I have been warned that the part of London in which I live is in danger of becoming, in terms of dereliction and crime, a British equivalent of the south Bronx in New York or the south side of Chicago.

The warning was not issued to me personally, but is contained in a report by the independent Audit Commission, which was set up under the Thatcher administration to monitor the spending of local government authorities.Prime Minister Thatcher thinks that many of the local councils, which set their own property taxes and manage most of their local affairs, have been spending too freely and relying too much on support from central government


She thus introduced measures to promote greater local government efficiency and cost-effectiveness, primarily by denying a proportion of central government grants to authorities that spend above government targets and by setting a limit on the amounts such councils may raise their property taxes or rates.

My council, Islington, which covers an area immediately north of London's square-mile finan cial heartland, happens to be one of these "rate-capped" boroughs, and one of the eight within London that the Audit Commission warns is in danger of going the way of certain depressed inner city areas in the United States.

John Banham, the controller of the commission, warns that mismanagement of the affairs of these eight councils - which, incidentally, are all under Labor Party control - will plunge them into a 290 million ($446.6 million)

financial crisis in only eight week's time.

He believes they face this threat primarily because of the "creative accounting" methods - i.e. borrowing - they have used to maintain high spending despite rate-capping and the reduction in central government grants.

Their "amateur approach" to their responsibilities, with inexperienced councilors meddling in business that should be left to professional staff, is obstructing a solution to the boroughs' real social and economic problems, Mr. Banham says.

"Once the cycle of decay becomes established, it will be immensely difficult to reverse," he warns.

For this reason, there is no time to waste "if effective action is to be taken to prevent the emergence in London of the urban dereliction that now affects some large North American cities."

While more money would help alleviate the problem, this is not the entire answer. Better management than has so far been exhibited is what is really needed, Mr. Banham believes.

"The key to solving this problem is a productive partnership between the private sector, the government and the local boroughs. But the chances of attracting that kind of investment are very small, like zero, if would-be private investors have no confidence in local management."

The eight profligate councils (out of London's 32 boroughs) are singled out for such wastefulness as spending 7 a week more a household than the others; taking seven weeks longer on average to relet council-owned properties needing minor repairs; allowing rent arrears on these properties to run nearly three times as high as elsewhere; spending 20 percent more a year on rubbish collection; and spending an extra 400 a year a vehicle on maintenance.

At the risk of appearing selfish, this is personally worrying since I own my home and happen to like to immediate area in which I live.

Since the last war, the area, which still retains numerous streets and squares of elegant Georgian and early Victorian homes, has undergone extensive gentrification to properties that earlier had been allowed to suffer from extensive inner-city decay.

Islington is as mixed an area as can be found anywhere in London, with some of these large houses restored as family homes and selling for the equivalent of well over $500,000, and others in the same street divided up and providing low-income council-owned housing.

Elegant restaurants and antique shops, including the tourist attractions of Camden Passage, are side-by-side with hamburger takeaways and charity stores.

After my first three years of living in Islington, when my property taxes rose 20 percent to 35 percent annually, I welcomed Mrs. Thatcher's rate capping, which forced the local council to reduce the rates by a total of 20 percent over the past two years.

Despite its earlier warnings that rate-capping would mean extensive cuts in essential services to local residents, Islington council now says that it has managed to maintain such services by employing this "creative accounting" method.

The worry, as Mr. Banham points out, is what will happen when these loans fall due?

Apart from recommending stricter criteria for those put into council management posts, Mr. Banham says local authorities should be made more accountable, learning to live more within the means of what can be reasonably collected from local residential and commercial taxes.

He also urges urgent reform of the central government grant and capital expenditure system, pointing out that some London authorities are receiving less grant per capita than other less deprived provincial authorities.

I hope Mr. Banham's recommendations fall on receptive ears. I don't really fancy my "up-and-coming" area of London becoming a blighted center of urban dereliction.

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