Clause 2 - Control of borrowing
Local Government Bill
11:15 am
Mr Philip Hammond (Runnymede and Weybridge, Conservative)
I would expect the Minister to recognise that some experts may have a vested interest in preserving the existing system. He said that the present system does not allow for ''doubling up''. It is curious that he uses that phrase, because no commercial organisation would think of going into the market to raise new cheap debt in order to retire a few days later expensive and burdensome debt as ''doubling up'' or of having some such onerous implication. They would regard it as a sensible operation to conduct and carry out.
The Minister said that local authorities manage under the present system and that he wants to see that continue. Does that mean that he wants to see what he originally provided for in his draft Bill—the ability to regulate with whom local authorities could conduct their borrowing business?
Does he want to see local authority borrowing effectively remain the exclusive preserve of the Public Works Loans Board, or does he want to encourage local authorities to use more innovative and diverse forms of finance? If the latter is the case, I suggest that a power akin to that proposed by amendment No. 26 may be necessary.
The Minister says that the Public Works Loans Board makes available a cushion—of unused facilities available at the time, for example. However, the most hard-pressed authorities may be the ones that are over-borrowed—within their prudential limits, but highly borrowed—and need to conduct such Treasury operations. Those authorities are not likely to have the headroom within existing prudential limits.
I readily admit that I am no financial expert, but if we want diversity in local authority debt instruments and the participation of the local community in financing local authority debt, we must reconsider the matter. I do not intend to press the amendment, but I will talk to experts on the subject and communicate with the Minister before Report stage.
Turning briefly to amendment No. 5, the Minister said that orders were less flexible than directions. They are: that is the price of democracy, I am afraid. I suggest that any process under subsection (2) must be transparent. If the financial markets are to be settled by the imposition of overall limits in a macroeconomic crisis, they need to know that the Government are not sliding out letter directions to local authorities right, left and centre.
It being twenty-five minutes past Eleven o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.
Adjourned till this day at half-past Two o'clock.