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Lord Whitty: I do not think that the second of those options is analogous. Clearly there is an underlying assumption concerning government support for the scheme, but it is not a direct public authority that is being allowed to borrow. It is an entirely private company.

In relation to municipal airports, we have agreed that there should be a relaxation in relation to local authority airport companies where they have constituted a separate incorporated company. That is possibly the analogy of housing stock drawn by the noble Baroness, Lady Miller of Chilthorne Domer. But in relation to fully commercial operations such as municipal airports, we are in a different situation from that of an authority which is dependent ultimately on the Treasury for various forms of taxation for its finances. So there is not a direct comparison. Nevertheless, as I said, the Government are considering whether some change in regime should apply to local authorities as a whole. The point of principle I make tonight is that the GLA should not be treated differently from the rest of the local authority sector in this respect.

Lord Dixon-Smith: Perhaps I may comment briefly on the Minister's statement that in recent times the local authorities have not greatly resorted to the bond market. My experience has been that the decision of local authorities in the management of their capital debt depended very much on their reading of the long-term prospects for interest rates. If they were of the view that interest rates were likely to rise, the tactic was always to borrow long with the Public Works Loan Board (PWLB). However, if their view was that the interest rates were likely to be low, so far as they could they would borrow short and in the bond market. They did so for the good reason that they could borrow from the bond market for shorter periods than they could borrow from the PWLB.

That is the reading that tends to lie behind decisions on loans and I do not believe that we should assume that because local authorities have tended to use one type of loan debt as opposed to another at any particular time,

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the situation should or will continue for a while. In any major authority, the decision is tactical and can result in an authority which gets it right saving considerable sums of money on behalf of its council tax payers. Therefore, good financial management in responsible authorities does produce real and tangible benefits.

Baroness Thomas of Walliswood: Perhaps I may add a couple of points before the Minister responds. I am disappointed to hear the old canard that borrowing by local authorities adds to public expenditure. It does so only because the Treasury decides it does so. Many economists will not accept that that is sensible, but there we go! The argument is not easy to justify, because the borrowing would be done in the private market and would not have the effect of creating a new money supply.

The Minister said that the new authority could not be different from any other authority. The new authority is different. It is taking a direct charge from the people who live in its area in the form of congestion charging and levies on workplace parking. That is unique. Those powers combined are different. The new authority will have a new revenue stream, which is hypothecated within the Bill, and that will make it different from any other authority. I was chairman of my highways committee for three years and I know about borrowing, and the difficulties of it, for capital projects in highways and transport. But this authority will be different. We are talking about a stream of revenue which can be created by the local authority. In fact, the Bill provides for that. The GLA will not be the same as any other local authority.

The Minister referred to PFI for raising additional funds. Yes, that is possible. The various ways in which local authorities can combine with the private sector to achieve agreed objectives are most useful, but almost always the local authority has to make capital input to show commitment to the scheme. It is seldom that all the money is found in some magic way by the private sector. One of the uses which could be made of borrowing in this way against revenue streams is precisely to provide that top-up in the more expensive kind of schemes to which various members of the Committee have referred.

On the two last points, I should like the Minister to reconsider the theory that in this respect the GLA is exactly like every other local authority. In my submission, it is simply not like every other local authority. Therefore, it is at least worth considering whether its financial powers should not reflect that very different character.

We have taken note of the comment of the noble Lord, Lord Brabazon of Tara, and will consider whether the suggestion that borrowing against revenue streams might more properly be allocated to Transport for London is a sensible way of moving forward.

Lord Whitty: The view of the noble Baroness as to whether this should or should not be counted against public borrowing is a matter that we shall not resolve on the basis of this Bill. I understand that there are fairly firm views, and effectively we are now also bound by

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some European aspects which make our position more similar to that in other countries. Part of the argument against was that we were disadvantaging ourselves, but that is no longer the case.

As for whether the GLA is a different kind of local authority in terms of financial regimes, it is in certain respects, but there is no reason why the rest of the country should regard it as being subject to preferential treatment.

As for saying that the GLA is different because it will have a revenue stream arising from road-user charging, it is our intention, which has been signalled fairly clearly, to legislate more generally, and all local authorities should be able to raise such charges and levies. Therefore, the GLA would rapidly become the same as local authorities a year or so after the passage of this legislation, so that is not a particularly good argument for special treatment.

The noble Lord, Lord Dixon-Smith, has considerably greater knowledge of local authorities in earlier periods raising more money through bonds. It is true that at times they have resorted to bonds, based on the expectation of relative movements of interest rates. However, in general it has been for relatively short periods of time compared with the long-term capital that we would be looking to raise under the objectives behind this clause--perhaps long-term capital investment in transport.

In any case, any judgment at any particular point in the cycle must be fairly subjective. We could not rely on a relative improvement in the bond rate of interest, as compared with that of the Public Works Loan Board, lasting long enough to alter the fact that bonds are a very particular way of financing capital expenditure. Nevertheless, it is an option that is available to the GLA, depending on its long-term assessment of the capital projects under consideration.

I hope I have responded to those additional points. We shall no doubt return to this debate later in the Bill, and I hope that for the moment, with those comments for the record, we can move on.

Baroness Hamwee: In a moment.

One of the things that I have gleaned from the debate is that in the eyes of the Committee I have dreams and the noble Lord, Lord Dixon-Smith, has fantasies. I shall stick with some of my dreams.

My noble friend Lady Thomas of Walliswood referred to an issue that the Minister said we shall not resolve tonight: the definitions applied by the Treasury in the case of the PSBR. In our eyes, as was said in the report of the Select Committee on relations between local and central government, that is the Humpty-Dumpty argument--"Things mean what I say they mean."

As regards why the GLA should be treated differently from other authorities, we believe that these freedoms should be available to all authorities. Sadly, the Bill provides only for the GLA. Therefore, in our dreams, we wish the GLA to achieve that which we wish to see all authorities achieve. It is a question of taking advantage of the opportunities which are available.

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I note what the Minister said about future legislation. But time will have been lost. I am sad but not surprised that there has been no answer to the points that I made about the need for public support for the schemes which may be brought forward by the mayor. Congestion and parking charging will be new to this country and it is extremely important that those measures should have public support and that the public should see the additionality of the funds used. They should be confident that they are not, yet again, being ripped off by some bureaucratic and rather grasping government, whichever level of government we are talking about.

In our eyes, those political points underlie and underpin the need for those financial freedoms. As the Minister said, we shall clearly want to return to this topic. We shall be talking to the noble Lord, Lord Sheppard of Didgemere, about the right approach. We may return with more than one approach to the issue. For the moment, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

9.30 p.m.

Clause 85 [General GLA grant]:

Lord Dixon-Smith moved Amendment No. 225:

Page 49, line 10, at end insert ("and the cost assumptions on which the amount of the grant has been determined, which shall be published in such manner as the Secretary of State deems appropriate").

The noble Lord said: Clause 98 is of fundamental importance to the future of London because capital expenditure predicates future revenue expenditure. One is not talking just about interest and loan repayments when one says that; one is discussing also running costs. That could be the cost of running the Underground, if one puts in a new line, new signalling equipment, new rolling stock, highway improvements or it could be, because we are discussing capital expenditure in general, the cost of a building, staffing it and all the associated costs which would run with that. Therefore, consideration of the capital budget is fundamental to the future of this great conurbation. Capital investment can be regarded as good, by definition; but, in the way of the world, it is like everything else because an excess may have an adverse effect.

I apologise to the Committee. I am dealing with the wrong amendment. Amendment No. 225 is a simple amendment which requires that the Government should publish the cost assumptions on which they calculate the amount of grant which they are to give to the GLA. It is a simple matter which the Government could reasonably accept.

The cost assumptions on which the budget are made for the GLA grant and the GLA transport grant are fundamental. If they are not well and widely known, it makes it much more difficult for the people of London to understand what is going on. It also makes it more difficult for the people of London to understand the budgetary process of the authority.

I use the word "authority" because we are talking about the authority's budget. We are not talking about the mayor's budget. In the end, it must be the authority's budget.

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This is really another of those issues of open government. The case should be unarguable. I look forward to the Minister accepting the absolute validity of this simple little matter. I beg to move.

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