John Glen
MP for Salisbury · Conservative · United Kingdom
“I welcome the Chief Secretary to her new position, but what words of comfort could she give the residents of Salisbury in Wiltshire, a unitary authority? We are not part of a combined authority and we do not have a metro mayor.”
“Sam Moody is my constituent. He is the chief executive of Rockhopper. During my time in this House, he has been absolutely scrupulous in following the laws of this country and respecting the Falkland Islanders.”
“I listened carefully to what the Minister said about the process, and I respect that. But most people who take a pretty level-headed, pragmatic view of the need for a transition over time still cannot get their heads around the short-term reality: when we have so much turmoil in the middle east, why would we extend the time that we are no…”
“It is 55 days till the Budget. Given the market’s reaction to the Prime Minister’s statement on Tuesday, and given that our gilt rates are higher than those of our peers in the G7, could we have a debate on the implications of higher taxes for growth?”
“Before the hon. Lady makes her statement on Thursday, will she, when reflecting on the arrangement in Wiltshire that would embrace Wessex—although we have been told that that is not the Government’s view—address the prevailing concern that the people of rural Wiltshire will be considerably worse off without having the opportunity to embra…”
“I recognise that the Minister wants to come to what the Government are going to do, but does he not accept that the decisions already made in the last two years—with respect to the price of employment and the national living wage, the cost of employment with regard to legislation, and business rates—have depressed the appetite of many sma…”
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“I appreciate the three points raised by the hon. Member for Oxford East. In typical fashion, she has got to the heart of some of the core matters of the SI. I will address regulation 32, the accounting standards and the wider point she makes about the 12-month transition. I will then deal with the points raised by the hon. Member for Motherwell and Wishaw on the broader effect of this process on the financial services industry. On the first point—the consideration we have given to the risk of extending public bodies exemption to all third countries—we have worked closely with the FCA in the drafting of the instrument to ensure that investors remain suitably protected, and we believe this approach offers the most appropriate balance between investor protection and maintaining the attractiveness of the UK’s capital markets.”
“The SI is essential to ensure that the prudential regime applying to credit institutions and investment firms works effectively if the UK leaves the EU without a deal on 31 October. I hope that colleagues will join me in supporting the regulations, which I commend to the Committee.”
“The Government have not used that procedure lightly, and it must be remembered that, across Departments, we have laid more than 600 exit SIs under the usual secondary legislation procedures. As we draw near to exit day, however, it is vital that all critical exit legislation is in place, including legislation necessary to ensure that our financial services regulatory regime continues to function effectively from exit. It would have been reckless to leave that until the last minute. Industry and our financial regulators need—and needed—legal certainty on the regime that will apply from exit. Without addressing the deficiencies in the new CRR rules, there would be significant legal uncertainty, disruption for firms and increased risk to financial stability.”
“In drafting the SI, the Treasury worked closely with the financial services regulators, and we have engaged extensively with the financial services industry, incorporating feedback from industry players that will be significantly affected. Before I conclude, it is important to address the procedure under which the SI has been made. Along with three other financial services SIs, the SI was made and laid before Parliament under the made affirmative procedure provided for in the European Union (Withdrawal) Act. It is an urgent procedure that brings an affirmative instrument into law immediately, before Parliament has considered the legislation, but it also requires that Parliament must consider and approve a made affirmative SI if it is to remain in law.”
“That is appropriate, given the regulators’ responsibilities for prudential and resolution policy and the supervision of global firms, and the major role that they have already played in the EU to develop CRR technical standards. Where CRR II confers delegated legislation-making powers on the Commission, those powers are converted into regulation-making powers conferred on the Treasury. Their use by the Treasury will need the approval of Parliament. The final area is updates to definitions. CRR II amended some definitions used in the CRR; the regulations correct those updated definitions so that they can operate in a UK-only context. Here, too, the approach is consistent with fixes that Parliament has already approved in the previous CRR SI.”
“It must be stressed that this is not about the ability of EU firms to carry on doing business here after the UK has left the single market; through comprehensive temporary permissions and transitional regimes, we have done everything we can to support EU firms that already have business here to continue with that business while they become UK-authorised. The second area is transfer of functions. In line with the Government’s approach to all onshored financial services legislation, the regulations transfer a number of functions currently within the remit of EU authorities to the appropriate UK bodies. Such functions, such as the development of detailed technical rules on certain provisions of the regulations, will now be carried out by the Financial Conduct Authority, the Prudential Regulation Authority or the Bank of England.”
“This retained EU law will contain deficiencies that need to be fixed and that have not been addressed by the 2018 SI because they relate to changes that have come into effect since it was made. There are three main areas in which fixes are required. The first area is third-country treatment. Consistent with the approach taken in the 2018 SI to amend the CRR, the regulations remove the preferential treatment given to the largest banks and investment firms in the EU27 to reflect the fact that the EU and the UK will treat each other as third countries after exit.”
“Earlier this year, the European Council and European Parliament finalised a revised banking package, which included several amendments to the capital requirements regulation made by an amending instrument known as CRR II. This gives effect to some of the internationally agreed Basel reforms, which are the centrepiece of the post-crisis reforms aimed at making banking safer. Similar changes are expected in all G20 economies that follow the Basel guidelines. Through the UK’s membership of the G20 and the Financial Stability Board, we have committed to the full, timely and consistent implementation of the Basel III reforms. Several of the amendments made by CRR II are already in force and will therefore become retained EU law on exit day.”
“The regulations deal with one of the new pieces of EU legislation that has recently become applicable. They resolve deficiencies in the EU’s prudential regime that will be retained in UK law at exit. The regime sets out how much capital credit institutions such as banks and investment firms need to hold; these rules are currently set in the EU capital requirements regulation, as well as in UK secondary legislation to implement the fourth capital requirements directive. The CRR is a directly applicable EU regulation that has applied since 2013. A statutory instrument to correct the deficiencies in this retained law was laid before and approved by Parliament last year: the Capital Requirements (Amendment) (EU Exit) Regulations 2018.”
“I beg to move, That the Committee has considered the Capital Requirements (Amendment) (EU Exit) Regulations 2019 (S.I. 2019, No. 1232). It is a pleasure to serve under your chairmanship, Mr Bailey. As the Committee will be aware, the Government had made all the necessary legislation under the European Union (Withdrawal) Act 2018 to ensure that in the event of a no-deal exit on 29 March 2019, there was a functioning legal and regulatory regime for financial services from exit day. Following the extension to the article 50 process, new EU legislation will become applicable before 31 October. Under the 2018 Act, that new legislation will form part of UK law at exit; further deficiency fixes are therefore necessary to ensure that the UK’s regulatory regime remains prepared for exit.”
“The document also requests views for the Treasury and the regulators in terms of short-term changes, and how the co-ordination of UK regulatory activity can be improved to manage the combined impact of regulatory change on firms and their customers. The call for evidence ends on 18 October and is the first stage of a longer review. Obviously, the nature of our exit from the EU will determine the way that evolves in subsequent stages. I hope that that addresses the substantive points that were raised. The Government believe that the SI is essential to ensure that prudential regulation of credit institutions and investment firms continues to work safely and effectively if the UK leaves the EU without a deal. I hope that the Committee has found the sitting informative and will join me in supporting the regulations.”
“Obviously, we will always be part of wider bodies globally in terms of regulation in this area, but the aim of the onshoring legislation for financial services has always been to ensure that we are at a base point in terms of a functioning regime in all scenarios. Onshoring is designed to provide continuity and to minimise disruption, as well as to provide time for the Government and Parliament to design a regulatory framework fit for the future. The first step in that has already taken place with the call for evidence document of 19 July, which set out the context of a long-term review of the regulatory framework and the key issues that we will need to consider for a regime that operates outside the EU.”
“I will write to him, but I do not think that we have changed anything from previous approaches. Like the hon. Gentleman, the hon. Member for Glasgow Central made a number of wider political points that I will resist responding to now. However, I will try to address the specific points regarding the use of SIs. Again, it is completely consistent with the approach approved by Parliament, and it would not be feasible to use primary legislation for onshoring. The hon. Lady asked about the future regulatory framework, and made some wider observations about the potential diminution of UK influence.”
“Gentleman asked about the provision of the changes with respect to the in-flight files Bill. Only legislation under the European Union (Withdrawal) Act can onshore legislation before exit. The IFF Bill would have been for new files after exit, but we are dealing with all the immediate risks prior to exit. Given that there was an evolution in the corpus of EU material and directives over the summer, it is within scope of this mechanism. The hon. Gentleman asked about the “shall” versus “may” language, and whether action is optional for regulators. That fits with the UK’s existing regulatory framework. Parliament has already delegated responsibility to our regulators for technical rules. That approach has been accepted in the UK and is supported by industry. I am happy to look carefully at what he said and see whether there is an issue.”
“I will endeavour to address the points raised by the hon. Members for Stalybridge and Hyde and for Glasgow Central. The hon. Gentleman referred to our conversation on 12 December regarding preferential sovereign debt and preferential capital treatment. In the circumstances of no deal, the consequences will be the inevitable result of leaving the EU: the UK and the EU27 will no longer be part of the same overriding legal infrastructure. It is Government policy not to provide unilateral preferential treatment, but the hon. Gentleman made a reasonable point about different scenarios that might ensue. In practice, the impact would be largely mitigated by the transitional powers that we have given through this process to regulators, enabling them to phase in the new requirements between now and 31 December 2020. The hon.”
“The SI makes relatively minor fixes to new Solvency 2 legislation and to the UK’s legislation for insurance risk transfer to ensure that the legislation continues to operate as intended after exit. It does not alter the substance of requirements in either case, and the same Solvency 2 and risk transfer rules will continue to apply to firms. I hope that colleagues will join me in supporting the draft regulations, which I commend to the Committee.”
“It must be remembered that, across Departments, we have already laid before Parliament more than 600 exit SIs under the usual secondary legislation procedures. However, as we draw near to exit day, it is vital that we have all critical exit legislation in place, including legislation necessary to ensure that our financial services regulatory regime continues to function effectively from exit. It would have been reckless to leave that until the last minute. Industry and our financial regulators need legal certainty about the regime that will apply from exit. If we did not address the deficiencies covered by the SI—particularly the deficiencies in new Solvency 2 rules recently introduced by the EU—there would be significant legal uncertainty for firms and for our regulators, with the risk of serious disruption to the insurance sector.”
“This instrument fixes those by using references to relevant UK legislation and importing certain definitions into Solvency 2 as it will form part of UK law at exit, with those definitions adapted to work in a UK stand-alone regime. Before I conclude, it is important that I address the procedure under which the SI has been made. This SI, along with three other financial services exit SIs, was made and laid before Parliament on 5 September under the made affirmative procedure provided for in the EU withdrawal Act. That is an urgent procedure that brings an instrument into law immediately, before Parliament has considered the legislation. However, the procedure also requires Parliament to consider and approve a made affirmative SI if it is to remain in law. The Government have not used that procedure lightly.”
“This instrument also replaces references to EU law with references to relevant UK law at exit. I turn to the amendments to the UK’s risk transformation regulations. The Risk Transformation Regulations 2017 set up a new regime for insurance-linked securities. ILS are an innovative form of risk transfer that allow insurers and reinsurers to transfer risk to a special purpose vehicle. ILS are now an important and rapidly growing part of the reinsurance market, and the new regime for ILS was introduced as part of our efforts to help ensure that the UK remains a leading global centre for specialist reinsurance business. As the risk transformation regulations were designed to follow Solvency 2 requirements, they rely on references to and definitions in EU law.”
“Since then, revisions by the EU to the delegated regulation made under the Solvency 2 directive have updated aspects of the approach to setting solvency requirements for insurance firms, including the simplification of capital calculations and greater alignment of capital requirements across insurance and banking legislation. Those revisions took effect across the EU on 8 July 2019 and will form part of UK law after exit. The substance of those revisions will not result in deficiencies after exit, and the updated provisions will continue to operate in the UK as they do now. However, routine deficiency fixes, including removing references to the EU and EU institutions, will be needed to ensure Solvency 2 regulation continues to operate effectively in the UK.”
“First, the instrument updates UK law to ensure that EU revisions to the Solvency 2 delegated regulation made since 29 March operate without deficiencies. Secondly, the instrument makes amendments to the UK’s domestic risk transformation regulations, which govern the UK’s regime for insurance-linked securities. I turn first to the provisions that deal with revisions to the Solvency 2 delegated regulation. In January this year, the Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 were approved by Parliament. Those regulations addressed deficiencies in Solvency 2 legislation as it will form part of UK law at exit.”
“I beg to move, That the Committee has considered the Risk Transformation and Solvency 2 (Amendment) (EU Exit) Regulations 2019 (S.I. 2019, No. 1233). It is a pleasure to serve under your chairmanship, Mr Wilson. The Government made all the necessary legislation under the European Union (Withdrawal) Act 2018 to ensure that, in the event of a no-deal exit on 29 March 2019, there was a functioning legal and regulatory regime for financial services from exit day. During the article 50 extension period, the Treasury has continued to work with UK regulators and the financial services industry to ensure our regulatory regime remains prepared for exit on 31 October. This statutory instrument ensures that our regulatory regime for insurance and reinsurance business will continue to work effectively from exit.”
“Lady referred to her question to the Secretary of State for Digital, Culture, Media and Sport and to the update of FSMA on the gov.uk website. The National Archives is working to have FSMA updated in time for exit day, and the Treasury is helping with this work. I am not more familiar with the situation than that; obviously my officials helped me answer that question, but I would be happy to examine the matter closely and come back to her on that.”
“We will ensure that onshoring regulation is not commenced if there is a deal and a transitional period is agreed with the EU. The hon. Lady asked about the difference between EEA and non-EEA firms. The UK special purpose vehicles are already subject to the same Solvency 2-derived requirements, regardless of whether they are accepting risks from EEA or non-EEA firms. The distinction in the Risk Transformation Regulations 2017 simply reflects the fact that EU law applies only to deals that involve EEA firms. This notional distinction will no longer make sense after exit, so it is being removed, but it will not affect any deals already in place. There is no distinction for these regimes in practice—all deals must comply with UK standards, so equivalence is not necessary. The hon.”
“If a deal is secured, any withdrawal agreement Bill will make provision to defer any Brexit SIs that are not needed in a deal scenario until the end of the implementation period. We expect that the Bill will achieve this through a blanket deferral of Brexit SIs that come into force on exit day until the end of the implementation period. We expect that the Bill will also ensure that Ministers can revoke or amend any EU exit SIs as appropriate, so that they deal effectively with any deficiencies arising from the end of the implementation period. In the circumstances that we are talking about, following a hopefully successful conclusion of the deal-making process, we would have a 14-month implementation period, as per the plans at the moment, in which to make provision for the enduring solution.”
“I am happy to address the points raised by the hon. Member for Oxford East, and the point made by the hon. Member for Linlithgow and East Falkirk. The SI follows the same process as all SIs. With respect to Solvency 2, the simple reality is that the legislation was amended between the previous presumed exit date and this one. We have simply brought that up to date, and the ILS-related mechanism derived from, and made reference to, the Solvency 2 provision. As a consequence of that relationship, which was something that we authored in the UK, it made sense to update both at this time, given that they are within the same category. The hon. Member for Oxford East asked what would happen to this SIs if we got a deal.”
“In conclusion, the deficiency fixes in this SI will ensure that the UK’s prudential regime for insurance and insurance risk transfer remains prepared for withdrawal from the EU in any scenario. I hope the Committee has found this evening’s sitting informative, and will now be able to join me in supporting these regulations. Question put and agreed to.”
“I do not try to contradict my colleagues in Government, but that is the information I have received. I will provide clarification as soon as I can. Turning to the points made by the hon. Member for Linlithgow and East Falkirk, I recognise the distinction between the Government’s perspective on these matters and his party’s. All I can say is that the financial services industry, which is significant in Edinburgh and Glasgow, is made secure by this process. He may—and indeed does—disagree with the Government about what should happen, but I assure him that in a no-deal scenario, the interests of the financial services industry in Scotland will be looked after as best they possibly can. I thank the Committee for its consideration of this SI, and the points made by hon. Members on the Opposition Benches.”
“Without addressing the deficiencies covered by this SI, there would be significant legal uncertainty for firms and our regulators. To conclude, this statutory instrument makes important additional deficiency fixes that will improve our state of readiness for exit. Regulators and the industry support our approach. This SI will help reinforce the message that Government and Parliament will not take any chances with the safe and effective operation of the UK’s regulatory regime. I hope that colleagues will join me in supporting these regulations, which I commend to the Committee.”
“This is an urgent procedure that brings an affirmative instrument into law immediately, before Parliament has considered the legislation. The procedure also requires that Parliament must consider and approve a “made affirmative” SI if it is to remain in law. The Government have not used that procedure lightly. It must be remembered that, across Departments, we have already laid over 600 exit SIs under the usual secondary legislation procedures. But as we draw near to exit day, it is vital that we have all critical exit legislation in place, including legislation necessary to ensure that our financial services regulatory regime continues to function effectively from exit. It would have been reckless to leave that until the last minute: industry and our financial regulators need legal certainty on the regime that will apply from exit.”
“When making an equivalence determination after exit, the law needs to be clear on the aspects of the UK regime for which a third country has equivalent provisions. If Parliament approves a decision on a third country having equivalent insurance regulation to the Solvency II directive, UK law will be clear that that refers to the UK’s implementation of Solvency II as it stands when the equivalence decision is made. Before I conclude, it is important that I address the procedure under which this statutory instrument has been made. This, along with three other financial services exit SIs, were laid before Parliament on 5 September, under the “made affirmative” procedure provided for in the European Union (Withdrawal) Act 2018.”
“For example, loss of access to third-country foreign exchange rate benchmarks could prevent firms from carrying out important risk management functions, such as hedging their currency risk. This SI extends the period in which the transitional regime applies by three years, from the end of 2019 to the end of 2022, ensuring that benchmark administrators outside the UK have an appropriate period of time to make an application under the UK’s onshored third-country regime. I also want to explain the amendments that the SI makes to our onshored equivalence framework. Those amendments are purely for legal clarity and do not change the policy approach to equivalence that Parliament has already approved.”
“However, since the regulations were made it has become clear that there will be a damaging cliff-edge when the transitional regime expires at the end of 2019—a point highlighted by the Secondary Legislation Scrutiny Committee in its report published on 3 October. Very few third-country benchmark administrators have made applications to be registered, and only two equivalence determinations have been made by the European Commission, covering only seven third-country benchmarks. If we leave the EU without a deal on 31 October, benchmark administrators outside the UK will have insufficient time to make an application under the UK regime by 31 December 2019. That would mean that UK firms would no longer be able to use those benchmarks for new contracts and products, causing considerable market disruption.”
“Also, in a limited number of areas, the instrument makes Financial Conduct Authority powers more consistent with the powers it has with respect to credit institutions in the run-off regimes, such as by making it explicit that the FCA may publish a register of firms in contractual run-off. Those changes ensure that the FCA has proportionate powers to take action to protect UK consumers. The second substantive set of provisions in this SI covers changes being made to the onshored benchmarks regulations. As they currently stand, those regulations contain a transitional regime for third-country benchmarks, allowing UK entities to use non- registered third-country benchmarks up until 31 December 2019.”
“The first category is to ensure that EEA firms in contractual run-off can continue to carry out various payment-related activities, as intended. That will include provision of payment and e-money services by EEA credit institutions such as banks. The second category of amendments applies to the temporary regimes for EEA payments and e-money firms. Those amendments clarify and make more explicit the full range of permissions and obligations of firms that enter those regimes. For example, the amendments make it explicit that an EEA firm in a run-off regime can legally redeem outstanding electronic money. That clarifies the fact that they can return any balance on an account to UK e-money holders.”
“In those two areas, we decided that it is right to do more to protect UK consumers of payment services and to prevent disruption to firms and markets that rely on financial benchmarks. First, an important part of our onshoring programme is to provide a range of temporary permissions and contractual continuity schemes to minimise disruption to UK consumers and businesses currently serviced by European economic area firms. Part 3 of the instrument supplements provisions for the temporary permissions and contractual continuity regimes for EEA payments and e-money firms. A review of that legislation has identified a limited number of provisions that should be amended to ensure that the temporary regimes are as robust as possible. The amendments fall into two categories.”
“In my time as Minister responsible for financial services exit legislation, the message from our regulators and from the industry has been clear: the legislation is essential to ensure that our regime is prepared for exit in any scenario and it is vital to underpin confidence in our regulatory regime. In contrast to the previous miscellaneous provisions instruments, the SI makes substantive changes to earlier exit legislation in two key areas: the contractual continuity and temporary permissions regimes for payment services; and transitional arrangements for financial benchmarks. Those changes are not to correct errors but to strengthen our readiness for exit, and I make no apology for that. We are continually reviewing our exit arrangements to ensure that they are as robust as they can be.”
“Members have been critical of the SIs, arguing that the correction of errors shows that we are putting rushed, poorly drafted legislation before Parliament. I want to make it clear that that is not the case. Errors have been few and minor and I applaud and thank my colleagues in the Treasury—particularly Lee O’Rourke and his team—for the work that they have undertaken in difficult circumstances over many months. Financial services onshoring has been an unprecedented legislative challenge and I think we should acknowledge the constructive and effective collaboration that has taken place between the Treasury, our regulators and our industry stakeholders. I can tell the Committee that the regulators and the industry do not think our legislation has been poorly thought through—quite the opposite.”
“I beg to move, That the Committee has considered the Financial Services (Electronic Money, Payment Services and Miscellaneous Amendments) (EU Exit) Regulations 2019 (S.I. 2019, No. 1212). It is a pleasure to serve under your chairmanship, Ms Buck. As the Committee will be aware, Parliament has now approved well over 50 exit statutory instruments for financial services. They have included three on miscellaneous provisions, which are sometimes necessary to make isolated deficiency fixes, which do not fit easily into more thematic instruments. Those miscellaneous SIs have sometimes been used to correct minor errors or omissions made in earlier exit legislation. The one before the Committee also makes some minor corrections, as well as updating some earlier exit provisions to account for the article 50 extension. Some hon.”
“I recognise that considerable work will need to be done if we leave with no deal, and that we would have to bring that before the House. I hope that the Committee has found the sitting informative and will join me in supporting the regulations. Question put and agreed to.”
“Gentleman asked about the benchmarking issue. Not many firms have gone through the process of applying, which is why so few have gained permission. We have aligned the instrument with what we have done with many of the transitional regimes by making a three-year provision. That will allow greater certainty in the marketplace. I acknowledge his broader concerns about the process, but we have done all that we can to ensure that we are in the best possible position in the undesirable outcome of no deal at the end of October. I think that I have dealt substantively with the hon. Gentleman’s points. I accept that the supplementary measures and provisions included in the instrument will help to ensure that the UK’s financial services regulatory regime remains prepared for withdrawal from the EU in any scenario.”
“However, as with all legislation, drafting errors occur from time to time, and we put them right as soon as they are discovered. When considering the volume and complexity of the financial services legislation made under the European Union (Withdrawal) Act 2018, drafting errors have been minor and small in number. We have grouped them under the miscellaneous provisions and have worked closely with regulators to get them right. The hon. Gentleman asked me to speculate on the nature of future amendments, should any be needed. Obviously, I cannot give an absolute assurance. He asked about the inclusion of the capital requirements regulation in this particular instrument. That is so because this is a collective, miscellaneous capturing of small and essentially legally significant but inconsequential changes. The hon.”
“I would like to respond to the points made by the hon. Member for Stalybridge and Hyde, and I thank him for the typical courtesy and care in his remarks with respect to this process. He made a number of points around the challenges of this approach, and I think we could both agree that this has not been an ideal process. We have worked through it, as a Committee, on probably nearly 40 occasions over the last 12 months. The hon. Gentleman raised concerns around, in essence, the mistakes. I reassure him that there is no casualness to our approach. All SIs pass through quality control procedures, and we have engaged extensively with regulators and industry, where appropriate, in drafting them. We publish them in advance of laying them, in order that a degree of familiarity can be gained.”
“I hope that the whole Committee will join me in thanking the Public Works Loan Commissioners for the services that they render, on an entirely voluntary basis, to the benefit of the citizens of this country, as well as the staff of the Public Works Loan Board who support their work.”
“Local authorities may borrow from any willing lender, provided that the authority’s finance director is satisfied that the borrowing complies with relevant law and is affordable from the authority’s revenues. Whether local authorities meet their borrowing needs from the commissioners or from the private lending market, the effect on public spending, borrowing and debt is broadly the same. There are two advantages of the Public Works Loan Board, however: quick access to PWLB loans gives local authorities long-term certainty in their capital plans, and the interest paid on them stays in the public sector and is recycled into spending on public services.”
“Demand for this lending can be volatile and is heightened in periods when the Government’s cost of borrowing is low, as it is now. The draft order will ensure that councils can continue to build and maintain infrastructure and other capital projects, such as local roads and maintained schools. It does not authorise any increase in the capital expenditure of local authorities or in the amount that they may borrow. Borrowing and investment decisions are subject to statutory guidance that applies at the level of the individual authority. Decisions about whether and how to borrow are a matter for each local authority’s elected council, which is accountable to its electorate.”
“I beg to move, That the Committee has considered the draft Local Loans (Increase of Limit) Order 2019. It is a pleasure to serve under your chairmanship, Mr Gray. Parliament is asked periodically to raise the limit on lending by the Public Works Loan Commissioners to local authorities. The draft order, which is being introduced under the Finance Act 2014, will raise the limit on the sum of loans that may be outstanding at one time from the Public Works Loan Commissioners, from £85 billion to £95 billion. The procedure is well established: it has been done approximately 20 times since the limit was established in 1968. The commissioners currently have £2.3 billion available to lend before they reach the existing lending limit of £85 billion.”
“PWLB finance continues to play a critical role in helping local authorities transform services and realise broader objectives, such as local growth regeneration via their capital strategies. I hope that those two clarifications meaningfully meet the concerns raised by the hon. Gentleman, and I hope the Committee has found this morning’s sitting informative and will join me in supporting the draft order. Question put and agreed to.”
“They are subject to the prudential code of the Chartered Institute of Public Finance and Accountancy and to statutory guidance from the Ministry of Housing, Communities and Local Government. That guidance was updated in 2018 and makes clear that local authorities that borrow more than, or in advance of, their needs solely to generate profit are not acting in accordance with the prudential framework. MHCLG is currently reviewing the impact of the revisions to the prudential framework. When local authorities borrow, they must have regard to the prudential framework as set out by the aforementioned bodies. Borrowing and capital spending decisions are devolved to local councils, but it is expected that they should not take on disproportionate levels of financial risk, especially where it is funded by additional borrowing.”
“The spending round a few weeks ago in respect of the local government settlement provided the largest increase in spending power since 2010, increasing core spending power by £2.9 billion, or 4.3% in real terms. It includes an additional £1 billon of grant funding for adult and children’s social care on top of maintaining £2.5 billion for existing social care grants. As I have made clear, the SI relates to the rules of capital expenditure through the Public Works Loan Board. Borrowing can be used only for capital investment. Both I and my right hon. Friend the Chief Secretary keep the expenditure of local government under close review. On the hon. Gentleman’s assertions about where the search for yield can go, local borrowing and spending decisions are made at a local level.”