| Feature | Leasing World |
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The Treasury has, since the arrival of the Code, taken a fairly
“hands-off” stance on local authorities’ use of capital. This is to
be expected as the Code was designed to allow local authorities to
borrow in their own right if it was affordable. However, in light
of the current and ongoing Comprehensive Spending Review
(CSR) up to 2010/11, it is likely that capital spending by local
authorities will be more constrained. Perhaps by no more than 1-
2 per cent, but this is a significant reduction on previous years.
From 2000 some £7 billion has been spent on capital spend, a
doubling from hitherto. Central government financed
approximately 50 per cent of this through grants or supported
borrowing, the remainder being financed by local authorities from
sale of assets and by using revenue for capital purposes.
So what of the future? The effects of a changing depreciation policy could have significant impacts – at present local authorities take account of depreciation in their bottom line then net it out to avoid any impact on council tax, but with a new regime and a proper depreciation discipline in place, what might be the effects on Whole of Government Accounts? What might be the impact on council tax and how might a fair implementation be introduced when most local authorities have different histories in managing assets? The key challenges as I see it, and also the Treasury in this process, is affordability and impact on council tax. The CSR targets, combined with these changes, should enable asset finance products to gain greater |
significance in the piece; however we
must as an industry begin a campaign to change the hearts and
minds of many local government officials. The current trend for local authorities to use long-term finance arrangements of 40 years plus to finance short–life assets has raised questions around matched funding. At a recent FLA Local Government Forum meeting, one of the members very eloquently suggested it was “akin to putting a toaster on a mortgage”. This is an argument now shared by many and should be directed with more vigour at changing local and central government perception. Encouragingly, there is some good news on this issue as the DCLG is once again working on a project with greater focus on asset management. As in the past, if our industry positions it well, we have the ideal products and solutions to help in this important arena. As I see it, the leasing industry has become too bogged down in delivering “option appraisals” rather than assisting local authorities with strategic content, planning and asset utilisation and future service requirements. We seem to be more focused on tender response when many of our customers want and need greater engagement, discussion and understanding from our industry and our vendor partners. Where applicable, a more consultative sale and approach are required – a “one fit for all” approach, which is often seen in tenders, doesn’t seem to be the way forward. Other industry sectors, which service this market, are solution driven and enhance their offerings as a result. With the exception |
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