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Combined Authorities (Consequential Amendments) Order 2014

Volume 753: debated on Monday 24 March 2014

Motion to Consider

Moved by

That the Grand Committee do consider the Combined Authorities (Consequential Amendments) Order 2014.

Relevant documents: 23rd Report from the Joint Committee on Statutory Instruments

My Lords, I am pleased to introduce the draft Combined Authorities (Consequential Amendments) Order 2014, which was laid before this House on 10 March. In speaking to it I shall also speak to the other three orders in my name on the Order Paper relating to the three proposed combined authorities.

The orders we are considering this afternoon, if approved, will bring about the establishment of combined authorities in three major metropolitan areas: across Merseyside and Liverpool, around Sheffield and South Yorkshire and in West Yorkshire. The purpose of these combined authorities is to enable the councils and their partners in each of these areas to work together more effectively to promote economic growth, to secure more investment and to create more jobs. These combined authorities will be central to delivering the outcomes in the city deals that the Government have agreed with each of the areas. They will also provide the governance needed for any future growth deals drawing on resources of the local growth fund.

Each combined authority will be responsible for economic development, regeneration, and transport across the functional economic area. All the councils in each area have agreed that their combined authority will be able to exercise their functions on economic development and regeneration. The combined authority will also have the transport functions currently exercised by the area’s integrated transport authority. That integrated transport authority will be abolished when the combined authority is established.

The process for setting up a combined authority is set out in the Local Democracy, Economic Development and Construction Act 2009. Crucially, all the drive and initiative has to come from the places involved. It is what we call a bottom-up process. It is a process where the first steps are taken by the councils involved. The first step is for the councils to undertake a governance review in their area looking at how decisions are taken on economic development and regeneration, and on transport. This review will allow the councils to decide whether the combined authority approach is the most effective way for them to work together and with their public and private partners, particularly the local enterprise partnership for the area concerned to promote economic growth and prosperity. All the councils concerned have followed this process and concluded that a combined authority is the right way to work together and with their partners to drive growth.

This Government’s approach is one of localism, which reflects our belief that residents and their representatives are best placed to decide what happens in their area. Where councils come forward with a proposal for a combined authority—like the three before us—which commands wide local support and we consider that the statutory conditions have been met, we invite Parliament to approve a draft order to establish the proposed combined authority. If, in the future, local councils decide that changes are in the area’s best interest—perhaps another council joining, or one leaving—and statutory conditions have been met, we would bring an order back to Parliament for approval to enable the change to take place.

As the 2009 Act requires, each group of councils concerned have provided the Government with detailed information about how they wish the combined authority to operate, to take decisions and be open, transparent and accountable. The Government have consulted on each proposal, and each proposal has been considered in the light of relevant statutory conditions to make sure that the proposal: is likely to improve the exercise of statutory functions relating to transport, economic development and regeneration in the area; is likely to improve the effectiveness and efficiency of transport in the area; and is likely to improve the economic conditions in the area. In each case I can tell the Committee that the Government consider that these tests are unambiguously met. The Government have also had regard to the need to reflect the identities and interests of local communities and to secure effective and convenient local government. Furthermore, we are clear that in each of these areas the combined authority would command wide local support—from local businesses, other public bodies and from local people and their democratically elected representatives.

I turn to the draft orders themselves. Three of them provide for the establishment respectively for combined authorities across the areas of Greater Merseyside, South Yorkshire and West Yorkshire. Each of these three orders specifies the formal, legal name for the combined authority, to which all the councils concerned have consented. But—and I know that this is an important matter and one of great interest to many noble Lords in the Grand Committee today—how that authority will brand itself, including the use of any brand name, will be entirely a matter for the combined authority.

Each of these three draft orders also makes provision for the abolition of the integrated transport authority for the area, about the transport and economic functions the combined authority will have and about its membership and constitutional arrangements. A combined authority will be governed by its members and subject to scrutiny by one or more overview and scrutiny committees with a membership drawn from members of the councils concerned to hold the combined authority to account. Good governance practice will mean that such committees will be politically balanced, enabling appropriate representation of councils’ minority parties in the governance of combined authorities.

Combined authorities are also subject to the same transparency and audit requirements as local authorities, so they will be audited by an external independent auditor. Meetings of the combined authority are open to the public in the same way as local authority meetings, and in future people will have the right to film and use social media to report on council meetings. This applies equally to meetings of combined authorities.

Finally, the fourth draft order simply makes amendments to transport legislation which are applicable to all combined authorities.

In conclusion, these draft orders will enable the councils concerned and their partners to work together more effectively to deliver economic growth across their areas. Establishing these combined authorities is what the councils and their partners in these areas want. They want this because they believe it is the most effective way for them to promote economic growth. In creating their combined authority, they are putting the promotion of economic growth at the heart of all that they do. This is a priority for them. It is a priority for the Government. I commend the draft orders to the Committee and beg to move.

I am very grateful for the comments from my noble friend. I am also delighted to hear the Minister address a number of issues that have caused concern among Members. We are very much in favour of combined authorities—they are an important economic opportunity for local areas. However, the thing that concerned us most was the citation. The word “region” is apparently no longer acceptable, and when in my area there was discussion about what name would be acceptable, it was not possible to come up with an agreed name. The notion of trying to market and get external investment into the Liverpool region using the citation “Halton, Knowsley, Liverpool, St Helens, Sefton and Wirral”, would be rather difficult. I was going to ask my noble friend whether that was purely a legal name and whether these areas could choose whatever name they wanted to get this external investment and marketing which has been so important, certainly in my area, for the past 10 or so years, and she has said—it is quite important—that they can have whatever brand name they choose. That is hugely important.

Sitting suspended for a Division in the House.

I was just turning to the issue of transparency, having dealt with the issue of branding and flexibility. I was delighted to hear my noble friend talk about the issues of scrutiny and independent audit. I assume that the minutes of the proceedings of the combined authority are,

“kept in such form as the Combined Authority may determine”.

I presume that that therefore means that they would be open to press and public for scrutiny as well. That is quite an important matter. The same will be true of the role of transport, which will now be part of the combined authority. The Minister in the other place got it completely wrong when he suggested that Merseytravel had purchased £1 million worth of Beatles memorabilia which are worth only £300,000. Actually, it was the transport authority that did it, not the council. With transparency, issues like that will be dealt with and we will know which council or organisation is responsible. I am delighted with the orders and I thank the Minister for her helpful replies.

My Lords, it is a great pleasure to follow the noble Lord, Lord Storey, not least because in the 1970 general election, what seems like a million years ago now, we were both students and friends, and I sent him out on his first election day experience. Sad to say, he returned later that day minus the wheels of his car. I thought that that might put him off politics for the rest of his life, but it did not do so. On this occasion I am happy to be able to concur with what he has said, and I thank the Minister for the way that she introduced the orders.

Personally, I entirely approve of and agree with the decision to allow local authorities to create combined authorities. I think that they will encourage strategic cohesion and be a catalyst for economic development, notably job creation and transport, as we have just heard. It will allow the regions to speak to central government with a more united and stronger voice. It will create partnership between boroughs, in this case referring specifically to those on Merseyside where it will create cohesion and partnership between six boroughs, and it does not give disproportionate power to any of them. It is worth saying in this context that some 84% of those living within the city region work there.

I was struck by a report for Liverpool City Council produced in August 2013 by the Mayor of Liverpool, Joe Anderson OBE, which he has been good enough to share with me. He states:

“A Combined Authority is not a merger or a takeover of existing local authority functions nor would be a ‘Super-Council’. Instead it would seek to complement local authority functions in economic development regeneration and transport and enhance the effectiveness of the way they are discharged”.

I was struck when reading that report and an earlier one produced in July 2013 by the reasons given by the mayor why a combined authority would be so worth while. In the earlier report he states that,

“current governance is not helping rebalance the”—

Liverpool city region—

“economy quickly enough; the structural issues highlighted remain issues; a more collaborative approach is required for change; and there is a lack of coordinated delivery structures at present”.

In the August report I see that he points out some of the other challenges facing the Liverpool city region and talks about the opportunities that would be created if such a body was to be set up.

As a one-time member of Merseyside County Council and Liverpool City Council and as a Liverpool Member of the House of Commons for 18 years, I was saddened to see the title of the Liverpool combined authority as it appears on the order which has been laid before the Grand Committee. The Minister said by way of a curtain raiser to her excellent speech that she thought that this was one of the issues that was most likely to be raised. Whatever else might be said in its favour, the title, “Halton, Knowsley, Liverpool, St Helens, Sefton and Wirral Combined Authority”, hardly trips off the tongue. This nine-word title is not just clumsy, it is a missed opportunity. This is not just about nomenclature or that ugly word “branding”, which has been used. In the early 1970s when Merseyside County Council was established, it puzzled me then that while Greater Manchester capitalised on a name that immediately told everyone in the world where it was, we were not to be known as “Greater Liverpool”, but as Merseyside. It was a decision based on petty rivalries and parochialism rather than on what was in the best interests of the common good. That lost opportunity weakened Liverpool and actually played into the hands of some of those who were agitating against the city and were exploiting some of the problems in the community during the 1980s, and which disfigured Liverpool’s reputation. Liverpool is at the very heart of the conurbation, and if a body’s heart is not well cared for, all the other organs will fail, too. During the past two decades the regeneration of Liverpool has become a sine qua non for the regeneration of surrounding boroughs. That success story is something that everyone in the six boroughs should be proud of and celebrate.

I am always struck that wherever I have travelled, even in remote parts of Africa, Latin America and Asia, Liverpool’s name immediately elicits a response. It is synonymous with sport, music and culture. Just think of the extraordinary success in which the noble Lord, Lord Storey, was involved in 2008—the Capital of Culture. I do not think that anywhere that has been designated a Capital of Culture has been able to rival the success of that year. Think of the city’s maritime legacy and its world-class universities. I declare an interest as holding an honorary chair at Liverpool John Moores University. Liverpool’s international reputation is further enhanced by the extraordinary work of its school of tropical medicine. I know from my time as chairman of the Merseyside Special Investment Fund that the city’s economy is in good shape, while its directly elected mayor is proving to be a good ambassador for the city and its interests. He has also been chair of the better-named Liverpool City Region cabinet for the past three years. That post of elected mayor was created as a result of the Liverpool Democracy Commission, which I helped to found and served on. It has proved to be a great success for the city of Liverpool.

In 1207, King John gave Liverpool its royal charter. Since then, there never has been a time in which Liverpool has not been the engine room for the region. It correctly describes itself as “the whole world in one city”. I agree with the Liverpool Echo’s assessment that the city is working,

“at a pace we’ve not seen for, arguably, the last 100 years”,

and that,

“it’s growing, it’s exciting and it’s the envy of most of its rivals”.

It is important to underline how vibrant the surrounding boroughs remain. In my professional life, I worked in two of those boroughs and, through the good citizenship award scheme that I founded at my university, I have been able to spend a lot of time in those neighbouring boroughs. The award scheme underlines what wonderful young people are emerging all over the region. It is their future that is at stake here, and it is their talent that the combined authority has to harness.

The new authority needs to be instantaneously recognisable. It needs a name that carries clout. It needs a name that exudes confidence and strength. People might mistakenly ask, “What’s in a name?”. “Everything” is the answer. A tongue-twisting piece of gobbledegook is no substitute for a name that would command immediate recognition, and I therefore hope that what the noble Baroness has said this afternoon—that it would be within the discretion of the authority to choose a name that resonates—will be heard loud and clear by the leaders of those six boroughs.

My Lords, I strongly welcome these draft orders, and the fact that the north-east draft order is on its way, making four orders in total, with the potential for more to come in the months ahead. As we have heard, combined authorities are important on the grounds of geography and scale because they reflect natural regions and travel-to-work areas. In terms of scale, so many councils are comparatively small that investment and risk management are much more difficult for them, so pooling with neighbours is a much better way in which to proceed.

I noted that the leader of Manchester City Council has said that this Government have devolved more in three years than the previous Government did in 13 years. He is right. The importance of this devolution is that it is essential to help to drive growth outside London and the south-east effectively. Combined authorities, working closely with their LEPs, will be responsible for regeneration and economic development, and for strategic transport investment and management, as the Minister confirmed. That is a hugely welcome change. I have been involved in the first and second waves of city deals, which have been very important in increasing the understanding that councils have with their LEPs in terms of their leadership role in promoting economic development. I have no doubt at all that the creation of combined authorities will help enormously with that process.

I would like to raise one important issue of principle with the Minister, which concerns the membership of the combined authority. I listened carefully to what the Minister had to say earlier. I understand that the overview and scrutiny committees will be politically balanced so that minority parties in councils will have representation in the governance of the combined authority. Can the Minister say, either now or at a later date in writing, a little more about how proportionality will work, whether an opposition member will be required to chair them and how agendas will be constructed to ensure that debate is not stifled by individual party political interest? That is a very important issue and there have been a lot of discussions around it.

There is a strong case for saying that minority parties should have access to the main deliberations of the combined authorities. However, it would help significantly to know now that the Government understand the issue and are prepared to ensure that the rights of minority parties are guaranteed in the orders when they are finalised, either now or at a later date. In terms of principle, it is important, as my noble friend Lord Storey said, that the public have confidence that this is not to be the creation of a one-party state.

My Lords, I thank the Minister for introducing these important orders in a clear and comprehensive way. As the noble Lords, Lord Shipley, Lord Alton and Lord Storey, said, and as would have been clear from the debate in the House of Commons, we thoroughly support these orders. Indeed, why would we not, given that the authorities involved are largely Labour and that the primary legislation from which they spring—the Local Democracy, Economic Development and Construction Act—was legislation of the previous Government? We acknowledge that the work of the noble Lord, Lord Heseltine, has spurred the coalition Government to take the opportunities that that legislation offers, and we acknowledge the Government’s current commitment to localism. I am bound to say that those of us who spent many hours ploughing through the Localism Bill and its detail will recall that it seemed to us then to be as much about power for the Secretary of State as about freedoms for local government, but it would be wrong to be too churlish on this occasion.

As for growth, of course we welcome the improvement in the economy. We will have to see how sustainable it is and how much of it genuinely comes from a rebalancing of the economy, a point touched upon by the noble Lord, Lord Alton. We agree that local authorities working together in the interests of their communities can be a real engine for growth, particularly outside London. As my honourable friend Andy Sawford put it when this matter was debated in the Commons:

“The new combined authorities will bring many benefits, including the strong and visible collective leadership of an area with democratic accountability and an influential and unified voice. That leadership will be able to have a single conversation with the Government, national agencies and business leaders and to align decision making and economic growth at a strategic level”.—[Official Report, Commons, 18/03/14; col. 707.]

As the noble Lord, Lord Shipley, said, combined authorities should enable more effective engagement with LEPs and facilitate delivery of city deals.

The issue that York is currently a non-constituent council in the West Yorkshire Combined Authority was the subject of some discussion in the other place, particularly following an earlier intervention from my right honourable friend Hilary Benn. We took it from the Minister’s reply in another place that the current problem is that combined authorities require whole local authority areas that share the same boundaries. The Minister undertook to consult in the next few weeks about how the legislation could be changed to address that problem. Perhaps the Minister could add a little more about the propositions that are being developed in that regard.

We welcome the commitment to see the combined authorities brought within the VAT refund scheme, which is another matter that was discussed in the other place.

From the comments in the Explanatory Memorandum, it is clear that these propositions were forged from consensus. Indeed, we heard that from noble Lords today. The formal names of the combined authorities seemed a particular bone of contention, and when I first read this, I wondered whether they were a bit of a nit-picking issue, but I have been convinced by the discussion in the Committee this afternoon, particularly from what we have heard about all the accolades delivered for Liverpool, that they are not. They are clearly an important issue. It seems to me that how the combined authorities address this and reach a consensus will be a test for them.

I understand that the combined authorities’ borrowing powers are limited to their transport functions. Will the Minister say why this is so? Presumably the levies that the authorities impose on constituent authorities now have to feature in the determination of whether each is raising an excessive level of council tax. This is a change in the legislation which we debated in the Local Audit and Accountability Act. Will the Minister confirm that there are no adverse tax or otherwise consequences for the ITA, the passenger transport executives or the constituent councils from their transfer of functions, properties, rights et cetera to the combined authority?

We are pleased to support these orders. We await further such developments, particularly—in support of the noble Lord, Lord Shipley—in relation to the north-east; we would be happy to support that order when it emerges.

My Lords, I am very grateful to all noble Lords for their strong words of welcome in support of these orders. I shall start by acknowledging a point made by the noble Lord, Lord Alton. He quoted a report stressing that a combined authority is not a merger. I agree with that. These combined authorities open the way for more effective collaboration between the councils and their partners to promote economic growth and secure investment for their area. This is about collaboration. It is most definitely not a merger.

My noble friend Lord Storey again flagged the question of the naming of these combined authorities. The noble Lord, Lord Alton, went into greater detail about his concerns and said that the statutory names on the orders do not trip off the tongue. The most important thing for me to do is to be absolutely clear in restating what I have said and to answer directly the noble Lord, Lord Alton, that the decision about what a combined authority might want to call itself will be a matter for that combined authority. The names on the orders are the legal names, but we feel that it is right for these combined authorities to decide the best way to—I know the noble Lord did not like the word “brand”—present themselves and their local people to the rest of the country and indeed the world. As the noble Lord said, there is widespread awareness of Liverpool around the world. On that, I can be absolutely clear, and I hope I have reassured noble Lords on that point.

My noble friend Lord Storey asked for some assurances around accountability and transparency. I am happy to confirm that these orders and other existing legislation place robust requirements on the combined authorities. To the point made both by him and by my noble friend Lord Shipley, I can say that the combined authority will be governed by its members and subject to scrutiny by one or more overview and scrutiny committee, with membership drawn from members of the councils concerned, to hold the combined authority to account. Good governance practice will mean that such committees will be politically balanced, enabling appropriate representation of councils’ minority parties in the governance of combined authorities.

My noble friend Lord Shipley asked some specific questions around how proportionality will work, who would choose the chairman of the committee and how agendas would be decided. I understand why he raises these questions and certainly acknowledge to him the importance of these points. However, what he has outlined is what I would describe as, and what would be commonly described as, good practice. What we are clear about is that it is for the individual councils and the combined authority itself to decide how they will put in place their arrangements. I urge them to take the good practice approach that we would all expect and want them to follow, not least because of the strong welcome that we all have for this new governance structure.

Can the Minister clarify further how it will be possible to see minority representation when in a combined authority there is only single-party representation—and, therefore, only leaders of that party are part of the combined authority? Is it not therefore particularly important that there should be some specificity when it comes down to the openness of meetings, and some requirement that meetings should be able to be accessible by the public and the media?

The noble Lord raises a couple of points there. The point that I am getting to with the overview and scrutiny committee is that it would be made up of representation from the various authorities that make up membership of the combined authority. The scrutiny committee that will hold the combined authority to account will be made up not of the chairman or the leaders of the different local authorities but of people from the different parties represented in that local authority. So there will be a variety of political parties represented on the scrutiny committee that holds the combined authority to account.

As to access to meetings of the combined authority, I was going to come on to that, because it was a point that my noble friend Lord Storey also raised. They will be subject to exactly the same transparency requirements as local authorities. So, yes, the meetings of combined authorities will be open to the public; this is a statutory requirement. Their minutes will be published in exactly the same way as local authority minutes will be published—and, indeed, they will be subject to the requirements of the Freedom of Information Act in exactly the same way as local authority meetings are at this time. I hope that before I sit down I will be able to confirm that the scrutiny committees will also be open to scrutiny in the same way.

The noble Lord, Lord McKenzie, referred to West Yorkshire and York in particular. He acknowledged there that we are seeking what we describe as a legislative reform order to amend primary legislation on combined authorities to enable a council that is not contiguous with other members of the combined authority but which is in the same functional economic area to become a constituent council of that combined authority if it wishes. As a first step, we will be consulting on proposals for such a legislative reform order, which will be an opportunity for those with views on this to put them to government.

The noble Lord, Lord McKenzie, also referred, I think, to the combined authorities’ ability to reclaim VAT. I confirm that they will not be disadvantaged by VAT legislation. Last week, the Government launched a consultation on the proposal to add Greater Manchester and these proposed combined authorities to the existing VAT refund scheme for local authorities, which can be achieved through secondary legislation. The consultation closes on 18 April and, following that, if the Government decide to proceed, parliamentary approval will be sought to give effect to this and to enable established combined authorities to recover VAT, just as the constituent local councils can.

The noble Lord, Lord McKenzie, also sought confirmation that local authorities and the ITAs that will be abolished would not be subjected to any disadvantage around tax arrangements. I will see whether the answer to that emerges, but if it does not, I will write to the noble Lord. I can confirm that there will be no disadvantage. I am nearly at the point where I might be able to avoid a letter, which would be great.

Going back to the point that I was talking about previously, I confirm to the noble Lord, Lord Alton, and all noble Lords, that the scrutiny committee will be open to the public, as will be the combined authority meetings.

Several noble Lords mentioned devolution and localism more generally. The Localism Act 2011 devolved powers not only to local authorities but to local communities. We are interested in discussing with local authorities what more can be done to empower them to deliver economic growth and take their communities forward. We certainly hope that more of the combined authorities will come forward. As my noble friend Lord Shipley said, the combined authority covering local authorities in the north-east will be with us very shortly. I hope that I have been able to address all the key issues that have been raised.

I may be able to avoid the Minister having to write. I am not sure that she dealt with the point about funding and whether the opportunity runs beyond the existing opportunities in relation to transport funding. In particular, given what is effectively a recent change, as levying bodies, presumably these are the very sorts of levies that have to be taken into account by individual local authorities in judging whether or not their council tax increases are excessive. Within the overall constraints—whether we agree with them or not—that the Government have imposed, there is an effective cap, subject to referendums, on what the combined authorities would charge in their constituent authorities. Should that not be an argument for perhaps some relaxation in relation to prudential borrowing for so long as it could be funded through the levy mechanism?

The noble Lord is right to say that I had omitted to respond to him on that important point. We are absolutely clear that levies should be included in the regime for the consideration of council tax levels. Levies will therefore be caught by the council tax referendum policy. We are absolutely clear that local people should be able to have their say on any proposed excessive increase in council tax, whether caused through a levy on the council or by any other reason. Certainly in Leeds, where this has been a particular debate, we are confident that the measures proposed in that area would be possible without an increase above 2%. If a combined authority wanted to propose an increase above 2%, it would be open to it to conduct a referendum.

The noble Lord asked specific questions about borrowing. There is no intention or plan to extend the powers of the combined authority to borrow beyond those powers that already exist for the ITA and will be transferred to the combined authorities. The funding of combined authorities outside of transport will be provided by the membership local authorities. The level at which each local authority makes its contribution will be decided by the members of that combined authority, with the default position being that the level of funding would reflect the size of the local authority.

I hope that I have been able to address all the points that have been raised today. I think we are in general agreement that establishing these combined authorities will support these councils in driving their commitment to deliver growth and prosperity for their area. That is a priority which should be at the heart of everything councils across the country do, and I commend these orders to the Grand Committee.

Will the Minister give further guidance on the overview and scrutiny structure? She referred to good practice. Will she write to the councils that form combined authorities about what that good practice might entail? In particular, will she advise that having an opposition chair of scrutiny, which anyway is common practice in many councils for the overview and scrutiny process, might be recommended by the department? Will she also advise on whether all members who are appointed to serve on an overview and scrutiny panel are able to place items on the agenda? I am seeking to avoid a situation in which the majority party on the combined authority chairs the overview and scrutiny panel and then controls the items placed on the agenda. Good practice is what I would expect to happen, and I am sure that in the case of the combined authorities orders we have today, and get in the future, that would be deemed to be good practice, but it might help if the Minister defined clearly what good practice actually means so that everybody can be aware of it, including those authorities that are yet to put in their proposals.

My noble friend raises some very important points. As a point of principle, I or one of my ministerial colleagues would be happy to write to the combined authorities, and I will discuss with them the precise detail to put in such a letter.

The exchange has prompted a thought. Presumably the combined authority will have to have an audit panel, subject to the constraints or requirements of the recent Act.

Motion agreed.