Cities and Local Government Devolution Bill [HL] — House of Lords, 2015-06-24
Topic: Government Operations
William David McKenzie (Labour, Centre-left): My Lords, before discussing Amendment 35, perhaps first I could speak briefly to Amendments 34 and 36 in the name of my noble friend Lord Smith of Leigh, who cannot speak to them himself. They are self-explanatory, in that Amendment 34 makes reference to a, "local authority member of a combined authority", having, "responsibility for finance and resource management" Amendment 36 calls for the Bill to specify, "the number of local authority members within a combined authority area who can veto the draft budget" We would happily support each of those amendments The Bill enables a power of veto over the mayor’s budget, and Amendment 35 would enable the combined authority also to change that budget in circumstances that would clearly need to be spelt out in the order. That opportunity seems to be provided for in the Manchester agreement. The Bill itself makes reference to changing the budget, but it implies that that is as a result of the initial scrutiny process, not following on from the combined authority’s approval or otherwise of the draft budget. Could the Minister confirm that Just to recap, the Bill talks about a mayor preparing a budget; a draft to be scrutinised by other members of the combined authority and the committee, dealt with in Schedule 5A; the making of changes to the draft as a result of the scrutiny—presumably with the approval of the mayor; and the approval of the draft by a combined authority, including a power to veto the draft circumstances specified in the order and the consequences of such a veto. Our amendment proposes simply that we have not only a right to veto but a right to change the budget. There would need to be a threshold of those supporting that proposition, which is again the case in Manchester. A veto is a power, and it can be quite a weak power in certain circumstances. You could simply end up with a ping-pong type arrangement between the mayor and the other members of the combined authority, which would be unfortunate and inconsistent with the effective operation of a combined authority We support the thrust of Amendment 33. As some noble Lords have touched on, it raises a number of issues that need clarification. In part, those of us who can remember municipal bonds support it with a sense of nostalgia. I am sorry to hear that my noble friend did not buy any Luton bonds in her previous investment, but perhaps next time. I am interested to understand quite how this will work when it will be available only to residents of an area. I think that that is easily dealt with at the point at which it is issued, but what happens thereafter? As my noble friend Lord Liddle said, whether that has an impact on marketability is an important issue As I understand the Bill as it stands, the Secretary of State can by order enable an authority to borrow for specified functions, provided that it has the consent of the constituent councils, but I do not think that that extends to mayoral functions. That could be changed, but we would like better to understand how this all fits together and how the total funding and borrowing opportunities of the combined authority sit with the existing position of those separate authorities. How does that impact on prudential borrowing and, therefore, the scope for the type of bond the Minister is talking about We can certainly see the benefit of raising funds for specific projects but, even if you can borrow for mayoral functions within a combined authority, it seems to me that you do not want that borrowing power to drive the functions the mayor gets; that is the wrong way round. You have to see what functions the mayor would have under these arrangements and see how they should be financed My understanding is that if there were associated costs—if my noble friend is right and this measure did not wash its face in all circumstances, particularly on infrastructure projects where there can be long lead times and not necessarily early returns—those would be picked up and met by a precept, not a levy, on the constituent authorities. Given the constraints that central government have hitherto imposed on increases in precepts, it could unwittingly impact on all that This measure needs to be unpicked so that we can better understand it. It seems to be a very helpful suggestion, and you can see the benefits that could flow from it, but it would need to sit together with the intended funding arrangements or the likely opportunities for the combined authority as a whole, quite apart from the wider issue of fiscal devolution, which we will come to in subsequent amendments, probably on Monday. We are on the side of those who would like to make this work, but it needs to fit with what we have before us.