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House of Lords Hansard
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Combined Authorities (Finance) Order 2017
30 March 2017
Volume 782

Motion to Approve

Moved by

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That the draft Order laid before the House on 13 March be approved.

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My Lords, the order puts in place the process that elected mayors and their combined authorities will follow for setting the mayoral budget and issuing precepts. For the six mayoral combined authorities with elections this May, these processes will apply in relation to 2018-19 and each subsequent year. This is applicable to all mayoral combined authorities, except for the West of England. In this case, reflecting local choice, there will be no mayoral precept and outcomes secured by provisions in the order establishing that combined authority. In addition, the order makes certain transitional finance provisions for Greater Manchester, reflecting that, from 8 May 2017, its mayor will have police and crime commissioner responsibilities, and be responsible for the Greater Manchester Fire and Rescue Service.

This order establishes the final element in the funding framework for mayoral combined authorities. Under this framework, the activities of combined authorities and their mayors will be funded as follows. First, combined authorities and their mayors, as provided for in the devolution deals, will receive new, additional financial resources from government. In particular, noble Lords will recall that the Government are providing £30 million per year for 30 years of investment funding, known as “gain share”, to areas such as Greater Manchester, the West of England and the Liverpool City Region. In the case of the West Midlands, which we have considered in the previous debate ahead of the Statement, this investment funding is £36.5 million per year for 30 years. In the case of Cambridgeshire and Peterborough it is £20 million per year for 30 years and in the Tees Valley, reflecting the size of the area, it is £15 million per year for 30 years. Central government resources also include budgets for transport and the mayors will have the powers to allocate this funding to the constituent councils, as we saw in the order that we previously considered today for the West Midlands.

Secondly, the primary legislation—the Local Democracy, Economic Development and Construction Act 2009—together with the orders we have made for individual combined authorities, provides that the constituent councils can make contributions to combined authorities and mayors. Importantly the orders also provide that, in the case of mayoral expenses, the mayor must agree contributions with the constituent councils in advance of incurring expenditure.

Thirdly, combined authorities can levy on their constituent councils for transport costs. It is open to us also to make further secondary legislation to extend these levy powers for other functions of the combined authority. The constituent councils then build these levies into their own budgets.

Finally, mayoral functions—to the extent they are not met by other means—are to be met by a precept. This precept is determined each year through the mayoral budget process and is formally issued by the combined authority to the billing authorities in its area. The billing authorities then build this precept into their council taxes and the precept will be visible on council tax bills. As I said earlier, the mayor for the West of England does not set a precept. In this area, the costs of the mayor will be funded through contributions from the constituent councils.

If approved by Parliament, today’s order is to be made under the Local Democracy, Economic Development and Construction Act 2009—as amended by the Cities and Local Government Act 2016—and makes detailed provision about budgeting and precepting. If approved by Parliament, the order will come into effect the day after it is made. The specific provisions, which are designed to ensure an effective process including robust arrangements for scrutiny and challenge of the mayors’ proposals, are as follows. First, there is a requirement for combined authority mayors to submit by 1 February of a given year a draft budget to their combined authority for consideration. Secondly, the combined authority recommends any amendments to the draft budget before 8 February, and the mayor considers them and makes a further proposal if he should choose to do so. Thirdly, the constituent members of the combined authority may impose amendments to the mayor’s draft budget, if supported by a two-thirds majority—except in the case of the Tees Valley, where that majority is three-fifths. In the absence of this majority, the mayor’s proposals must be accepted by the combined authority.

Fourthly, the combined authority must set a mayoral budget if the mayor does not submit a draft for consideration by 1 February. Fifthly, the mayor is to fund mayoral functions through a precept, which will be subject to referendum principles that limit precept increases in the absence of a council tax referendum. Sixthly, the standard local government finance regime applies so that precepts must be issued by 1 March. Seventhly and lastly, to aid transparency the mayor is required to maintain a fund relating to the receipts and expenses of the mayor’s functions, excluding police and crime commissioner functions, for which Manchester city combined authority is responsible and for which there is a separate police fund.

The order also contains detailed provisions about transitional measures. The duty to issue a precept is disapplied in relation to the year in which the first mayor for the combined authority is elected. This is because for this year the mayor will not be in office in time for the precept to be set. Mayoral expenses in this first year will therefore be met by contributions from the constituent councils.

The final transitional provisions relate to Greater Manchester, where the mayor will be responsible for police and crime functions and the fire and rescue services. These provide that the precepts for 2017-18, which have been issued by the Greater Manchester police and crime commissioner and the fire and rescue service, will from 8 May this year fund the mayor’s activities in respect of policing and fire and rescue functions.

In conclusion, the order will support the new combined authority mayors to fund their functions through a precept and a budget-setting process that allows for effective challenge and robust and transparent scrutiny by the combined authority. The draft order will complement the orders already approved by this House to implement the devolution deals agreed between local areas and the Government, paving the way for a more balanced and successful economy and improving housing supply across the country. I therefore commend the order to the House.

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My Lords, I shall make two brief points. First, the powers and the checks and balances proposed in the order seem appropriate, but I note the final paragraph of the Explanatory Memorandum concerning monitoring and review, which says:

“Mayoral combined authorities will be required … to put in place an extensive programme of evaluation”.

I suggest to the Minister, not least because there are two different methods for creating the mayoral budget now—for most the precept, and for the West of England by agreement of the constituent councils—that evaluating how that works could well be something for independent review as opposed to being done by the combined authorities. I hope the Minister will pay some regard to that.

The other issue is that I did not quite understand what the Minister said about audit and, in particular, scrutiny. There is a very tight timetable between the beginning of February and the beginning of March. There is to be a budget proposed by the mayor, then to be agreed by the combined authority. The combined authority is of course scrutinising that mayoral budget, except that the combined authority itself is subject to scrutiny. My question is: at what point will the scrutiny arrangements that have already been approved by another order apply? Will there be a role for the scrutiny panel before 1 March, or will the scrutiny panel put forward its views at a date between 1 March and the date at which the constituent councils are setting their budgets, which need to come very early in March? There is a process issue about the role of scrutiny, because I think the Minister said that the combined authority has a scrutiny power over the mayoral budget, but the combined authority is actually itself subject to a formal statutory scrutiny arrangement.

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My Lords, I refer the House to my declaration of interests and put on record that I am a councillor in the London Borough of Lewisham and a vice-president of the Local Government Association. I have no objections to the order before us and I am very happy to agree it. There does, however, need to be a wider debate at another time about where we are going with local government in England outside London. I will leave that for another day.

The section of the order with respect to mayors’ budgets is particularly welcome. I was pleased that the Minister made reference to the fact that there is a veto provision. All mayors will be mindful of that but, equally, it is set at the high bar of a two-thirds majority, or, in the case of Tees Valley Combined Authority, of a three-fifths majority. That is an important provision that mayors should be aware of.

The noble Lord, Lord Shipley, made important points regarding auditing and scrutiny. I welcome the Minister’s response to that. I assume I am correct that if local electors have objections to the council they can make these as normal, but could the Minister confirm that as well as he can in writing?

For the record, in the previous debate when asking about mayors and their function the point I made was about selling land below market value, not at market value. Will the Minister also respond to that point in writing?

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My Lords, I thank the noble Lords, Lord Shipley and Lord Kennedy, for their contributions on the issue of local government finance. If I may first pick up the point from the noble Lord, Lord Kennedy, in relation to the previous debate, I will certainly take another look at that. As I indicated, I think the function will be balanced between the mayor and the combined authority. But there will of course be an overriding obligation to get best value and, if land is being sold below market value, I would anticipate that there was a danger of falling foul of that. I will cover that issue in a letter to the Minister—I mean the noble Lord; days of yore in the National Assembly for Wales are kicking in, so I apologise.

I thank the noble Lord, Lord Shipley, once again for the generous welcome he has given to this piece of secondary legislation as well as for his attention to the different interests of the mayor and the combined authority and to the important checks and balances. He asked specifically about the budget process and about scrutiny. As I think he will know, the overview and scrutiny committees can require the mayor to appear before them at any time, including in the first year of the mayor’s term, before this more detailed process kicks in. In the first year, of course, it is too late for the precepting procedure, which applies later on. The budget scrutiny requirement refers to the scrutiny of the mayor’s budget by the combined authorities, though there is a specific requirement under the order, as the noble Lord appreciates, for a mayoral fund to be set up. I will perhaps enlarge on that in a letter because it is a fairly technical area.

I thank the noble Lord, Lord Kennedy, again for his pragmatic approach and for welcoming this particular measure. He raised similar points about scrutiny in addition to the point he raised on the last order. I will of course pick those up in a detailed letter.

As I said, this issue is central to the system of mayors, which I think we all support in principle. I accept that we have different concerns but it is obviously essential that going forward we have a system for how money is to be organised. I also accept that we have bespoke deals. For example, the West of England Combined Authority did not want precepting, while Tees Valley Combined Authority wanted decisions to be made with a 60% rather than a 66% majority because it has five constituent councils—I think that is the reason for that; they would each have 20% of the vote. Accepting that there are going to be slight differences, the general approach to scrutiny and budgets is set out in this order, which I think is non-controversial. As I said, any points that have been raised and that have not been covered in my response will be picked up in a letter, in addition to the point made by the noble Lord, Lord Kennedy, in relation to the previous debate. I commend the order to the House.

Motion agreed.