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Baroness Hamwee: I decided that this would be the point at which to declare an interest as a Member of the London Assembly, but that has already been done for me by the noble Lord, Lord Bassam. I should say that I am currently also chair of the Assembly and chair of the Budget Committee. Could I first—

Lord Bassam of Brighton: Leave it with the Government.

Baroness Hamwee: Unfortunately, the Greater London Authority Act did not give as extensive powers to the Assembly or indeed to the Budget Committee as I might have liked.

Perhaps I may plead with the noble Baroness, Lady Hanham. Mr Livingstone will not always be the Mayor; please do not encourage him by talking as if he might be. I am sure that the noble Baroness takes the same view even if our conclusions as to the outcome might be different.

As to Amendment No. 8, the Mayor's annual budget can indeed by blocked by two thirds of the Membership of the Assembly, but only if there is agreement by two thirds on an alternative revenue budget. I do not say that I support that, but that is how it is. I am not sure how the amendment of the noble Baroness fits in with it.

Of course the issue of how much the GLA "can afford to borrow" will be considered as part of that process because that is a part of the revenue budget. As regards capital, as distinct from the implications of the borrowing, the Assembly is consulted on the capital budget. After three years, I have learned that consultation can be all well and good but you say what you have to say and maybe that is an end of it; it does not necessarily affect the outcome.

On Amendment No. 10, I am concerned about muddying the role of the functional bodies. The budget of the GLA, including that of the four functional bodies, is the Mayor's budget. It is not the budget of the different functional bodies. I would have liked to have seen some of the functional bodies taking a bigger part in the consideration of the budget put forward by the current Mayor over the past three years—in particular, Transport for London. However,

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I am not sure that that is consistent with the role of the functional bodies. It is tempting to use the Bill to go down the road of suggesting substantial amendments to the established regime. I shall try not to do that and simply confine myself to those remarks. Although, as I say, I should like some of the functional bodies to take a more energetic role in regard to their own budgets than they have done up to now.

Lord Dixon-Smith: I was very interested to hear what the noble Baroness, Lady Hamwee, had to say. Of course when the GLA was set up we debated together against the Government about the arrangements that were finally set up.

I have a great deal of sympathy with what both noble Baronesses have said. It is a dangerous thing to do to stand between two ladies. However, we need to remember that the Mayor is in a unique position. Whether or not we agree that it is the appropriate position is neither here nor there. The Mayor will not always be Mr Livingstone. I am grateful for that reminder. I draw Members' attention to Clause 3(8). It states:

    "A local authority's function under subsection (1) shall be discharged only by the authority".

That implies that such authority must be taken by the council and the Members quite openly and that it can never be delegated. We need to remember in respect of the Mayor of London that he is the authority. I can imagine his having some fairly ferocious debates with himself from time to time, but I do not see how he possibly manages to divide, and even if he does, he will always win the Division.

Lord Bassam of Brighton: The digression into London GLA politics is interesting, but we ought to try to focus on the mechanics of this because they are not just there for the GLA, they are there for all local authorities.

The regime we seek to establish is to enable local authorities to be able to borrow whatever is prudent; in other words, what they can afford. Clause 3(1) requires the authorities to determine and keep under review how much money they can afford to borrow. Clause 3(2) makes a similar provision for the GLA and its functional bodies.

Amendment No. 8 relates to Clause 3(3), which requires the Mayor to consult the London Assembly before setting the prudential borrowing limit for the Greater London Authority or one of its functional bodies. It would require the limit to be approved by at least two thirds of the Assembly Members. We understand that.

It might be helpful if I set out and explain the policy behind the arrangements in Clause 3 relating to the GLA bodies. In the case of all other authorities, the intention is that the setting of the borrowing limit should always be undertaken by the full council, rather than being delegated to officers. That is an important safeguard, which is implemented by Clause 3(8).

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In the case of the Greater London Authority and its functional bodies, we again believe that the setting of the borrowing limit should not be delegated to officers. However, for the GLA group of authorities, the term "full council" has no application. To achieve the equivalent result, the Bill provides special arrangements to reflect the current responsibilities for budget setting and, as noble Lords have given good voice to, the central role—the key importance—of the Mayor of London.

The affordable borrowing limit is to be set by the Mayor, both for the GLA itself and for each of the four functional bodies—Transport for London; the Metropolitan Police Authority; the London Fire and Emergency Planning Authority; and the London Development Agency. Before doing so, the Mayor must consult the London Assembly. Also, in the case of the limit for a functional body, the Mayor must consult that body itself. So that point is established. Clause 3(9) makes it clear that the Mayor's normal wide powers of delegation are curtailed in this context.

The amendments to Clause 3(3) seek to elaborate on those requirements. The reference to the two thirds majority is no doubt meant to reflect the veto arrangements which the Assembly already has over the GLA budget. But, in practice, the prudential borrowing limits will have to be considered as part of the annual budgetary process and the Assembly's normal scrutiny and intervention powers will of course apply in those circumstances. The statutory consultation with the Assembly is sufficient to ensure long-term precept issues are fully exposed to democratic debate; and the Assembly has adequate teeth, through its ability to override the Mayor on the annual precept, subject to the two thirds majority.

Furthermore, as it stands, Amendment No. 8 presents a potentially serious problem. If the Assembly were unable to reach a two thirds majority on the Mayor's proposals, the GLA and the functional bodies would have no borrowing limit set and so would not be able to borrow at all. That would be unacceptable. Being answerable to the electorate for the GLA's budget and precept through the ballot box is in our view a very important part of this process.

Amendment No. 10 relates to Clause 3(4), which requires the Mayor of London, when setting the borrowing limit for the GLA functional bodies, to consult those bodies. It would require two thirds of the board members of each body to approve the borrowing limit. The amendment seems to be based on the assumption that responsibility for considering the precept is a matter for the functional bodies themselves. In fact, it is for the democratically elected Mayor and the Assembly to consider the impact on the precept on London taxpayers and to justify their decisions directly to the electorate. The arrangements proposed in the Bill are sufficient to ensure that the effects of the borrowing limit are properly considered in the normal budgetary process.

The boards of the functional bodies, which are not elected, do not have a formal role in setting the precept and should not be expected to concern themselves with

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precept and taxation issues. The amendment would give them such a role and for that reason we believe it to be inappropriate.

I hope, with that understanding explanation, that the noble Baroness will feel confident to withdraw her amendment.

4.30 p.m.

Baroness Hanham: I suppose that if I had greater confidence in the Greater London Assembly I might not be making these proposals. We have to understand that borrowing by the Greater London Assembly is going to be a major issue; it impacts not only on the authority itself but more specifically on the London boroughs. Moreover, any borrowing that it undertakes is not likely to be of a minimalist nature but is likely to be fairly substantial. It therefore seems fundamental that proposals for borrowing of whatever extent should be part of a policy initiative. Such proposals should not simply drop out of the sky, but they could do so. In the middle of a financial year the Mayor might suddenly decide that he had yet another wonderful wheeze that he wished to implement and would require borrowing. He may therefore wish to borrow outside the agreements already reached in the annual budget.

The mayoral authority is at a quite different level from every other local authority. As we were reminded throughout our consideration of the Regional Assemblies Bill, the GLA is not a local authority. It must therefore be right that members of the functional bodies should have a significant role in policy and in considering the reasons for which money is sought. They should be able to decide whether to approve that policy. Equally it must be right that the Greater London Assembly has a view on the purposes for which borrowing is sought and that it should agree that borrowing.

I hear what is being said—that the budget itself must be agreed by two thirds of the Assembly. However, I foresee cases in which the Mayor may wish in the middle of a financial year to borrow for some scheme or other which was not dealt with at the annual review. In such circumstances it is essential that a proper majority is in favour of the proposal. Not only should a majority of the democratically elected members of the specific authority approve the proposal, the proposal should also be approved in the functional bodies by more than a simple majority of those interested in the particular policy. It should be approved by many more people than simply the Mayor himself.

Therefore, although I heard what has been said and I listened carefully to the beseeching voice of the noble Baroness, Lady Hamwee, for now I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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