Peterborough denies it used capital receipts unlawfully
0Peterborough City Council yesterday approved its budget for 2018/19 after council leaders vigorously denied suggestions the authority might be spending capital receipts unlawfully.
An article on news website the Huffington Post headlined “Has Peterborough council unlawfully used money raised from selling public spaces?” this week questioned the council’s use of its capital receipts over the past three years.
However, the council says that it has acted within existing rules by using the receipts to offset its annual minimum revenue provision (MRP) charge rather than the total amount of borrowing.
David Seaton, cabinet member for resources at the council, said: “I must stress that we are not acting illegally in taking this approach.
“Legislation allows us to use capital receipts to pay loan debt and it is perfectly in line with the council’s MRP policy.
“It has also been confirmed as appropriate by both external treasury advisors and the council’s own external auditors.”
The council, cited statutory guidance on MRP, revised last year, which covers the annuity method of calculating MRP provision.
This guidance states: “Adjustments to the calculation to take account of repayment by other methods during repayment period (e.g. by the application of capital receipts) should be made as necessary.”
In a statement, the council added that its approach had been backed in the past week in a legal opinion by a QC.
Peterborough’s Medium-Term Financial Strategy, approved by a full meeting of the council yesterday, provides for £10.6m in capital receipts to offset MRP provision in 2019/20.
In 2018/19 it used £12.7m using the methodology and £4.1m the previous year.
The strategy said: “As the council has used capital receipts from the sale of properties (assets) to support the budget for a number of years, the remaining value of assets is relatively low, especially with some of the higher value assets being sold in recent years.
“This now leaves the council with very little flexibility to use capital receipts in the future to support the budget, and also reduces the potential for the council to generate property rental income.”
In a statement, the Ministry for Communities, Housing and Local Government said that it was looking into whether Peterborough had complied with the rules.
It said: “We are examining Peterborough Council’s use of capital receipts in the light of this information.
Local authorities must demonstrate the highest standards of transparency and accountability, and where appropriate, the government will take action where this is found not to be the case.”
Following the publication of the Huffington Post story – written by the Bureau of Investigative Journalism – senior council officers met with councillors to emphasise that it was acting lawfully.
Following these meetings, Shaz Nawaz, Labour Party leader on the council, told Room151 that he had been given some confidence by the reassurances.
He said: “I do take advice from officers who understand these matters.
“But I welcome the investigation from the MHCLG – if there is nothing to hide and everything is hunky dory then that will give us peace of mind.”
Opposition councillors voted against the budget due a number of issues including a proposed cut to council tax support for the poorest, he said.
Earlier this week, councils defended their use of capital receipts to fund redundancy packages, in the face of criticism from a separate article published on Huffington Post.
