 43 of the Local Government Finance Act 1992 (c. 14) or section 85 of the Greater London Authority Act 1999 (c. 29) applies is making calculations in accordance with that section.
(2) If in relation to the previous financial year it appears to the chief finance officer that a controlled reserve is or is likely to be inadequate, he must report to the authority on—
(a) the reasons for that situation, and
(b) the action, if any, which he considers it would be appropriate to take to prevent such a situation arising in relation to the corresponding reserve for the financial year under consideration.
(3) For the purposes of subsection (2)—
(a) a controlled reserve is a financial reserve of a description specified by regulations under section 26(3), and
(b) such a reserve is inadequate if the balance of the reserve at the end of the financial year concerned is less than the minimum amount determined in accordance with regulations under section 26(2).
(4) An authority to which a report under this section is made shall have regard to the report when making decisions about the calculations in connection with which it is made.
(5) In this section, “chief finance officer” has the same meaning as in section 25.
(1) Where in relation to a financial year an authority to which section 31A, 32, 42A or 43 of the Local Government Finance Act 1992 (billing or major precepting authority) applies has made the calculations required by that section, it must review them from time to time during the year.
(2) In carrying out a review under subsection (1), an authority must use the same figures for financial reserves as those used in the calculations under review, except in the case of financial reserves to meet a revenue account deficit from an earlier financial year.
(3) If as a result of carrying out a review under subsection (1) it appears to the authority that carried out the review that there has been a deterioration in its financial position, it must take such action, if any, as it considers necessary to deal with the situation.
(4) For the purposes of subsection (3), there is a deterioration in an authority’s financial position if on the review an amount falls to be calculated under section 31A(4), 32(4), 42A(4) or 43(4) of the Local Government Finance Act 1992 (c. 14) (council tax or budget requirement) and—
(a) none fell to be calculated under that provision at the time of the calculations under review, or
(b) an amount did then fall to be calculated under that provision and the amount then calculated is less than the amount calculated on the review.
(5) Where substitute calculations have effect, it is those calculations to which the duty under subsection (1) applies.
(1) Where in relation to a financial year the Greater London Authority has made the calculations required by section 85(3) to (7) of the Greater London Authority Act 1999 (c. 29) (calculation of component budget requirement for each constituent body), each of the bodies in respect of which the calculations have been made must from time to time during the year review the calculations relating to it.
(2) In carrying out a review under subsection (1), a body must use the same figures for financial reserves as those used in the calculations under review, except in the case of financial reserves to meet a revenue account deficit from an earlier financial year.
(3) If as a result of carrying out a review under subsection (1) it appears to the body that carried out the review that there has been a deterioration in its financial position, it must—
(a) take such action, if any, as it considers necessary to deal with the situation, and
(b) if it is a functional body, report the deterioration to—
(i) the Mayor of London, and
(ii) the Chair of the London Assembly.
(4) A report under subsection (3)(b) shall—
(a) include a statement of the reasons for the deterioration, and
(b) set out what action, if any, the body making the report proposes to take to deal with the situation.
(5) For the purposes of subsection (3), there is a deterioration in a body’s financial position if on the review an amount falls to be calculated under section 85(6) of the Greater London Authority Act 1999 (component budget requirement) and—
(a) none fell to be calculated under that provision at the time of the calculations under review, or
(b) an amount did then fall to be calculated under that provision and the amount then calculated is less than the amount calculated on the review.
(6) Where substitute calculations have effect, it is those calculations to which the duty under subsection (1) applies.
(7) In this section, “functional body” has the same meaning as in the Greater London Authority Act 1999.
30 Authorisation of agreements during the prohibition period
(1) In section 115 of the Local Government Finance Act 1988 (c. 41) (which sets out the consequences for a relevant authority of the receipt of a report made by its chief finance officer under section 114(3)), in subsection (6) (which prevents an authority that has received such a report from entering into certain agreements during the prohibition period), at the end there is inserted “ unless the chief finance officer of the authority authorises it to do so ”.
(2) After that subsection there is inserted—
(6A) The chief finance officer may only give authority for the purposes of subsection (6) above if he considers that the agreement concerned is likely to—
(a) prevent the situation that led him to make the report from getting worse,
(b) improve the situation, or
(c) prevent the situation from recurring.
(6B) Authority for the purposes of subsection (6) above shall—
(a) be in writing,
(b) identify the ground on which it is given, and
(c) explain the chief finance officer’s reasons for thinking that the ground applies.
(3) In subsection (14) of that section (which defines certain terms used in that section), after the definition of “the Assembly”, there is inserted—
“chief finance officer” has the same meaning as in section 114;
.
(1) A Minister of the Crown may pay a grant to a local authority in England towards expenditure incurred or to be incurred by it.
(2) A Minister of the Crown, or the National Assembly for Wales, may pay a grant to a local authority in Wales towards expenditure incurred or to be incurred by it.
(3) The amount of a grant under this section and the manner of its payment are to be such as the person paying it may determine.
(4) A grant under this section may be paid on such conditions as the person paying it may determine.
(5) Conditions under subsection (4) may, in particular, include—
(a) provision as to the use of the grant;
(b) provision as to circumstances in which the whole or part of the grant must be repaid.
(6) In the case of a grant to a local authority in England, the powers under this section are exercisable with the consent of the Treasury.
(1) For the purposes of section 31, expenditure of a functional body shall be treated as expenditure of the Greater London Authority.
(2) The conditions on which grant under section 31 may be paid include, in the case of a grant to the Greater London Authority, a condition requiring the Mayor to transfer the grant to a functional body.
(3) A decision to pay a grant under section 31 subject to such a condition as is mentioned in subsection (2) above shall be notified to the functional body concerned as well as to the Greater London Authority.
(4) Where a grant paid under section 31 to the Greater London Authority is paid subject to such a condition as is mentioned in subsection (2) above, the Mayor must transfer the grant to the functional body concerned forthwith.
(5) Where a grant paid under section 31 to the Greater London Authority is not paid subject to such a condition as is mentioned in subsection (2) above, the Mayor may transfer the grant to a functional body.
(6) Where grant under section 31 is transferred under this section to a functional body, any conditions to which the grant is subject shall apply to the transferee instead of the transferor.
(7) In this section, “Mayor” means Mayor of London.
32A Power to pay grant to joint committees of London councils
(1) A Minister of the Crown may pay a grant to an eligible London joint committee towards expenditure incurred or to be incurred—
(a) by the committee, or
(b) by an eligible sub-committee of the committee.
(2) The amount of a grant under this section and the manner of its payment are to be such as the person paying it may determine.
(3) A grant under this section may be paid on such conditions as the person paying it may determine.
(4) Conditions under subsection (3) may, in particular, include—
(a) provision as to the use of the grant;
(b) provision as to circumstances in which the whole or part of the grant must be repaid.
(5) Where a Minister of the Crown wishes to pay a grant towards expenditure incurred or to be incurred by an eligible London joint committee or an eligible sub-committee, the Secretary of State may pay a grant under this section to one or more persons (other than the committee) to hold and use in respect of the expenditure by the committee or sub-committee.
(6) The powers under this section are exercisable with the consent of the Treasury.
(7) The Secretary of State may, by regulations—
(a) make provision for determining the question of whether a committee, or sub-committee, is “eligible”, including provision about conditions that must be met for a committee or sub-committee to become or remain eligible;
(b) make provision about the constitution, procedures, administration and oversight of London joint committees, or their sub-committees, that are eligible.
(8) Regulations under subsection (7)(a) may (in particular) make provision about conditions that relate to—
(a) the power under which, or way in which, the committee or sub-committee is established;
(b) the functions or purpose of the committee or sub-committee;
(c) the kinds of persons who are members of the committee or sub-committee;
(d) the constitution, procedures, administration or oversight of the committee or sub-committee.
(9) Regulations under subsection (7) may amend any Act passed before, or in the same session as, the English Devolution and Community Empowerment Act 2026.
(10) No regulations under subsection (7) may be made unless a draft of the statutory instrument containing the regulations (whether containing them alone or with other provisions) has been laid before, and approved by a resolution of, each House of Parliament.
(11) In this section—
“eligible” has the meaning determined in accordance with regulations under subsection (7)(a);
“London joint committee” means a joint committee established under section 101(5) of the Local Government Act 1972 by—
all the London borough councils, and
the Common Council of the City of London.
(1) A combined authority or CCA may pay to a constituent council a grant towards expenditure incurred or to be incurred by it.
(2) The amount of a grant under this section and the manner of its payment are to be such as the person paying it may determine.
(3) A grant under this section may be paid on such conditions as the person paying it may determine.
(4) Conditions under subsection (3) may, in particular, include—
(a) provision as to the use of the grant;
(b) provision as to circumstances in which the whole or part of the grant must be repaid.
(5) Subsection (6) applies where, in exercising a function under this section, a combined authority or CCA determines an amount of grant to be paid towards expenditure incurred or to be incurred by a constituent council in relation to the exercise of its highway functions.
(6) In determining that amount, the combined authority or CCA must have regard to the desirability of ensuring that the constituent council has sufficient funds to facilitate the effective discharge of those highway functions.
(7) To comply with subsection (6), the combined authority or CCA must take into account any other sources of funding available to the constituent council for expenditure incurred or to be incurred in relation to the exercise of its highway functions.
(8) The functions conferred by this section on a mayoral combined authority or mayoral CCA are functions of the authority or CCA exercisable only by the mayor on behalf of the authority or CCA.
(9) In this section—
“combined authority” means a combined authority established under section 103 of the Local Democracy, Economic Development and Construction Act 2009;
“combined county authority” means a combined county authority established under section 9(1) of the Levelling-up and Regeneration Act 2023;
“constituent council” means—
in relation to a combined authority—
a county council the whole or any part of whose area is within the area of the authority, or
a district council whose area is within the area of the authority;
in relation to a combined county authority—
a county council for an area within the area of the authority, or
a unitary district council for an area within the area of the authority;
“highway functions” means functions exercisable by a constituent council (in whatever capacity) in relation to the highways for which it is the highway authority;
“mayoral CCA” has the same meaning as in Chapter 1 of Part 2 of the Levelling-up and Regeneration Act 2023 (see section 27(8) of that Act);
“mayoral combined authority” has the same meaning as in Part 6 of the Local Democracy, Economic Development and Construction Act 2009 (see section 107A(8) of that Act).
32B Application to Mayoral development corporations outside London
(1) For the purposes of section 31, expenditure of a Mayoral development corporation for an area in the area of a combined authority or CCA shall be treated as expenditure of the combined authority or CCA.
(2) The conditions on which grant under section 31 may be paid include, in the case of a grant to a combined authority or CCA, a condition requiring the combined authority or CCA to transfer the grant to the Mayoral development corporation.
(3) A decision to pay a grant under section 31 subject to such a condition as is mentioned in subsection (2) above shall be notified to the Mayoral development corporation as well as to the combined authority or CCA.
(4) Where a grant paid under section 31 to a combined authority or CCA is paid subject to such a condition as is mentioned in subsection (2) above, the combined authority or CCA must transfer the grant to the Mayoral development corporation forthwith.
(5) Where a grant paid under section 31 to a combined authority or CCA is not paid subject to such a condition as is mentioned in subsection (2) above, the Mayor may transfer the grant to a Mayoral development corporation.
(6) Where grant under section 31 is transferred under this section to a Mayoral development corporation, any conditions to which the grant is subject shall apply to the transferee instead of the transferor.
(7) In this section—
“CCA” means a combined county authority established under Chapter 1 of Part 2 of the Levelling-up and Regeneration Act 2023;
“combined authority” means a combined authority established under Part 6 of the Local Democracy, Economic Development and Construction Act 2009.