Draft Local Loans (Increase of Limit) Order 2024

Darren Jones Excerpts

Wednesday 13th November 2024 General Committees

[The Chief Secretary to the Treasury (Darren Jones)]

I beg to move,

That the Committee has considered the draft Local Loans (Increase of Limit) Order 2024.

It is a pleasure to serve under your chairmanship, Ms Vaz, and to bring forward the order for parliamentary approval. The order increases the aggregate limit on local loans through His Majesty’s Treasury’s Public Works Loan Board lending facility from the current level of £115 billion to £135 billion. As specified by the powers within the Public Works Loans Act 1875 and the National Loans Act 1968, those are loans to any local authority for any purpose for which the authority has the power to borrow. In accordance with the powers in the 1968 Act, His Majesty’s Treasury can increase the aggregate limit on outstanding loan debts through statutory instruments up to the maximum limit specified in the Act, which is currently set at £135 billion.

As of March 2024, the Public Works Loan Board’s stock of loans stood at £103.7 billion and is expected to increase further, broadly in line with forecasts for overall local authority borrowing. The Government are therefore bringing forward this statutory instrument to ensure that local authorities can continue to access lending from the Public Works Loan Board to support their capital investment plans and treasury management.

The Government recognise the valuable contribution that local authorities make to the social and economic infrastructure of this country and are committed to supporting local investment through the Public Works Loan Board. His Majesty’s Treasury will continue to work with the Ministry of Housing, Communities and Local Government to ensure that local authorities are borrowing in a prudent manner and not for speculative, for-profit investment, which is now prohibited through our Public Works Loan Board lending guidance. I stand ready to answer any questions from the Committee and look forward to receiving its support for this legislation.

--- Later in debate ---

[Darren Jones]

I am grateful to hon. Members for sharing their feedback on this statutory instrument and asking a number of questions. The rate of lending is broadly in line with market expectations; post pandemic, it reflects the fact that activity is now getting back to normal after the pandemic years, when fewer things could be done.

We are committed to the guidance on speculative investment and commercial lending, and that will remain in place. As a Treasury, we have general oversight of the Public Works Loan Board and the guidance and monitoring in respect of which the loans are taken out across the country. It is for local authorities, of course, in their own institutional capacity—through their own committees and audit functions—to look at the reasons for borrowing locally and see that that capital is being used well on the ground, but the Treasury has powers to intervene on particular loans and councils if concerns are raised.

Housing is, of course, a really important part of lending from the Public Works Loan Board, which is why we have extended the housing revenue account discount rate on lending for a further year, into financial year 2025-26.

Question put and agreed to.

4.37 pm

Committee rose.