New Clause 10 - Power to abolish Public Works Loan Commissioners

Part of Infrastructure Bill [Lords] – in a Public Bill Committee at 4:45 pm on 13th January 2015.

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Photo of Nick Raynsford Nick Raynsford Labour, Greenwich and Woolwich 4:45 pm, 13th January 2015

I shall be brief, but I want to raise one further Alice in Wonderland element and then add a little historical observation. The Alice in Wonderland part is the actual terminology of new clause 10. The Minister will know that the way in which he is effecting the abolition of the Public Works Loan Board commissioners is by inserting into the Public Bodies Act 2011 a new power or listing of the Public Works Loan commissioners to the list of bodies that can be established by Ministers. However, what I notice is that it is being inserted after “Plant Varieties and Seeds Tribunal.” Is this bringing us back to the whole story of invasive species that we were debating a week ago or is it entirely coincidental? I would welcome the Minister’s observation on whether this is a piece of serendipity or whether there is some malign intention to do away, not just with the custodians of our country against invasive species, but with the fine people who have established probity in government finance throughout the past 150 years or so since Sir Stafford Northcote set them up.

My second observation relates to history because the Minister was generous in referring to my contribution towards the process leading to the present in the introduction of the prudential borrowing regime in 2003—it came into effect in 2004—but, of course, there is a longer story behind that. I apologise for injecting an element of partisan debate into what otherwise has been a rather non-partisan discussion, but hon. Members should be aware that the prudential borrowing regime was introduced because the then previous Conservative Government, headed by Baroness Thatcher, had interfered with Sir Stafford Northcote’s framework for lending to local authorities by imposing draconian additional restrictions on local authority borrowing. That was the beginning of the process of, essentially, drawing to an end the life of the Public Works Loan Board commissioners because the Treasury was given much more specific and draconian powers to control local authority borrowing than had previously existed. That is what we were getting rid of in 2003 by establishing a prudential regime.

I am pleased that the Minister has been generous in conceding that that was the right thing to do, and in recognising that the fears that were voiced at the time by the then Opposition, as well as by Members of our party, that that should not be allowed to open the door to unwise borrowing have proved groundless. The safeguards that we put in place have not proved necessary. The scheme has worked well, which is why the Minister has some explanations to give to the Committee because the present Government do not really believe that. Look at borrowing by local authorities for housing: the current Government impose a cap on local authority borrowing limits below the cap that would otherwise apply through the prudential regime. They do not allow local authorities to borrow for housing investment up to the prudential borrowing cap; they have a separate lower cap.

The LGA estimated—this is about a year ago so it may not be up to date—that the local government community could probably create something in the order of 60,000 new homes if it was free to borrow up to the prudential borrowing limit, rather than being restricted by the current cap. I put it to the Minister that although it in no way changes the purpose of this new clause, there is an unanswered question about whether local authorities should be allowed to borrow within the framework of a prudential borrowing arrangement that has proved successful, has not opened the floodgates to irresponsible borrowing, and has been generally seen as a worthwhile contribution to public finance. I leave it at that.