20180209 Things to note at WMCA Board
Life can always be too interesting, and at such times, we can do much worse than channel Mark Corrigan:
We left January’s WMCA Board with a WMCA Budget that wasn’t backed by the WMCA Board, leaving just one month to find an alternative that everyone could live with.
This also put a huge amount of pressure on Scrutiny to get its recommendations in place while they could still make a difference — as it was, we made the deadline to get our thoughts into the Board papers, but I suspect any substantive influence will be felt next time, when the Budget process runs to a nice, transparent timetable.
Anyway, it seems like we have got there for now, in an imperfect way. Seriously though lads (and two ladies). Bit tight.
The Second Devolution Deal
The Board is asked to do the following:
When we had Julia Goldsworthy (WMCA Director of Strategy) with us in Scrutiny earlier this year, she emphasised that the approach to devolution was relational, iterative, and less focused on ‘fiscal events’ (i.e. the Budget). In so doing, it is hoped that they will end with more/some devolution for their efforts.
If you cast your mind back to November, you might recall some of the substance of ‘Devo 2’: mostly aimed at supporting an industrial strategy for the West Midlands, and some limited focus on public service reform, including two quite substantial changes to the governance of West Midlands Police and the West Midlands Fire Service, both of which will be rolled into the Mayoral WMCA by 2020.
Without giving you any spoilers, I am almost certain that the Police & Crime Commissioner will have something to say about this item. Possibly at great length, so best get comfortable when the time comes. There will also be a chance to see this debated in the new municipal year (after the May elections) — so get in touch with your local councillors at that point if you have a view.
2018/19 Budget and Council Tax
As noted above (at their last meeting on January 12th), the WMCA Board voted that it was:
…not minded to approve the Mayor’s budget, including a Council Tax Precept of £10.80…
This was a first for the Board: a vote that had split down party lines. And while the revised Budget proposals demonstrate that a compromise has been reached in the intervening weeks, that the vote was lost is not without consequences for the WMCA, the relationships that underpin it and the region’s investment plan. In our response to the Budget, the WMCA Overview & Scrutiny Committee, said:
The current situation where the CA Board refused to agree the proposed Mayoral Budget does not resonate with the level of partnership and collaboration required for the Combined Authority to achieve its strategic objectives.
It’s easy to scoff at this — “it’s politics!” — but trust matters. Collective investment from partners across the region — in cash or in kind — unlocks value, and locks in commitment. When trust dies, partners are less likely to collectively invest in that way. That doesn’t mean that there shouldn’t be political battles on how resources are raised and used (particularly while Council Tax endures as a way of funding places), but the basic principle is that we work together to create a bigger pie to divide up.
My fear is that the events of the last few weeks run the risk of the pie shrinking.
Let’s look at how the budget proposals have changed in the last month. The easiest starting point is the Mayoral Precept: there will not be one in 18/19. That was projected to raise £7.5m.
Part of the slack has been picked up by the Transport for West Midlands Levy — which the seven constituent authorities of the WMCA invest into collectively. Having underspent in 2017/18, all seven were due to share a rebate of £0.265m, but they will now invest this straight back into the Mayor’s office. The rest of the Mayor’s office will be funded by drawing on the part of the £2m Mayoral Capacity Fund that had been destined to bolster the operations of the wider WMCA, and by removing a further £0.047m from the operational budget.
This will see the Mayor’s office funded to £0.823m —seven percent lower than last month’s proposal of £0.888m, firmly in compromise territory. This arrangement cannot be repeated — the Mayoral Capacity Fund is otherwise destined to help the West Midlands deliver its industrial strategy, and there is no guarantee of a levy underspend/increase to create the headroom.
The precept was also due to fund ‘Network Resilience’, to £0.572m: this will now be covered by an increase in the transport levy of the same amount. Birmingham, the most populous of the Constituent Authorities, will pay £0.225m of that increase.
With the Mayor’s office and Resilience covered, that leaves the most substantial segment left to cover: £6m that was destined for the Investment Programme, which is now deferred until next year.
To summarise, instead of raising new local money from citizens via the Mayoral Precept, the money has either been replaced — broadly speaking — with the money that citizens have already invested via Council Tax, Business Rates and general taxation, or the spending deferred until 18/19. In a year when many councillors in the Constituent Authorities are facing local elections, you can understand the tactical rationale for voting down the precept — but it hits the bottom line of already stretched Council budgets.
We can also conclude from the above that the WMCA’s ability to deliver its Strategic Economic Plan will be hampered by a lack of capacity within itself and a short-term reduction in its investment income — although the Board have been assured that this doesn’t put the wider capital programme at risk in the round. However, there is a risk that the Treasury — which factored in a “local contribution” (i.e., a precept) when striking the first devolution deal, may claw back some of the ‘gain share’ revenue after the first gateway review — a funding stream currently coded as ‘amber’ in the Investment Programme, with the associated capital projects:
Later in the paper, this is made more explicit:
So, whatever the reasons for voting down the precept (and I have heard a variety of reasons), it is vital that the Leaders of the Constituent Authorities and the Mayor work together to secure the funding. The minutes of the Constituent Authority meeting are interesting, notably their assertion that there should be no decisions relating to reprioritisation of the investment programme outside WMCA Board. I suspect that one of the Leaders of the areas containing one of the above programmes (and I have my guess) is afraid that their area will suffer because of, erm, a decision they took. Imagine.
As the Overview & Scrutiny Committee, we made the following recommendations:
The Funding For Growth programme — which, amid its wider remit of exploring fiscal levers open to the WMCA ,was supposed to see whether there were alternatives to a precept, finally provided us with its paperwork just minutes before the meeting. Having read it in the light of a guttering candle/energy saving lightbulb, we eventually concluded the following:
…after analysing the information provided members felt that there was
sufficient evidence to support that none of the potential revenue streams, that could cover the Mayoral office, could commence in time to set the 18/19 Budget. In addition, attendance for Funding for Growth Programme meetings demonstrated that the Mayor considered this to be important work, attending every meeting.The Scrutiny Committee felt that in future papers and documentation in relation to the Funding for Growth Programme should be made public (unless a relevant exemption applies) and that the timeline for exploring different fiscal options should be explicit — with the understanding that some elements may require Parliament to grant powers which is difficult to plan for.
We spent an awful lot of time discussing this detail, and I am pretty sure it could have been avoided had there been a bit more transparency around this work. Still, you live and learn. Do read our full report
As an aside, note that the collapse of Carillion has now been added to the WMCA’s Risk Register.
WMCA Powers — Supplementary Business Rates
Supplementary business rates provide one of the revenue streams that provides the basis of the overall investment plan:
In order to deliver the £8 billion Investment Programme, the West Midlands Combined Authority is required to develop funding plans through new financial mechanisms to the value of £3 billion to support £2 billion of investment and associated debt finance costs agreed as part of the first Devolution Deal for the West Midlands.
Given the slippage caused by the Government failing to get the Local Government Finance Bill onto the legislative agenda (clearly, ensuring that people and their places are funded is not a priority), and the fact that this decision will have to go through each of the seven Constituent Authorities, there is a time imperative to this decision. Initially, the plan had been for it to be in action by April 2018: this is not possible now.
It is also worth noting that this power — which would mean that the WMCA has the same powers as the Constituent Authorities — differs slightly from the original proposal. In the original proposal, the WMCA would have only had to consult, but this way, it is has to ballot.
Social Economy Taskforce
This is part of the WMCA’s ‘inclusive growth’ agenda, which focuses on “businesses united by a clear social purpose”:
We are establishing a Social Economy Taskforce to look specifically at the role that the social economy sector can play within this inclusive growth picture, and ask how the WMCA can support and enable opportunities for the sector that will benefit our residents and communities. We are doing this because we feel a vibrant social economy sector is a critical component of an inclusive and balanced economy, and recognise that the agenda risks being underplayed without specific, concerted action.
The idea is that the WMCA gets better at supporting the social sector in a co-ordinated way, thereby enabling it to make a more powerful contribution to our social goals — the taskforce (nine months in duration) will organise itself around those goals. It is noted that the sector substantially delivers on substance misuse services across the region, thereby working with a cohort of citizens who are a high priority in the public service reform agenda.
The paper has pulled together a comprehensive summary of some of the challenges and context to the social sector — a move away from grant-making, the burgeoning focus on ‘system change’, the impact of digital technology, etc.
This chart demonstrates one of the challenges — regional inequality, which is mirrored in the assets and income of our social sector:
It is also explicit that other areas of the public sector — the Constituent Authorities, the police — is already doing work in this area, and it wants to ensure that it enhances that work.
This focus is both right and welcome — although my first question would be about how this work can foster a wider culture of social good in business activity in the West Midlands. I am fascinated by Mariana Mazzucato’s work on the ‘mission-led economy’, wherein the values and aspirations of a place can be used to determine how investments are made, shaping business activity. Her work is not referenced specifically in the paper, although there is plenty of intellectual meat in there, if you want to get into that level of detail.
Wellbeing Dashboard and Intelligence Update
This is another step along the road to building a picture of the WMCA’s goals and progress in key areas — worth looking at in full, particularly where they have endeavoured to visualise the intelligence, e.g.:
This deserves more focus at some stage, but it could be its own blog, and this one is already huge. So that’s your lot.
PS: would you believe that the next WMCA Board falls on my birthday? What larks! Do you think I will get a card?
