Draft Combined Authorities (Borrowing) and East Midlands Combined County Authority (Borrowing and Functions) (Amendment) Regulations 2025

Paul Holmes Excerpts

Wednesday 8th January 2025 General Committees

[Paul Holmes (Hamble Valley) (Con)]

It is a pleasure to serve under your chairmanship, Mr Twigg. I wish the Minister and all Members a happy new year.

Considering the bulging numbers on the Opposition Benches, the Minister will be pleased to know that we will not challenge the regulations. But we do have some general questions. He gave a detailed explanation of the business before us but there are, as he would expect, a number of questions that the Opposition want to flag and that I would appreciate an answer to.

The Opposition completely understand the reason for the measures and for the need to enhance devolution in the existing combined authorities. We must also stress the impact of excessive borrowing on taxpayers and council tax payers. It is important that—as the Minister would expect me to note—Conservative mayors have never raised the mayoral precept that they can impose. They have either cut it or not put it in place at all, while Labour mayors such as Sadiq Khan have increased it. However, we welcome the introduction of the debt caps agreed with the Treasury.

Given his announcement on devolution plans a couple of weeks ago, the Minister would expect me to ask about the Government’s plans and mechanisms to legislate with the new authorities. Will they have to legislate en masse, or does the Minister expect to come to the House with other statutory instruments like this one, following consultations and the establishment of new mayoral combined authorities? What debt caps will feature in the future? Will there be central Ministry of Housing, Communities and Local Government guidance on acceptable debt caps and borrowing levels for combined authorities?

What will the Government do to keep council tax down and ensure that the temptation to borrow more—particularly in the financial situation that we find ourselves in—does not lead to increased council tax or taxes on residents? Will the Minister not only urge the East Midlands authority, and other authorities going forward, to behave responsibly, but urge caution on borrowing with the powers that will be given to new combined authorities? As we move forward, will the Minister legislate to allow borrowing against all functions, as in the changes and adaptations he has outlined today, or will he look at it on a case-by-case basis, as local authorities come forward under his devolution plans?

As we move towards devolution, another concern is about what will happen to the debt incurred by councils that choose to undergo restructuring. That is slightly outside the scope of the SI, but it is in the policy that we would have to see statutory instruments such as this one. Where will councils’ debt go when they merge into a new devolution settlement? Will councils have to have the difficult conversations on their own, and organise their own affairs, or will central Government support them as they go forward locally?

Liberal Democrat-controlled Eastleigh borough council has a debt of £500 million. I do not think it will surprise the Committee that other councils do not want that council to merge into their functions under future devolution plans. [Interruption.] It comes as a surprise to my hon. Friend the Member for Hinckley and Bosworth, but it should not. I wonder whether the Minister will facilitate plans going forward and what Government support will be given to local authorities as they go through the mergers.

I note that for the general power of competence for economic development and regeneration to be conferred on the East Midlands combined authority, a public consultation was required by law, as the Minister outlined. That is perfectly acceptable and right, and he gave a detailed review of the responses from the local public. I think it is safe to say that the feedback indicated general but not overwhelming support. What lessons will the Minister and the Government draw from the consultation mechanisms that were outlined? On reflection, how will he adapt transfers of the devolution of powers? What shape will future consultations take to encourage greater co-operation and participation by local residents when they face changes in their local authorities?

Lastly, as we enter this phase of quite disruptive top-down restructuring, I hope the Minister will outline some detail on the policy going forward, and particularly on my specific questions this morning, beyond its current embryonic nature. Overall, we support the mechanism. We believe in devolution as an Opposition and as a party—it was set up by this party originally—and we look forward to seeing locally elected mayors deliver the powers and functions that this Government want them to.

[Jim McMahon]

I thank the shadow Minister and wish him a happy new year in return. His were generally positive comments, with the exception of the standard view of the Mayor of London, who is obviously doing a fantastic job of delivering the Government’s missions—and long may that continue.

Let me answer the shadow Minister’s questions, all of which were completely legitimate. We expect all public bodies, whether they are councils or mayoral combined authorities, to exercise their borrowing powers with the restraint that the public would expect. We expect them to borrow for a purpose and honour their borrowing commitments through the repayment schedule. That is why there is a clear mechanism in place for HMT to assess borrowing caps on an individual basis, reliant on the financial status of the local or combined authority in question. The checks and balances are robust and in place, and it may well be that the powers are not used in some places.

The point is that as we move towards a new phase of devolution there has to be an assumption of trust and autonomy for local authorities to do what is right for their local communities, without them always coming cap in hand to the Government or waiting for a new Government grant scheme that they can bid into. In the end, areas will be expected to self-organise, to work with their local business community and investors, and to marshal projects for the economic wellbeing of the country. This devolution mechanism is very much about bringing the relevant areas in line with other authorities that already have those powers.

We have seen mayoral combined authorities in particular making a difference to economic growth. Greater Manchester is significantly outperforming large parts of the economy elsewhere in England. That has been in large part because of the mayor’s convening role and the activity and energy of the local authorities, but also, importantly, because they have been able to team up and label different elements of funding to make schemes stack up and bring them to market so that they can be achieved. Having that role in place, with the legal powers required, is entirely what this mechanism is all about.

I have a different view from the Opposition on the use of a mayoral precept. The reason for that is that every mayoral operation has a cost to it. We can all agree that we want them to be slim, efficient and nimble, but the idea that some mayors have a cost to them and some do not is frankly ridiculous. Every mayoral combined authority has an operating cost. The more that authority does, the higher that cost will be, reflecting the activity that has been undertaken. There are two ways to meet that cost. We can have a levy or a charge on the local authority, which is not particularly transparent and cannot be seen by the public. The public do not even get to see on their council tax bills how much has been spent on that function, so where is the democratic accountability? Alternatively, we can shine a light on it and say that the public have a right to know how much mayoral combined authorities cost. That should be transparent on the council tax bill, and the public, through the democratic voting process, will have the right to say whether they believe that money is being used to the best effect.

[Paul Holmes]

I do not want to break the spirit of consensus, but although the Minister is quite right that transparency is crucial to all local mayors and that the public must know how much the authorities cost, why is it that Labour mayors seem to be raising their precept much more than any Conversative mayor? Is he saying to the Committee that Labour mayors are inefficient and their operations cost more than those of Tory mayors?