Explanatory note

Section 72(3) of the Local Government, Planning and Land Act 1980 ( “the Act”) limits the prescribed expenditure of a local authority, and other bodies to whom Part VIII of the Act applies, to the aggregate of various amounts including its net capital receipts. “Prescribed expenditure” is expenditure, essentially of a capital nature, described in Schedule 12 to the Act.

The disposal of assets mentioned in section 75(2) of the Act gives rise to capital receipts, from which net capital receipts are derived. The Secretary of State may by regulations provide that the disposal of specified classes of assets does not give rise to capital receipts or gives rise to such receipts only to the extent specified in the regulations. Regulations may also provide that particular expenditure is not to be prescribed expenditure and that authorities are to be treated as incurring prescribed expenditure in certain circumstances.

These Regulations amend the Local Government (Prescribed Expenditure) (Consolidation and Amendment) Regulations 1987 ( “the 1987 Regulations”). They reproduce, with amendments, the provisions of the Local Government (Prescribed Expenditure) (Amendment) Regulations 1988 ( “the 1988 Regulations”) (S.I. 1988/434), which cease to have effect on 1st October 1988, and they make certain other amendments to the 1987 Regulations.

Regulation 4 of the 1987 Regulations lists certain classes of assets on the disposal of which no capital receipt arises. These Regulations make the same additions to the list as were made by the 1988 Regulations, but provide that the first of these additions does not apply to new town assets transferred to local authorities nor to cases where the acquisition of the asset occurred by operation of law (regulation 2(d)).

Regulation 6 of, and Schedule 3 to, the 1987 Regulations provide that expenditure incurred in certain circumstances, or for certain purposes, is not to be prescribed expenditure. These Regulations make similar provision to the 1988 Regulations, so that, in general, expenditure on leases of three years or less and leases which succeed certain other interests will not constitute prescribed expenditure (regulation 2(m)).

There are two new changes of substance, both of which relate to provisions in the Local Government Finance Act 1988. Section 131(6) of that Act provides for the value of any consideration which is not in money to be taken into account in calculating the payments that an authority is to be treated as making in respect of expenditure on works under section 80A(1) of the Act. These Regulations provide that regard is also to be had to any consideration not in money which is given by an authority in calculating its prescribed expenditure where section 80A(1) does not apply by virtue of regulation 8 of the 1987 Regulations (regulation 2(g)).

Amendments are also made by these Regulations relating to the addition, by section 132(1) of the 1988 Act, of the acquisition of share capital and loan capital to the list of activities in Schedule 12 to the Act, expenditure on which is prescribed expenditure. Regulation 2(n) provides that expenditure on the acquisition of share capital or loan capital where the acquisition is of an investment falling within Parts I or II of Schedule 1 to the Trustee Investments Act 1961 is not to be prescribed expenditure. Regulation 2(e) provides for the disposal of share capital and loan capital in certain circumstances to give rise to capital receipts. The proportion of the sums received on the disposal of these assets, which is to be taken into account for the purposes of the limit on the prescribed expenditure of any authority in any year, is prescribed by regulation 2(b) and (h).

The provisions in these Regulations relating to share capital and loan capital are given effect with respect to disposals of assets on or after 10th March 1988 of assets acquired on or after that date, and with respect to expenditure incurred (or treated as incurred) on or after that date. The remainder of the Regulations have effect with respect to expenditure incurred (or treated as incurred), and disposals, on or after 1st October 1988(regulation 3).