Cities and Local Government Devolution Bill [HL] — House of Lords, 2015-06-24
Topic: Government Operations
Susan Williams (Conservative, Centre-right): My Lords, it is refreshing to hear innovative ideas coming from your Lordships’ House. I commend my noble friends Lady Wheatcroft and Lord Moynihan on some of the suggestions that they have put forward. Amendment 33 seeks to amend new Section 107F of the 2009 Act to allow the Secretary of State by order to enable the mayor to raise funds for the carrying out of specified development projects, by the issue of bonds to be made available only to those residents within the combined authority area. I was interested to hear about the experiences of the noble Baroness, Lady Janke, in Bristol. As I have said, the intentions behind the amendment are to be commended. The Secretary of State can by order confer a power on a mayoral combined authority to borrow. The mayor individually cannot borrow because, as the noble Lord, Lord McKenzie, said, he or she is not a corporate body. Borrowing by a combined authority where it is given the powers to borrow is secured on the revenue that that authority will receive, as the noble Lord, Lord Woolmer, pointed out. Accordingly, any borrowing by a combined authority will be under the same prudential borrowing regime that applies to local authorities. This means that the level of borrowing must reflect the level of its likely reserves The noble Baroness, Lady Hollis, asked what could be funded by bonds. In any case it would be a matter for the discussions leading to the bespoke devolution deal as to what might, in the art of the possible, be borrowed. As I have said, any borrowing must conform to the principles of prudential borrowing, which apply to all borrowing by local authorities My noble friend Lord Moynihan asked about the functions to benefit by municipal bonds. The functions that might be supported by investment and funded by prudential borrowing, which could be in the form of bonds, are a matter for the conversations with that area which lead to its bespoke devolution deal. As my noble friend Lady Wheatcroft said, this is an enabling Bill. Clause 8(3) allows the Secretary of State to specify which functions of a combined authority may come within the scope of borrowing powers given by the Local Government Act 2003. The sources of borrowing available to combined authorities include issuing bonds as well as taking out loans. The devolution deal will determine which functions the combined authority can borrow for. Decisions over whom an authority obtains their financing from are a matter for the authority Amendments 34 to 36 seek to alter the powers of the Secretary of State to provide for scrutiny of the mayor’s draft budget. Amendment 34 would insert a new Section 107F(3)(c), which would allow the Secretary of State by order to make provision to appoint a local authority member of a combined authority to have responsibility for finance and resource management. In effect, were such provision made, it would prescribe that there must be a member of the mayoral combined authority who had finance responsibilities, and that the member with these responsibilities would be a councillor from one of the constituent councils. It is rightly the mayor who should decide to whom he or she wishes to delegate his or her responsibilities, and this includes responsibilities for finance. To return to a point that I made earlier, it is consistent with local authorities operating their cabinet arrangements at present, with the mayor deciding which member of his cabinet should hold certain portfolios with certain responsibilities. We are clear that this should also be the case for metro mayors. For mayoral governance to be effective, the mayor must have discretion to assign portfolios and delegate responsibilities to enable the effective delivery of their promises to their electorate I understand that the intention of this amendment may be to place checks and balances on the mayor’s powers. There is of course a chief finance officer for the combined authority, also known as a Section 151 officer, whose role is to ensure compliance with all statutory requirements for accounting and internal audit and to manage the authority’s resources. The chief finance officer is under a duty to make a public report if they consider that there is, or is likely to be, any item of unlawful expenditure. An additional proscription on the creation and assigning of member portfolios is an unnecessary check or balance, and risks frustrating the exercise of the mayor’s functions Amendments 35 and 36 seek to provide additional checks and balances on the approval of the mayor’s draft budget. Amendment 36 would insert a power for the Secretary of State to provide for a specific number of local authority members within a combined authority area to be able to veto the mayor’s draft budget. The Bill as it stands allows for the Secretary of State by order to make provision about the preparation of the mayor’s annual budget which, in particular, may provide for the constituent council members of the combined authority to scrutinise the draft budget, to make changes to it and to have a power of veto. The circumstances in which a veto may be used, and the consequences of any such veto, would be proposed locally and provided for in the order creating the mayoral combined authority. The Bill also allows for the overview and scrutiny committee, a politically balanced committee made up of councillors from the constituent authorities, to scrutinise the draft budget and recommend changes to it.