Infrastructure Bill [HL]

Lord McKenzie of Luton Excerpts

Monday 9th February 2015 Lords Chamber

In conclusion, mayoral development orders are a positive planning tool that will allow London local planning authorities and the mayor to collaborate effectively on planning to deliver housing and growth. I therefore ask your Lordships to agree to this new clause, which provides powers that will help to deliver the jobs and homes that London badly needs. I beg to move.

[Lord McKenzie of Luton (Lab)]

My Lords, we can support the creation of a regime for mayoral development orders, which we see as being uncontroversial. We are certainly supportive of proposals that can improve the delivery of new housing in London, and we note that London Councils and the GLA have expressed support for MDOs.

From discussion in Committee in the Commons, it has been confirmed today that such orders have to be initiated by the London boroughs themselves, and a particular benefit will be supporting the development of complex cross-boundary situations. Can the Minister say a little more about the extent to which they might be used within a particular boundary and not on a cross-border basis? It is presumed that we will not get the underpinning regulations by the end of this Parliament, unless the Minister can tell us otherwise. We note that the negative procedure is to be adopted. Perhaps the Minister might say when they are expected to be ready.

On housing numbers for London, what the Minister said in the other place has been confirmed today: there is an annual shortfall in capacity of between 7,000 and 20,000 homes. It was less than clear from the exchanges at the other end the contribution that MDOs might make in addressing that shortfall. I think the proposition was that they might speed things up, but whether they will have broader impact will be interesting to hear.

A further point, for which there was no satisfactory answer, was how MDOs can contribute to more affordable housing. Can the Minister confirm that Section 106 agreements will not operate for MDOs? If that is not the case, how will MDOs impact on the obligation to provide affordable housing? If this is the case, how will it be assured that the provision of affordable housing will be forthcoming, and what is the mechanism? It would be helpful to have clarity on that point. Nothwithstanding that, as I have said, we do not oppose the new clauses and will support them.

[Baroness Kramer]

My Lords, there is indeed a broad consensus across this range of issues. The noble Lord, Lord McKenzie, asked whether these orders could be used within a local authority rather than just across boundaries. Indeed they can, and of course local development orders are already available to local authorities, but they may wish to tap into the additional capacity and capability that is available in the mayor’s office for particularly complex projects. There may be occasions when that happens, and our expectation is that it will be primarily for the kind of sites that are complex enough to cross boundaries. Obviously, that happens quite often in London. Secondary legislation will appear in due course—a phrase with which I am afraid the House is probably very familiar—but at this point I think we can say with some confidence that that will be in the next Parliament.

I share the noble Lord’s understanding of Section 106, and he will be aware that the voice of local authorities is very powerful on this issue in shaping the kinds of development that they see as appropriate for their communities. It is not the mayor imposing a vision on local authorities, but rather local authorities looking to use the capacity that is on offer from the mayor in order to move developments forward proactively. Its primary purpose in all the discussions with London Councils and others has been to emphasise the importance of accelerating new housing development across the city.

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[Baroness Kramer]

My Lords, in discussing these amendments I shall include Amendments 28 and 36. These amendments deal with the Government’s public sector land programme, which has successfully released land for almost 98,000 new homes to date. We fully expect to meet our 100,000 homes target by March this year. Looking ahead to the next Parliament, we have an even more ambitious target, which aims to deliver land for a further 150,000 homes. This programme will be led by the Homes and Communities Agency and the Greater London Authority, and will mean transferring a significant amount of government land into their ownership.

Clause 28 will ensure that future purchasers of land owned by the Homes and Communities Agency, the Greater London Authority and the mayoral development corporations will be able to develop and use land without being affected by easements and other rights and restrictions. Clause 28 will bring the position of purchasers of land from the HCA, the GLA and the MDCs into line with those presently enjoyed by purchasers from local authorities and other public bodies involved in regeneration and development. This in turn will enable us to increase the attractiveness of surplus public sector land to developers, thus ensuring that we can facilitate the development of much needed new homes and support economic growth by removing obstacles to development while achieving best value for the taxpayer.

I want to be clear, however, that where the HCA or the GLA currently retains the freehold in the land and leases that land to developers, the powers to override third-party rights and restrictions are already exercisable on that land under existing legislation. There has to date been a degree of uncertainty on this point, which I understand has resulted in delays to certain developments in London. Amendment 13 seeks to provide an assurance that where the HCA or the GLA retains the freehold of land, the powers to override third-party rights and restrictions in land already apply under existing legislation, and we are happy to provide that clarity.

I turn now to Amendments 14, 28 and 36. Perhaps I may move on to the related matter of the Greater London Authority’s powers to incur expenditure on the transport elements of housing and regeneration projects. This important issue was raised in the other place during Committee and the Government promised to look urgently at the legislative options available to address it. We concluded that it was necessary to make a minor change to the GLA Act 1999 and have therefore made the proposed amendment.

Amendment 14 removes a prohibition in Section 31 of the GLA Act 1999 that prevents the GLA incurring expenditure on anything that may be done by its functional body, Transport for London. We are making this change to the GLA Act because the GLA has said that TfL’s powers are wide-ranging and therefore preclude the GLA from incurring expenditure on anything transport-related when undertaking housing or regeneration projects.

The prohibition excludes the GLA from incurring expenditure on projects that the GLA has been responsible for since 1 April 2012 when it took on the roles, land and contracts of the former London Development Agency and the Homes and Communities Agency in London. Without this amendment, around 50 projects worth over £200 million would have to stop. This includes work which the GLA has been funding with the London borough councils to revitalise high streets, including in Deptford, Bromley and Cricklewood. It also affects new initiatives to deliver new homes such as housing zones and at Barking Riverside.

Amendment 36 allows for the clause to come into effect on the day the Bill receives Royal Assent and that it will apply in relation to expenditure incurred by the GLA before as well as after the coming into force of the new clause. This is because it was clearly the intention of Parliament that the GLA should have equivalent powers to the former London Development Agency and the Homes and Communities Agency, following the Localism Act 2011. Amendment 28 limits the geographical extent to England and Wales.

Making these changes to the GLA Act 1999 is therefore essential to ensure that the GLA can deliver new homes and jobs for London. I beg to move that this House accepts these Commons amendments.

[Lord McKenzie of Luton]

My Lords, we consider these amendments uncontroversial and are happy to support them. We particularly see the thrust of Amendment 14 and the need to change what is clearly an unintended provision in the 1999 Act. It is indeed perverse if because of the existing powers the GLA is precluded from incurring expenditure on anything transport-related, such as transport-related projects to deliver housing, jobs and growth in London. That cannot be right, which is why we support the amendments.

Motion agreed.

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[Baroness Kramer]

My Lords, I beg to move that this House do agree with the Commons in their Amendment 23. In discussing Amendment 23, I will also include Amendments 34, 40 and 48. The Board of Public Works Loan Commissioners, commonly known as the Public Works Loan Board or PWLB, is a statutory body that dates back to the Public Works Loan Act 1875. It comprises 12 loan commissioners appointed by the Crown to administer making loans to local authorities. The commissioners are independent of government and unpaid by law. Under Section 4 of the National Loans Act 1968, the PWLB currently has a statutory lending limit of £70 billion. The current level of debt amounts to £64 billion. The original role of the loan commissioners was to approve and issue central government loans to certain categories of permitted borrowers. Under the 1875 Act and subsequent legislation, the commissioners have the power to refuse a loan on the basis of lack of security, and to appoint a secretary who can hold security and to whom the powers of the commissioners can be delegated. The commissioners are also required to issue an annual report to Parliament setting out details of loans advanced by the PWLB.

However, since 2004 decisions on borrowing have been fully devolved to local authorities under the prudential regime. As part of the local authorities’ self-regulated regime, local authorities are free to finance capital projects by borrowing without requiring government consent, provided they can afford to service their debts out of their revenues. This means that the decision-making functions of the PWLB commissioners are essentially obsolete. Local authorities are responsible for their own decisions on whether to borrow and how much. Further, the day-to-day operations of providing loans are now carried out by the Debt Management Office—the DMO—which is an executive agency of HM Treasury.

The commissioners’ functions and powers are delegated to the secretary of the PWLB, who is a civil servant at the DMO. The highly regarded prudential regime means there is no scope nowadays for the commissioners to exercise influence or discretion over lending to local authorities. The Government are therefore considering whether to abolish the Public Works Loan Board while ensuring that permitted borrowers, mainly local authorities, will continue to be able to access central government loans in the same way as now.

The purpose of including the PWLB in Schedule 1 to the Public Bodies Act 2011, which is what these amendments achieve, is to confer on the Government the power to make an order under the Public Bodies Act that would abolish the PWLB and transfer its functions to an eligible person, as defined in the Public Bodies Act. Let me assure noble Lords that the abolition of the PWLB, and the succession arrangements, will be subject to proper parliamentary scrutiny under the Public Bodies Act process. This proposal is purely about governance reform. The PWLB abolition will not impact on the prudential regime or local authorities’ existing loans with the PWLB, and local authorities will be able to undertake new borrowing from the successor body, as now, at rates that offer good value for money. Interest rates will continue to be a policy matter for HM Treasury.

Following the commencement of the provisions in this clause, the Government plan to publish a consultation document providing details of their proposals for abolition and succession, as required under the Public Bodies Act. After taking into account responses from the consultation, both Houses will have the opportunity to scrutinise the draft legislation, which will of course be accompanied by the explanatory document, as required by Section 11 of the PBA. Abolition of the PWLB would remove bureaucracy and align the accountability for lending to local authorities with DMO’s existing responsibilities for day-to-day operational management. This is in line with the Government’s wider efficiency and modernisation agenda.

I am conscious that these amendments are so uncontroversial that this may be the last moment that I am on my feet in a discussion on the Infrastructure Bill. I would like to take this opportunity to thank my noble friends Lady Verma and Lord Ahmad, who have been stalwart in leading significant parts of the Bill. I thank your Lordships all across the House. The Bill has involved many different departments; individuals with different specialisation and Peers who have followed different issues have had to co-ordinate and manage across the complexities. They have done so brilliantly. I think we have collectively improved the Bill. It has also involved working closely with the other place. This is also an opportunity for me to say particular thanks to the Bill team, which has had to deal with some of the most extraordinary complexity in managing this whole process. Frankly, I think it has done it brilliantly.

I will of course wish to respond if issues are raised by any other Members of the House, but I did not want to lose the opportunity to say thank you, since I am aware that the amendments I am moving are so technical and uncontroversial that this may be my last time to speak. I beg to move.

[Lord McKenzie of Luton]

My Lords, I am bound to say that when I saw references to the Public Works Loan Board being abolished a sense of nostalgia swept over me. It took me back to my first finance committee meeting of Luton Borough Council in 1976—noble Lords will remember that in those days if you turned up with a briefcase you were put on the finance committee straight away—and to the regular reports of the borough treasurer thereafter. Little did one realise that we were then in the comparative twilight of the commissioners’ existence.

The most recent Annual Report and Accounts, in describing the functions of the commissioners, says that they derive from legislation of 1875 and 1968, which has been referred to. However, the report also says that the PWLB’s existence can be traced back to 1793. It became established on a permanent basis in 1817. It is asserted that changes over time have made the PWLB less relevant, to the point where it is suggested that its purpose is redundant. As we have heard, its functions and powers have been delegated to the Debt Management Office. A significant development was the prudential borrowing regime introduced under the previous Labour Government, which obviated the need for local authorities to go through a credit approval process. In fact, the prudential borrowing regime has proved to be a major success and has demonstrated that local authorities act responsibly and prudently when it comes to exercising borrowing powers. The proposition is to include the PWLB in Schedule 1 to the Public Bodies Act 2011 so that the Government can use powers under that Act to abolish it and transfer its functions to an eligible person. It seems as though any necessary consultations are to take place under the PBA processes—presumably about “how” to abolish it, not “if”.

My colleagues in another place have already challenged the Government on why the consultation promised last July has not taken place. They have also reasonably sought to clarify what residual functions the PWLB undertakes. The foreword to the 2013-14 Annual Report and Accounts described the functions of the commissioners as being,

“to consider loan applications from local authorities and other prescribed bodies and, where loans are made, to collect the repayments”.

As a practical matter, as we know, these responsibilities have been delegated to the secretary—effectively the accounting officer. The PWLB borrows from the National Loans Fund to fund its loans. All interest and loan repayments are paid over to the National Loans Fund. Commissioners are prepared to lend to an authority up to the available capacity in its prudential borrowing limit.

It seems to us that although the functions have been delegated to others the PWLB’s nominal powers are surely not insignificant. At 31 March 2014 it held loans of approximately £63.7 billion, with corresponding liabilities of the same amount. Its powers to facilitate borrowing and manage loans must be significant, even though delegated. As my honourable friend Roberta Blackman-Woods MP stated in another place, we all,

“want assurance that there is good oversight”—

and transparency—

“of local government borrowing”.—[Official Report, Commons, Infrastructure Bill Committee, 13/1/15 col. 333.]

Perhaps the Minister would take the opportunity to say how she considers that this will be provided under any new arrangements. Having said all that, we certainly will not oppose these amendments.

[Baroness Kramer]

My Lords, the consultation that will come under the Public Bodies Act is obviously an important step in the process to allow for full discussion of the kinds of issues that the noble Lord, Lord McKenzie, has discussed today. At the moment the commissioners simply meet on an annual basis. They note the loans issued and review the annual report prepared by the officials. I think this House would agree that sometimes it is important to recognise reality and make sure that the formal arrangements match the actuality. We hope that this is a step in that direction.