Baroness Wheatcroft
Main Page: Baroness Wheatcroft (Crossbench - Life peer)Cities and Local Government Devolution Bill [HL]
Baroness Wheatcroft Excerpts
Baroness Wheatcroft
“( ) enabling the mayor to raise funds for the carrying out of specified development projects by the issue of bonds to be made available only to those resident within the combined authority area.”
Baroness Wheatcroft (Con)
My Lords, this is a broad enabling Bill. Amendment 33 is a narrow amendment, intended to enable mayors to build their local communities and enhance local democracy. The Bill, according to the Prime Minister, is intended to widen civic engagement in the UK. This amendment is geared to help in that endeavour.
The Victorians left a wonderful legacy of public assets, built with the funds of local people. In Blackheath, where I lived for a long time, the 600-seat concert hall that was opened in 1895 is a tremendous and very well-used local facility, built by public subscription. The Holywell Music Room in Oxford, built even earlier, in 1748, is believed to be the first building geared entirely to the performance of live music, and concert performances are still played there regularly. It was funded by public subscription. Elsewhere, hospitals, village halls and sports fields have all been funded by local people and helped to build thriving local communities.
This amendment would give mayors of combined authorities the power to continue in that vein by issuing municipal bonds to fund specific schemes, thus involving local people directly in funding the developments that they want in their communities. Only local residents would be eligible to buy the bonds. This is all about local democracy. It is not a charter for extravagant mayors to rack up vast debts, imperilling the finances of city hall in order to fund their grandiose schemes. This is a way of allowing mayors to do what the local people want them to do.
It is right to be wary about a tendency to be extravagant that might exhibit itself among some mayors. Allowing mayors free rein to borrow would perhaps be dangerous, and in its extension of the Local Democracy, Economic Development and Construction Act 2009, the Bill does not include the power to borrow. In extending the Local Government Act 2003 in order to provide financing for this restructuring of local government, the Bill does provide for new authorities to have borrowing powers, but in order for the mayor to issue the municipal bonds that this amendment envisages, he or she would have to have the agreement of the new combined authority. That of course would depend on public opinion. As I say, this is all about giving local people what they want and what they are prepared to fund.
I know the Government wish to avoid putting specifics in the Bill, but sometimes there is merit in spelling out just what might be possible rather than leaving too much entirely to the discretion of the Secretary of State. Merely putting the ability to issue municipal bonds in the Bill does not in any way put a duty on mayors to issue them—but just think what might be achieved with such an option available. Your Lordships will hear from my rather sportier colleague about the sports facilities that could be provided with municipal bonds, but I like to think about the concert halls and the community centres—the buildings that might put life back into the heart of those estates and villages where there is no longer a real sense of community.
The bonds would provide the capital to enable such projects to be built. The coupon would not need to be high—certainly not with interest rates at their current level. In fact, in some cases, it may well be sufficient to say that those who subscribed would be entitled to a number of free entries or tickets every year. However, those subscribing to these bonds would be looking for far more than a meagre couple of percentage points on their investment: they would be investing in their community, which is surely what this Bill is all about. Of course, they would want to be assured that the project was workable, and those issuing the bonds would have to be able to demonstrate that the income generated from the new facility would cover the running costs and be sufficient, in the end, to pay back the capital.
Municipal bonds are not by any means a new idea, nor are they entirely in abeyance. For example, the Local Government Association is planning a new generation of municipal bonds. However, these are a very different category: the plan is that the LGA, in the guise of a new financial corporation, will pool the demands of local authorities and issue big bonds to the usual suspects—the major institutions that will be able to take a large chunk of them. That is very different to the sort of thing that this amendment proposes, and any link between the LGA’s version of municipal bonds and the actual municipality would be purely coincidental.
If we are serious about empowering local communities, devolving power away from the centre and building up mayors, surely the ability to issue bonds to build what people want to see and what they need in their local communities is something that we ought to at least be considering. Putting it in the Bill would be an encouragement to our new generation of mayors to think about what amounts to a new variation of crowdfunding. When I mentioned this at Second Reading, my noble friend said that she was “open” to all suggestions about the financing of the new structure. I hope that this is still the case—I trust that it is—and that we will therefore be able to pursue this idea. It is certainly in the spirit of the Bill.
Lord Flight (Con)
My Lords, I support my noble friend Lady Wheatcroft’s excellent amendment. If you go to America, you will find that cities have retained the right to finance infrastructure projects with municipal bonds. Indeed, income from bonds even enjoys the advantage of being tax-free. However, as she pointed out, much of the heritage of our great cities of the last century and much of their infrastructure investment were financed by municipal bond issues. That came to an end, sadly, during the Attlee Government after the Second World War. The argument was that the Government could borrow more cheaply via gilts and thus dosh out the money. What actually happened was that the money never got doshed out and the municipalities were unable to have their own bond issues.
For me, this subject is absolutely central to the reality of devolution to cities. It is about their ability to raise money and to invest in their own infrastructure. I, too, look forward to hearing of the opportunities in the sports world, but there is masses of scope for infrastructure investment. I raised this issue at Question Time in the House earlier this year I think, and got a response which seemed to be saying that, yes, the Government agreed with this and would include it in future legislation. Over a year ago, when I discussed the territory with the Mayor of London, he absolutely supported the idea that it should be a fundamental part of devolution to our cities.
I very much hope that the Government will accept my noble friend Lady Wheatcroft’s amendment, which, quite rightly, is designed to be cautious and not to allow the ability to go overboard. It would make a start and a crucially important contribution to real devolution.
Baroness Wheatcroft
To answer the noble Lord, insurance is always available for anything—at a price, of course—and I have no doubt that insurance could be provided for these bonds. As for a market in the bonds, there is always someone prepared to make a market.
Baroness Janke (LD)
My Lords, I, too, welcome this amendment. As a former leader of Bristol City Council I tried to look into this possibility. As the noble Baroness said, there is always a great deal of local ambition to achieve projects within the area for which, in straitened times, it is often difficult to raise funding. At the moment, I can think of the completion of the Colston Hall building—a concert hall in Bristol—for which we are trying to raise money. That would also be a project that local people would be very proud to see achieved.
When I made investigations, I found that local finance institutions welcomed this idea. I also found that local charities felt that it would be a really good way to invest funds within the local area rather than have local funds benefit central institutions. I welcome the idea as well because, as the noble Lord, Lord Liddle, said, this is a little bit more radical than a lot of the debate, which has been about concentrations of power. I welcome the idea of world-class cities and would like to see our cities at the heart of vibrant local economies. I hope that later in the Bill we can talk a bit more about some of the powers that might be made available to the combined authorities so that they can be at the centre of their local economies and exploit the potential that we have seen, as shown through various institutions such as Core Cities and Centre for Cities. There is great potential for economic growth.
I welcome this amendment and hope that the Government accept it. I hope that the idea may be explored further in due course.
Baroness Wheatcroft
My Lords, I thank the Minister for her detailed response, which was not entirely encouraging. I thank all those who spoke in support of my amendment. In answer to the questions asked by the noble Baroness, Lady Hollis—“Why not precept?” and “How would specific schemes be chosen?”—the point of the amendment is that the precept falls on all, no matter how able they are to afford it, whereas the bonds that I am mooting would enable those who have the money to invest in a local community to do so for the benefit of all.
As for the qualms voiced by the noble Lord, Lord Woolmer, about where the penny would drop if there were not enough pennies, every scheme would have to be looked at extremely carefully. They would all have to be budgeted. I am not as pessimistic as the noble Lord about how many such schemes would fail. The point about community building is that very often you can get the community involved, so one would anticipate—looking through those rose-tinted spectacles that I do not usually wear—plenty of volunteers to organise sports facilities, youth clubs and so on, and that running costs could be covered by letting out a hall or a sports field. I agree that the sums would have to be done carefully, and as a backdrop one would be looking at insurance.
Lord McKenzie of Luton
Will the noble Baroness clarify whether we are talking about simply a positive mechanism to raise funding, or a mechanism to expand the total borrowing capacity that the combined authority might have?
Baroness Wheatcroft
I gather from the Minister that the capacity to expand borrowing would not be there, so this would just be a different way of raising money, but it would be a way of involving the local community far more. As I understand it, the Bill is aimed at building local communities and pushing power to the people. I accept that this is not without qualms. There are questions to be asked—noble Lords have raised them—but I was delighted with the support for the general direction of travel, which is after all in line with our wish to devolve more power to the community and to build those communities. I hope that there may be scope for the Minister to spend some time working with me and others who support the general drift of this amendment to try to come up with something that we might bring back at a later stage.
Baroness Hollis of Heigham
From the noble Baroness’s response to the Minister’s point about borrowing capacity, I am still not clear whether she expects this ability to raise what would otherwise be capital expenditure to add to the PSBR.
Baroness Wheatcroft
There are clearly issues to be worked out. I am very flexible about this. It is the principle of getting local people involved in funding local facilities that I really want to pursue, and I hope that I can have talks that will enable me to do that. I beg leave to withdraw the amendment.