3. What discussions has the Minister had with local authorities in South Wales Central regarding their use of borrowing powers to fund capital projects? OQ59646

I discuss a range of financial issues with local authorities across Wales through regular standing and other meetings. Decisions on the use of their borrowing powers to invest in local priorities are a matter for local elected members. 

Diolch yn fawr, Gweinidog. In a recent meeting of St Fagans Community Council, the First Minister, attending there as the Senedd Member for Cardiff West, highlighted the fact that local government has more borrowing powers than the Welsh Government. The First Minister then went on to say that the Welsh Government were exploring whether local government could use that borrowing power and then the Welsh Government pay back the interest on that borrowed money. That seemed to me an interesting way forward to deal with the current lack of fair funding to Wales from Westminster. Are you in a position, Gweinidog, to update the Senedd on any of these discussions? Diolch yn fawr.

Thank you for the question. So, we have used supported borrowing in the past in terms of supporting local authorities with some of their road maintenance programmes in particular, and that was very much along the model that you described, where the Welsh Government would then provide revenue support to service the debts of that borrowing. It is something that we can continue to have some discussions about. We have talked to local authorities as to whether or not we could use this, for example, in the space of health and social care centres, but because of the rules that surround these matters, it would have to be a project that was very much more in the space of social care than health, so there are some things that we would have to get around to be able to deliver that. Of course, our lack of revenue budget is a challenge in and of itself.

So, we do continue to have these particular discussions with local authorities. We don't have any firm proposals on the table at the moment, but the broad point that you raise is also a really important one in terms of local authorities having more power to borrow. So, the amount of affordable borrowing that a local authority might undertake is determined by a professional assessment of what's affordable, prudent and sustainable for the circumstances of that authority, and then it's referred to the full council to endorse. Now, I think that is very much a model that would be appropriate for us in the Senedd. It would be a case of the Welsh Government coming forward with plans for prudential borrowing and for the Senedd then to scrutinise those plans and agree or otherwise. That is the model that I would prefer to see, especially since our current situation in terms of our annual borrowing limits and the aggregate just aren't really appropriate, and they haven't changed since 2016 and take no account of inflation in that period.

Minister, borrowing powers are a useful tool when deployed correctly to, obviously, improve infrastructure. In the Vale of Glamorgan, the village of Dinas Powys has had great difficulty with its transport infrastructure because of the main arterial route from Barry, which is the largest town in Wales, to Cardiff, which is a big employment centre. Is there scope within the borrowing powers for the local authority to look at major transport infrastructure projects unilaterally, and use those borrowing powers to fund such infrastructure developments in this key bottleneck that is causing so much blight to the villagers of Dinas Powys?

So, the local authority would need to undertake the borrowing fully within the prudential borrowing framework. It does allow local authorities to typically borrow for capital investment purposes, also to refinance existing debt, and then temporary borrowing for any purpose, should there be short-term need, such as if they’re expecting a large capital receipt. They would also then have to have full regard to the proper practices set out in the Chartered Institute of Public Finance and Accountancy prudential code for capital finance in local authorities, when they are determining their borrowing limit. The overarching requirement of that code, as I was saying to the former Member, is that it would have to be prudent, sustainable and affordable, so I think it would be really for the local authority to be considering its borrowing within those particular confines.