Considered in Grand Committee
My Lords, these regulations were laid before this House on 31 January 2022. The other place approved them on 14 March 2022. If approved by this House and made, they will implement a commitment made by the then Chancellor of the Exchequer, my noble friend Lord Hammond, back in 2016 to extend the borrowing powers of mayoral combined authorities that have agreed debt caps with HM Treasury, which is reflected in the devolution deals that North of Tyne, South Yorkshire and West Yorkshire have agreed with government.
This extension is another important step towards empowering these mayoral combined authorities to invest in infrastructure while giving local leaders the tools needed to stimulate local economic growth, increase productivity and seize levelling-up opportunities available to their areas. In the levelling-up White Paper we set out plans to transform the fortunes of places across the UK by spreading growth and prosperity in areas that feel as though Westminster has forgotten about them. That paper sets out a series of long-term missions that put us on a trajectory towards that goal, including giving every part of England that wants one a devolution deal by 2030.
Devolution is a central part of our levelling-up agenda and we want to give areas the powers they need, along with a simplified, long-term funding settlement. We are committed not only to extending devolution to new areas but to deepening it in areas that already have devolved powers. The regulations we are discussing today will live up to that ambition: deepening devolution in North of Tyne, South Yorkshire and West Yorkshire in line with commitments we have already given, by providing new and deeper powers to the local leaders so that they can act more flexibly and innovatively to respond to local need and be held to account by local citizens.
Put simply, these new powers will allow these three combined authorities to borrow not only for their transport functions but for any of the other functions conferred on them as a result of their bespoke devolution deals. These areas will be able to make the most of new opportunities by borrowing for their investment programmes, delivering improved public services and greater prosperity for their areas. At the moment, the legislation in place allows combined authorities to borrow only for transport or, where the mayor is also the police and crime commissioner, for such purposes. The primary legislation also provides that the Secretary of State may, by regulations, confer the ability to borrow for additional functions.
The draft regulations specifically provide that the three named combined authorities can borrow for all their functions other than transport, which is, of course, already covered by the existing primary legislation. Each of the three mayoral combined authorities and each of their constituent authorities—15 in total—has given consent to these regulations. If Parliament approves these regulations and they are made, then North of Tyne, South Yorkshire and West Yorkshire mayoral combined authorities will be able to borrow for all their functions. I should say that, through regulations made four years ago, this is already the case for the six other mayoral combined authorities of Greater Manchester, Liverpool City Region, West Midlands, West of England, Cambridgeshire and Peterborough, and Tees Valley. It is also the position for the generality of local authorities, which are empowered to borrow for all their functions.
In the same way as a local authority, combined authorities are subject to the requirements for borrowing provided in the Local Government Act 2003. The prudential borrowing regime requires that an authority can borrow lawfully only if it can demonstrate that servicing and repayments of debt are affordable. As such, this gives the necessary assurance that the proposed borrowing powers will be used appropriately. I add that, in the case of combined authorities, this ability to borrow is also subject to a debt cap agreed with the Treasury. Each agreed debt cap specifies the ceiling for the mayoral combined authority’s debt for 2021-22. Debt caps for future years are currently being agreed with all nine mayoral combined authorities.
These regulations fulfil our existing promise to deepen the devolution deals of these three combined authorities and extend their borrowing powers to bring them in line with the six other mayoral combined authorities. With this extension, they will be able to borrow to make investments in infrastructure that are essential to an area’s ambition for growth. We firmly believe they will also lay the groundwork for further levelling up in these areas. I commend these regulations to the Committee.
My Lords, this instrument implements a 2016 commitment to extend the borrowing powers of mayoral combined authorities. As the Minister noted, it reflects devolution deals agreed with the Government for North of Tyne, South Yorkshire and West Yorkshire.
During the debate in the other place, the Minister said that this is
“another important step towards empowering mayoral combined authorities to invest in the right infrastructure while giving local leaders the tools needed to stimulate local economic growth, increase productivity and seize the levelling-up opportunities available to their areas.”—[Official Report, Commons, Seventh Delegated Legislation Committee, 9/3/22; col. 3.]
Labour colleagues in the other place welcomed the instrument and reminded the Government that Labour mayors had indeed been calling for this change.
I politely and respectfully ask that the Minister recommends to his colleagues in the Department for Education that they trust the judgments of the MCAs when finalising the skills Bill that is about to return to your Lordships’ House.
I have two short questions for the Minister on this business. Do the Government intend to extend these borrowing powers in further devolution deals? What steps will they take to monitor levels of borrowing?
My Lords, that was a very short and knowledgeable debate. I make the general observation that we are both former local authority leaders. We are the most centrally taxed nation in western Europe, but we also hold the least amount of debt below the level of national debt. That is the policy background for all this. Essentially, this moves to a level playing field for all mayoral combined authorities.
I have just been given a helpful note to say that we are negotiating deals, so the points raised by the noble Baroness, Lady Wilcox, are in play and will be part of the negotiations with all the mayoral combined authorities. We all know that the reality is that the levers required to change places often require thinking about local taxation that is appropriate to a local place, but also about borrowing. If you get that right, you can borrow in a way that provides a real dividend for local areas. Those flexibilities are part of what makes local government function more effectively. This is a step in the right direction and I am sure that more will follow.
Committee adjourned at 4.55 pm.