Contribution
My Lords, I shall speak also to my Amendments 190 and 192. I welcome the broad thrust of empowering and reinvigorating the development corporations contemplated in the legislation. This is the best part of a complex Bill, although we know that it has already been overtaken by the devolution Bill launched in the other place.
Clause 94 seeks the achievement of sustainable development, and the mitigation of and adaption to climate change, but there would be no sustainable development without commercially sustainable financing of the proposals that the corporations bring forward. My amendment seeks to bring sustainable finance alongside those other sustainability issues. I approach this subject in the knowledge that local authorities may be reorganised and that mayors may be created in what we now learn to be a cat’s cradle of overlapping and competing responsibilities. Regardless of that, the day-to-day financial pressures felt by national and local government have never been greater.
In a former time, development corporations would simply hold out their hand to the Government or local councils for funding. Of course, that route may still be open, but we need to recognise that the old ways, with joint severability between various tiers of local government, are falling away. Building new towns is the work of generations; it goes beyond political cycles. Relying on national and local politicians will not be enough in a world where building a secondary school costs £40 million and a flyover £100 million. In the pursuit of sustainable development and delivery on the plans, the money needs to be right, because without the money, how can all the desirable options in Clause 94 be delivered?
We need to give the development corporations powers to exploit the difference between funding and financing—by explanation, funding is writing the cheque, but financing is putting the deal together. It is no surprise that it is the financiers in the City of London who are the highest paid, because their task of turning those good ideas into reality is the hardest.
Development corporations are independent, but they have the benefit of being able to lean on the covenant strength that comes from being a statutory body. I will not dwell too much on the significance of the governance of development corporations, but I will make the factual observation that strong governance leads to higher covenant strength, the ability to take a higher credit rating, and the willingness of institutional investors to pony up the cash. We need to make it easy for development corporations to raise funds in new and creative ways at the lowest possible coupon. My amendments would path find those.
Get this right and we will provide investable opportunities for pension funds that desire to invest in infrastructure bonds, for local people who want to invest in local facilities that benefit their area, or for sovereign wealth that seeks a home for its money within an advanced economy with well-defined property rights. But the well of wealth from these sources may not be enough, and there may be other ways to skin the cat. The corporations need to be empowered to engage in all manner of financial instruments, including the traditional issuance of bonds, debt or similar instruments. But we should contemplate other sources of finance. That extends to entering into joint ventures with landowners whose land is to be incorporated as an in-kind contribution to the whole, so that they may enjoy the uplift over a long period rather than cash up front.
It should not be right that development corporations feel they need to reach for the CPO lever by default and then be forced to pony-up a premium price to the owner up front after the unpleasantness of the process—there are lots of “p”s in that sentence. In other words, development corporations need to have powers not just to assemble land but to be creative in the assembly of that land. The creative concept of the joint venture would allow more money to be spent on upfront infrastructure than on land acquisition. That is a better-value enterprise. By thinking creatively like this, the amount of upfront funding will be less and the ability to deliver essential infrastructure at the outset greater.
I want to place finance in its widest possible context, not just rooting it in the sort of funding where you stand on the street corner with your hand out. Let us seed these stand-alone corporations away from the other financial pressures that afflict local government and free them from the apron strings of those local authorities. While I accept that the development corporations can plan for an area and have regard to all manner of desirable outcomes, contemplated in Clause 93, ultimately those plans or outcomes will stand or fall on whether the money can be raised and the finance deals put together. That is what my amendments seek to achieve. I beg to move.