On a similar point, what has been lacking in recent years with regard to capital funding and borrowing is the difficulty for local authorities to have the freedom to borrow and, because of that, a disconnect between identifying what it is they want to invest in, enthusing people for that and saying that they will back it with the capability of borrowing. That is the kind of thing that local authorities are examining. The question is whether this proposal would be more likely to generate enthusiasm and how it would fit in to the financing and the cost of the borrowing.
The amendment relates to specific projects, and it is highly likely, to judge from the enthusiastic speeches, that most of those projects will not cover their costs. There will be deficits; the only way in which the bonds will be sellable is if they are underwritten by the local authorities, which means the taxpayers. If one sets aside the initial enthusiasm, this can be a reality only if the taxpayer underwrites the bond. I hope that that is fair to say; it may not be the case, and the noble Baroness, Lady Wheatcroft, may say so. If the bond was tied to a specific project whose finances meant
that the bond stood or fell on those financial outcomes, it is highly likely that a number of those would fail. If they did not fail, that means it would have been perfectly easy to fund them, because they are profit making, and they did not need to go for this scheme. It would help me in understanding not the appeal but the practicality of this proposal, if I could understand the practicality of persuading the Treasury—among other things—that this would not ultimately rest on underwriting by the mayor. It would be the mayor, not the combined authority, who would be saying, “I’m going to guarantee that these bonds will be repaid however the projects perform”. It would be helpful to me to understand that, should the House in due course be moved to consider this issue.
6.15 pm