Draft Combined Authorities (Borrowing) Regulations 2018

Debate between Yvonne Fovargue and Jake Berry

Monday 23rd April 2018 General Committees

[Jake Berry]

I was beginning to worry about my hon. Friend, because he did not jump up to intervene the moment I mentioned Andy Street. The Mayors are free to borrow the money, if it is under the borrowing cap, from anyone they choose. My guess is that they are most likely to borrow from the Public Loan Works Board, which at the moment has an interest rate of 1.91% for a five-year loan. My hon. Friend will understand that the rate changes over time—the Bank of England is rightly independent of Government and will set future rates. The borrowing powers are subject to an overall borrowing cap, to be agreed with the Treasury, for either two or three years, or perhaps for longer in future, and they are covered in the same way as every local authority is now by the prudential borrowing regulations. Not only will they have to remain within their borrowing cap, but they will have to comply with the prudential borrowing regime, if the Committee accepts these regulations.

[Yvonne Fovargue (Makerfield) (Lab)]

Any proposed borrowing is subject to the unanimous consent of all the constituent councils. If there is complete deadlock, is there any mechanism to allow an impartial person to step in and resolve any disagreement?

[Jake Berry]

These borrowing powers are intended to give effect to the desires and hopes that the Mayor will have set out in his manifesto, so it is up to the local authorities to agree and back their Mayor. There are currently no proposals on how to break a deadlock, although we would look to Mayors to provide local leadership. For example, Andy Burnham, who is the nearest Mayor to my constituency, covers both Conservative and Labour authorities, but he has been able—with some political skill, I think—to persuade them all, including Conservative-controlled Trafford Council, to back his plans to drive forward the economy of Greater Manchester. I fundamentally believe in democracy. I believe that Mayors have a huge mandate from the population they represent, and I think that local authorities should back that mandate. Of course, local authorities have their own democratic mandate, to ensure that the Mayor is not wasting money and is considering all parts of the combined authority when he makes decisions—I keep saying “he” because currently all of them are men, but I hope that will change shortly.

Each mayoral combined authority has a bespoke set of powers, depending on the devolution deal agreed with the Government and subsequently legislated for by Parliament. The regulations allow different borrowing powers for each mayoral combined authority, reflecting the fact that each of them has slightly different powers. Each has agreed a debt cap with the Treasury, and therefore we have the necessary assurance that the proposed borrowing powers will be used appropriately.

Under the Local Government Act 2003, local authority borrowing is regulated by the prudential borrowing regime, which stipulates that a local authority can borrow lawfully only if it can demonstrate that servicing and repaying the debt is affordable. As my hon. Friend the Member for Lichfield suggested, we must be absolutely sure that any money borrowed is affordable, and the prudential borrowing regime will ensure that it is. As mayoral combined authorities are currently defined as local authorities for the purposes of legislation, they will be subject to the same rules, providing all necessary safeguards. The 2003 Act also provides that combined authorities have a power to borrow for transport purposes. The Cities and Local Government Devolution Act 2016 amended the 2003 Act to provide for the Secretary of State to make regulations extending a combined authority’s power to borrow for other specified functions in addition to transport.

In conclusion, these regulations extend borrowing powers to enable the six mayoral combined authorities to borrow in relation to all of their existing functions, as agreed in their devolution deals and announced in the 2016 autumn statement. The combined authorities have each agreed debt caps with the Treasury and are subject to the same prudential borrowing regime as all councils. We are therefore seeking parliamentary approval to make the regulations. As we approach the first anniversary of the election of the six Mayors for the combined authorities, I think this is a crucial next step towards ensuring that each Mayor has the powers they need to drive forward economic growth in their area. I therefore commend the draft regulations to the Committee.