New Clause 10 - Power to abolish Public Works Loan Commissioners

Part of Infrastructure Bill [Lords] – in a Public Bill Committee at 4:32 pm on 13th January 2015.

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Photo of Roberta Blackman-Woods Roberta Blackman-Woods Shadow Minister (Communities and Local Government) 4:32 pm, 13th January 2015

Let me say what a pleasure it is to welcome the Minister back to his place. As we know, the new clause will give the Government the power to abolish the Public Works Loan Board. We all have to accept that that was largely achieved by my right hon. Friend the Member for Greenwich and Woolwich when he was a Minister. This appears to be a largely uncontentious measure; nevertheless, that body has been in existence since 1875, as we have all heard. The Minister and I have a strong commitment to preserving our heritage, so we must tread carefully and be sure that all the questions that should be asked have been asked. I have a number of questions for the Minister this afternoon.

I shall start by asking about consultation. On 14 July last year the Government said that they were going to review governance arrangements for the PWLB and consult on them. However, we do not seem to have had a consultation on the new clause, and I am a bit  surprised by that. What we have heard from the Minister today is that he is asking us to approve the new clause providing powers to abolish the PWLB, and then he will consult. I suggest gently to the Minister, in an analogy appropriate to 1875, that that is putting the cart before the horse. It would be more normal and more rational, would it not, to have the consultation exercise, hear what people have to say and then decide whether it is appropriate to abolish, or even have the power to abolish, this board? Will the Minister explain why he thinks it is appropriate that the Government did not go ahead with the consultation last year, which they said they would, but have instead brought this measure forward completely out of the blue to seek the power to abolish the PWLB and then have a consultation? That does not seem to the Opposition to be doing things in the right order.

I thank the Minister for arranging a meeting with the relevant officials last week. Indeed, the Minister’s approach has been a model for other Ministers to follow in giving the Committee access to officials so that we could ask appropriate questions. I very much welcomed that meeting, but, as with all such meetings, I had more questions at the end than I had had at the beginning. There are a few issues that we did not get sufficient clarification on, either from that meeting with officials or from the Minister’s earlier comments.

We know that the Public Works Loan Board no longer makes decisions about loans to local government. It is pretty clear that, since 2004, local government loans are expected to follow the prudential borrowing scheme and that local government should inform the Treasury of loans that are made. What was not clear, and is perhaps still not clear, is whether the Public Works Board has any residual function. Does it have any say whatever in terms of what is happening to local government borrowing more generally, even if there is no specific function to approve particular loans? Indeed, from our meeting last week it was not apparent whether anybody has oversight of what local authorities are actually borrowing. It is important to have that clarification today.

We know that the functions of the Public Works Loans Board ended up with the Debt Management Office, an agency of Her Majesty’s Treasury. It is not clear at what point the office is able to intervene to turn down a loan if it thinks it is outside the prudential borrowing requirements. The degree to which the office has oversight is not clear, nor is it clear whether, at some future stage, it could interfere in setting the terms for the prudential borrowing requirement itself. Some clarification on who sets that requirement would greatly help our deliberations on whether the measure we are discussing is needed.

All of us want assurance that there is good oversight of local government borrowing, but also that there is not too much oversight or interference, and that there can be effective scrutiny of what is going on. At the minute, local authorities borrow according to the prudential rules, but it is not clear whether the commissioners had some general oversight or adhered to the public sector borrowing requirement, and whether that has been passed on to the DMO.

The Government have said that they wish to establish a new mechanism for local authority lending, which they want to consult on. However, again, we do not seem to have any idea of what the new system might be, who will have oversight of it or the degree of autonomy it will give to local government; absolutely critically, we have no idea whatever of how we will get parliamentary scrutiny of that mechanism. We know that, at the moment, an annual report is produced. It goes to the Public Works Loans Board Commissioners, but does not appear to go anywhere else, and we do not know whether it could. Could the Treasury Committee, for example, call for that particular report? Is it aware of its existence? If not, should there be a report on public sector borrowing by local authorities each year? If so, where should it be considered in Parliament? That is an interesting question on which we have had no comment from the Minister or his officials.

We also know that local government itself is seeking to establish a new borrowing scheme. The Local Government Association produced a report in mid-2012 proposing the creation of a collective bond-issuing agency. Participation would not be compulsory, but would be attractive to smaller local authorities that might not be able to obtain the best price in the conventional bond market. As of 15 December 2014, a total of 48 local authorities had agreed to invest in a new agency that would provide that function and it is anticipated that the first loans will be granted in spring 2015.

Again, there has been no indication from the Minister or his officials, or in any of the information they have passed on to us, of whether the new scheme will be acceptable to the Government. Will it be overseen by the Debt Management Office? How are we, as parliamentarians, to be given some reassurance that local authority borrowing will be subject to effective scrutiny, not only from local authorities themselves but in this House?

I would greatly appreciate it if the Minister could come back to me on these fairly substantive outstanding issues on what, on the face of it, seems a fairly innocuous measure.