Sections 2, 6 and 13: Control of borrowing
10.The main borrowing control section 2(1) will be the duty not to breach the prudential and national limits set under sections 3 and 4.
11.Authorities will be free to seek loans from any source, but will, as now, be prohibited from borrowing in foreign currencies without the consent of Treasury, since adverse exchange rate movements could leave them owing more than they had borrowed. Various provisions in the present legislation protecting lenders to authorities will be preserved. These include the long established ‘safe harbour’ (section 6): this ensures that debts can still be enforced even if it turns out that the authority borrowed unlawfully and means that potential lenders do not need to make detailed enquiries about authorities’ borrowing powers. Section 13(3) maintains the vital principle that all of a local authority’s revenues serve as security for its borrowing.
12.The mortgaging of property will continue to be prohibited: section 13(1). It will also remain unlawful to ‘securitise’, that is, to sell future revenue streams such as housing rents for immediate lump-sums (this is implicit in section 13(1)).