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 John Hayes John Hayes Minister of State (Department for Transport) 4:32 pm, 13th January 2015

We were discussing the Public Works Loan Board and the changes that have been made over time that have made its work less relevant and, ultimately, made its purpose redundant. I was describing the delegation of its functions and powers to the Debt Management Office. The Public Works Loan Board has a secretary, who is a Treasury civil servant, and in essence the powers are delegated to him. That means that with the devolution of decision making about the taking of loans, and the change in the circumstances of the board in relation to the Treasury, the exercise of its powers has been—I was going to say negligible, but that would be something of an exaggeration—non-existent.

At one time, local authorities had to go through a credit approval process when they wanted to invest. That was time-consuming and ultimately became regarded as unnecessary—thus the changes introduced by the right hon. Member for Greenwich and Woolwich, as I mentioned a moment ago. That was certainly the regime that prevailed when I was a local councillor before I became a Member of Parliament in 1997. The powers that the right hon. Gentleman gave local authorities have not led to a series of problems. There is no evidence that they have borrowed irresponsibly, and there is no history of problems with their repayments, which are of course how we gauge whether they are capable of funding the investments they make.

The purpose of the measures in the Bill is, in a sense, to do the final piece of work that became the inevitable consequence of the changes made in 2004. The highly regarded prudential regime, as it is known, means that there is no scope nowadays for commissioners to exercise influence or discretion over lending to local authorities. The aim is to abolish the Public Works Loan Board while ensuring that permitted borrowers—now mainly local authorities, as I said—will continue to be able to access central Government loans in the same way that they do now.

The purpose of including the PWLB in schedule 1 to the Public Bodies Act 2011 is to confer on the Government the power to make an order under the PBA which will have the effect of abolishing the PWLB and transferring its functions to an eligible person, as defined in the PBA. We briefed Members on this matter because it is, of course, quite a radical step on the face of it. I assure the Committee, as I have done informally, that the abolition of the PWLB and the succession arrangements will be subject to proper parliamentary scrutiny under the PBA process.

This proposal is purely about governance reform. It is not about the ability of local authorities to borrow or the checks and balances in place upon their repayments. It will not impact on the prudential regime or local authorities’ existing loans with the PWLB at all. Local authorities will be able to undertake new borrowing from the successor body as they do now, at rates that offer good value for money. Interest rates will continue to be a policy matter for HM Treasury. Following the commencement of the provisions in the new clause, the Government plan to publish a consultation document providing details of proposals for the abolition and succession, which we have to do under the PBA.

After taking into account responses from the consultation, both Houses of Parliament will have the opportunity to scrutinise the draft legislation, which will, of course, be accompanied by an explanatory document as required by section 11 of the PBA. The abolition of the PWLB will remove bureaucracy and align accountability for lending to local authorities with the DMO's existing responsibilities for day-to-day operational management. That is very much in line with the Government’s wider efficiency and modernisation agenda.

It may be worth adding that it has been exceedingly difficult to find people to become commissioners. As I said at the outset, there should be 12 but we currently have seven. As we are obliged under existing statute to recruit more, we are looking to add two more. Until the Bill becomes an Act, which I hope it will, we have to do that. There is no real incentive to become a commissioner, given the changes that I have described. Commissioners, for the sake of the record, are unpaid and unrewarded in that sense in any way.

My hon. Friend the Member for Newark has kindly said that he had not expected me to be able to furnish the Committee with details of the 1875 Act or, indeed, the 1968 Act, nor to have studied the Act of which the right hon. Member for Greenwich and Woolwich was the originator. My hon. Friend said—I end on this note—that my diligence is as great as my eloquence. I am too modest to draw the conclusion he drew, and almost too modest to draw it to the attention of the Committee. I am a proud supporter of local government and its continued ability to borrow to invest, and I am equally proud of the fact that we are clearing up something of a legislative mess.