Combined Authorities (Finance) (Amendment) Regulations 2024

Baroness Pinnock Excerpts

Tuesday 7th May 2024 Grand Committee

[Baroness Pinnock (LD)]

My Lords, I remind the Grand Committee that I have relevant interests as a vice-president of the Local Government Association.

As we heard from the Minister, these regulations extend the provisions of the 2017 order so that it applies to the new combined county authorities. As the noble Baroness, Lady McIntosh of Pickering, said, mayoral authorities require funding to operate as organisations. However, in extending the number of mayoral authorities, as has been said, the Government failed to publicise that the consequence would be an addition to the overall council tax bill for households in those areas. Perhaps the Minister could tell us what the average mayoral precept currently is for combined authorities. She may not know, but it is all right; I have some examples, so it will be okay.

Greater Manchester’s mayoral precept, which includes its fire and civil defence authority, is £112.95 for band D. I dug further into that figure and, on its own, the mayoral precept is only £31.75. What I want to raise here is that, in the interests of transparency and accountability, that precept ought to be separated on people’s council tax bills. Currently, the council tax is set by the local authority and there is the adult social care precept, which the Government insist on. Then there is the police precept and the mayoral precept, which includes fire and civil defence authority funding. The latter should be separated out, so that there is a clear indication of what is for the fire and civil defence authority and what is for the mayoral function. I hope the Minister can assure me that that will happen or, if she cannot, can tell me what we can do to ensure that it does.

My next point is that the 2017 order, which I have found, sets the governance requirements for acceding to the mayoral precept. The Minister said that a two-thirds majority would usually be required—I wrote it down—to confirm a mayoral proposal for the precept. If it is not “usually”, what is it? I think it needs to be clearer than “usually”. The 2017 order says two-thirds, but that a three-fifths majority is required for Tees Valley alone. I think this needs to be clearer than it usually being two-thirds.

Those are my two concerns: the first is about getting transparency and the second about the governance arrangements for decision-making. Obviously, if we have combined authorities and mayors then they have to be funded, which is an additional ask of council tax payers. For most authorities, the social care precept and this would add around £250 to people’s council tax bills, so we need to know whether they will get value for money.

[Baroness Taylor of Stevenage (Lab)]

My Lords, as this is the first local government item on the agenda since the elections, I think it is right to congratulate all those who stood for election and took part in the democratic process at a local level. It just shows, again, that local government matters. My congratulations to the noble Baroness, Lady Pinnock, on her election.

Democracy was the winner on Thursday. There is no better illustration of that than the West Midlands election, which was won, in an electorate of some 3 million, by 1,500 votes. Apparently, there were 1,500 ballot boxes in that election, so, if there had been one extra vote in each of those ballot boxes, the result might have been different. That is a great illustration of why local democracy is important.

We have no intention of creating any unnecessary controversy over this straightforward SI, which extends the powers already granted to mayoral combined authorities to the more recently created combined county authorities. I am pleased to see that different geographic, social and economic issues that exist in the two-tier areas of the country are now being recognised and accommodated, and that this SI puts in place the financial mechanism to enable that.

As the Minister will be aware, during the passage of the then Levelling-up and Regeneration Bill, we had the opportunity to express our reservations regarding the governance arrangements for combined county authorities. It will take some testing of those new arrangements in practice to see whether the topics we were concerned about create any ongoing issues. For example, the lack of representation of district councils, which have the planning, housing and economic development powers, on combined county authorities has the potential to frustrate mayoral plans, if they are not used properly. I hope that enough thought will be given to the mayoral structures as they move forward to smooth this path; the noble Baroness, Lady McIntosh, referred to this issue.

That said, it is absolutely appropriate that all areas, including those with two-tier government, can benefit from the combined authority approach. How much flexibility will the Government allow to those authorities outside of urban areas to create county combined authorities that work for the geography, particularly the economic geography, of their areas? As an illustration, the inflexibility of Boundary Commission reviews can, on occasion, act as a blocker to structural arrangements that would facilitate the progress of developing economic areas. It would be a shame if people were stopped from doing that just because of an arbitrary boundary somewhere.

It would be wrong to consider any SI relating to local government finance without referring to the wider picture of the extreme financial pressures facing local government. I am sure that the Minister will have all those stats that get rolled out to us every time we mention this in the Chamber—they are the Government’s smoke and mirrors to make it look as though they are piling cash into our sector—but, of course, those on the front line know better. The increasing demand driven by costs in adult care, the increasing number of young people needing an urgent and comprehensive response to their special educational needs and the tsunami of homelessness as rents in the private sector soar ever upward, leading to mass evictions on affordability grounds—as well as the unfunded inflationary pressures across the board—are seeing councils struggle to make ends meet and, as we have seen on occasion, be unable to continue without intervention. Nothing in this SI will change any of that.

We all know that the bulk of the new funding for local government is coming from the pockets of hard-pressed council tax payers—another issue referred to by the noble Baronesses, Lady Pinnock and Lady McIntosh. The Local Government Association talks about figures

“based on the assumption that councils will raise their council tax by the maximum permitted without a referendum”,

leaving councils with tough choices about whether to increase council tax bills in order to bring in desperately needed funding at a time when they are acutely aware of the significant burden that this places on households in the middle of a cost of living crisis.

Can the Minister tell us the overall cost of the new mayoral combined authorities? The noble Baroness, Lady Pinnock, talked about individual levels of precept but do we have a figure for the overall cost for those combined authorities and county combined authorities? None of these new structures comes free. It will be interesting to see, over time, whether the economic growth that the new structures are intended to generate justifies the cost of setting them up.

The Minister spoke about transparency in combined authority and combined county authority finance, but we all know of the dysfunction there has already been in the local authority audit sector. Some 300 councils missed the deadline for audit at the end of 2022-23. Only three of them—1% of councils—were on time. Some 150 have not been audited since 2020-21; 61 have not been audited since 2019-20; 22 have not been audited since 2018-19; and 10 have not been audited since 2017-18. This is a really important reassurance for the public about how public money is spent. There is no better illustration of the importance of this than the issues that have arisen in Tees Valley.

The Government’s stated objective for setting up these new structures is to enable the levelling-up agenda. However, this year has seen the fifth one-year settlement in a row for councils, which continues to hamper financial planning and financial sustainability. Only with adequate long-term resources, certainty and freedoms can councils or combined authorities deliver world-class local services for our communities, tackle the climate emergency and level up all parts of the country. Can the Minister tell us what work the Government are doing to ensure that short-term funding settlements will not continue to hold back councils and combined authorities from achieving the ambitious aspirations that they have for their communities? Until those long-term funding arrangements are in place and designed to provide the stable, sustainable platform to deliver what is necessary, all this tinkering about is just moving deckchairs on the “Titanic”.

That said, we agree that there is a financial and democratic need for transparency in the funding of combined authorities; in granting equal powers to mayoral combined authorities and combined county authorities in this regard, this SI does the job it is intended to do. We will not oppose it but I am interested to hear the Minister’s answers to our questions.

--- Later in debate ---

On the comment about the two-thirds majority, perhaps I could reiterate, to avoid confusion, that what I was referring to is that the constituent members of a combined county authority may impose amendments to the mayor’s draft budget if supported by a significant majority—usually two-thirds. I say “usually two-thirds” because, by all accounts, the numbers are not always easily divisible. Therefore, it needs to be as close thereafter to a two-thirds number as we can get. Given that that will not necessarily be a whole person, we need to take that into account. The two-thirds is indicative and an alternative measure may be needed if it is not divisible easily.

[Baroness Pinnock (LD)]

Well, this is going to be interesting. The East Midlands will have eight constituent members with two from each authority, as I understand it, so neither two-thirds nor three-fifths works numerically. Do we take the bigger number or the smaller? Do we round up or down?

[Baroness Swinburne (Con)]

I am going to write to the noble Baroness with the exact number and calculation that will be used in the East Midlands situation. Ah—somebody knows the answer. It works out as two-thirds or more, so it would go up not down. There we go.

On the precept overall, the regulations provide for decision-making processes applying to those mayors who set a precept, a process which involves the constituent members who have the ability to challenge and, with a significant majority, amend the mayor’s plans for that precept. Where the mayor exercises police and crime functions, the referendum principle for the PCC component of the mayoral precept has been set at the same level as for PCCs. The Secretary of State has been clear that he will consider any increases set by mayors when determining referendum principles in future years, so there are measures that allow us to intervene if need be.

It is true that local audit is vital to support democratic accountability and in providing the assurances for local people that their elected representatives are doing what they should be doing with the budget that they have. The Government are working with the Financial Reporting Council and others in taking action to deal with the significant backlog of local audits in England and put the system on a sustainable footing. In February this year, system partners, including the Government, issued a joint statement setting out a package of measures to meet these challenges. During February and early March, DLUHC and the National Audit Office consulted on core elements of these proposals. We are reviewing that consultation response and will set out our intentions and respond in due course. It is an urgent matter and we are trying to get to grips with it. I am not taking it lightly; it really does need to be dealt with.

A number of other questions have been put but I think it will be of interest to Members to have proper, detailed answers, rather than what I am scrabbling together here. I will come back with written responses to those, but in the meantime I commend the instrument to the Committee.