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Hopes rise combined authority borrowing powers will be relaxed

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Combined authorities are hopeful the chancellor will act to relax restrictive borrowing rules when he delivers the autumn statement next week, LGC has been told.  

Current legislation only allows combined authorities to borrow money for a purpose relevant to the body’s transport functions, meaning obtaining funds for investment related to housing or other infrastructure involves a bureaucratic and convoluted process.

Both Greater Manchester and West Midlands combined authorities have been making the case for greater freedoms.

West Midlands chair Bob Sleigh (Con) told LGC: “Twenty-five per cent of our combined authority’s devolution deal in essence relates to non-transport issues so we are looking for [borrowing] flexibilities in those areas.”

Papers which went before the GMCA in March highlighted that the current set-up had “caused considerable administrative inconvenience and led to the adoption of overcomplicated legal structures” just to manage the region’s £300m housing fund.

The fund comes in the form of a 10-year loan from central government but because the combined authority cannot borrow against it as it is not a transport function the body has agreed for it to be managed by Manchester City Council.

As a result proposals effectively have to be signed off twice – once by the combined authority and once by the city – while the council has effectively taken on an extra £300m debt. Arrangements are in place for each constituent council to reimburse Manchester City Council for its share of any shortfall in the funds should the region fail to repay to government an agreed 80% of the £300m at the end of the fund’s lifetime.

However, it will not be possible for any of Greater Manchester’s councils to take on borrowing powers in relation to police and fire authority functions, due to be transferred to the combined authority in May, as – unlike housing – local authorities do not have any powers in those areas.

LGC understands officials in Greater Manchester believe the government is aware of the issue and are proposing to make the necessary changes to parliamentary orders to allow the combined authority to borrow against these functions at the very least.

 

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