Are Combined Authorities in England strategic and fit for purpose?

A new funding regime from 2020?

BREXIT is focusing minds on the need to strengthen both the devolution process and the powers of Mayors and CAs to provide a better coordinated framework that moves the governance agenda beyond regeneration and transport planning. CAs have a vital role to play in Planning, Housing, Environment and Climate Change, Skills and Education, Culture and Sport and Health and Well Being as well as Economic growth and investment but their early development has been primarily economic growth and planning focused. This needs to change. If BREXIT proceeds, a key issue will be CA’s role in the administration and replacement of the UK Shared Prosperity Fund and replacements for European funding from 2020. Mayoral CAs are to have increased roles in the Local Industrial Strategy as a response to BREXIT and outside CAs Local Enterprise Partnerships (LEPs) are to take the lead in Local Industrial Strategies. In 2018 UK central government began to map out a role for Mayoral CAs in leading on the new Local Industrial Strategies. In Cambridge and Manchester and Birmingham, CAs are in the lead and in non-Mayoral areas there was a view that LEPs should be reviewed and refreshed to take on the role of developing the new Local Industrial Strategies. BREXIT and the anticipated UK Spending Review 2019 continue to delay policy discussions on these new initiatives; both created a policy vacuum which no one knows at the time of writing whether and when it will end (see House of Commons, 2018, Local Growth statement).

Many believe that CAs are going to require new financial resources beyond the Deal bidding culture which has become so popular in Central government since 2010. Replacing the City and Growth and Devolution Deals beyond 2019/2020 with a more sensible long-term funding strategy is set to become a crucial issue but is related to the large issues of the reform of Council Tax and Business Rates and powers for borrowing and the Spending Review 2019. These issues have suffered from a lack of attention.

Eight CAs have been formed since 2011 when Manchester was established, with the most recent (Cambridge and Peterborough) established in March 2017. In May 2017, six CAs held their first mayoral elections, and Sheffield City region became the seventh, in May 2018. This proved important, in that a sitting MP, Dan Jarvis of Barnsley Central, was also elected as Mayor of the Sheffield City Region CA. However, unusually this was on a platform of supporting the Sheffield One regional authority proposal – supported by 16 out of 18 Yorkshire local authorities – and arguing for a Yorkshire One CA; to date, this harks back to a regional solution and regional structures have not been supported by central government. If this materialises as a proposal the South Yorkshire CA itself would only survive a first four-year term and make the CA journey unstable, perhaps confirming the late Peter Hall’s (2011: 15–29) view that complexity can only grow in the coming decades.

Disagreements in Yorkshire mean that 16 local authorities have signed up, but Rotherham and Sheffield remain opposed and the rest of the world looks on bemused at this throwback proposal to a form of Labour regional governance (cf to city-regions) which many thought had ended with the Coalition government in 2010. Thus, Yorkshire appears to have held alive its regional ambitions whilst the actual reality has been the introduction of CA city-regions which have fractured regional perspectives, especially also in the North East Region and in the end Yorkshire One seemed destined for rejection with central government confirming its commitment to city-regions.

As legal entities, established, via an Order made by the Secretary of State, at the request of two or more local authorities, the executive of CAs consists either of one representative of each member authority or one representative of each member authority plus a directly elected mayor (a ‘mayoral CA’). The acceptance of the Yorkshire Model would signal a return to regional governance which is difficult to square with the mayoral City-Region model and continues to raise questions about the fragmented nature of local government in England and the need for better All-party support on modernisation plans. Super-mayors have not been accepted in all CA areas, e.g. Leeds and debates about Mayoral modes of governance indicate that further research is still required.

Recent research by Hambleton and Sweeting (2018) on Bristol city region where there are now two Mayors at City and City-Regional level have argued that:

It follows that it is misguided to adopt a view that is either ‘for’ or ‘against’ directly elected mayors. Rather, it is vital to first consider the detailed institutional design of the mayoral model of governance in question. To emphasise this point we can note, for example, that the directly elected mayor of New York City has massive legal and financial powers, whereas the directly elected mayor of the West of England Combined Authority (WECA), one of the UK metro-mayors elected in May 2017, has truly trivial legal and fiscal power.

The importance of the Manchester model

Greater Manchester CA has acquired the greatest level of devolution and is often held up as the ‘ideal’ form that all CAs in England must aspire to (see Hincks et al., 2017). GMCA has a wider remit having absorbed control over the office of the Police and Crime Commissioner and Fire and Rescue Service and having responsibility for health strategy. CAs are mainly focused on regeneration, skills and transport, such as bus franchising or mass transit investment. Tees Valley CA is the only CA to have requested legislation so far, to establish a Mayoral Development Corporation, whilst West Midlands CA has a remit on mental health and is also playing a leading role in plans for Sport and Culture with the task of delivering for the 2022 Commonwealth Games to be hosted in the West Midlands (www.wmca.org.uk/news/mayor-welcomes-commonwealth-games-village-go-ahead/).

A problem for CAs is that they have a primary focus on transport and economic growth, but central government still retains a level of power as they agree to policies to be pursued, governance structures, funding and how CAs should be brought to account. Far from being new forms of decentralisation, this disguises the reality that power still largely rests in the hands of central government. In this case, sub-national governance arrangements are hamstrung in just how much they can achieve in re-balancing the national economy. Moreover, the dominance of Greater Manchester in the national discourse on CAs has not always been received well outside of the North West region even in the wider Northern Powerhouse, and many have argued that the Northern Powerhouse concept requires more legitimacy, accountability and transparency.

Since 2016 Manchester’s Mayor Andy Burnham has sought to develop his role in Manchester but also to develop a network of Mayors and support the Northern Powerhouse Mayors and Leaders group in developing their role and influencing central policy-making, particularly in Transport and with the emergence of Transport for the North as a major new player in the transport policy arena.

The ever-changing policy contexts

CAs on which business representatives also sit through their membership of LEPs, work alongside a Cabinet of elected councillors and the directly elected Metro mayors, and although they do not formally have a vote in effect, they exercise a veto. Since the whole CA project is driven by local strategic Economic Plans that they define and have brought forward and by Skills Plans with considerable LEP input. The CA has the power to set business rates but can only raise the rates with the agreement of the LEP. Setting business rates could prove to be a useful instrument for pursuing economic development objectives but in areas where there is a weak business base already, this could exacerbate existing inequalities. Ending the block grant to local councils after 2020 will make localities more dependent on income from business rates, and this will have serious consequences in areas without a robust business infrastructure. The review of LEPs in 2018 began the process of trying to answer the criticisms of LEP governance and weak LEPs but it did not end the contradiction between unelected private sector boards and elected Mayoral CA governments (BEIS, 2018).

CAs are an instrument not for cutting public services but for reshaping and integrating them more closely into the economic and social agenda. The West Midlands WMCA, for example is responsible for the formation of the workforce from age 16 onwards through ‘employability’ and ‘skills development’, for housing, transport, land use, the police (taking over from the Police Commissioner), the fire service and ‘mental health’. GMCA has responsibility for the whole NHS and social care budget, with a policy intention that all CAs will take over more devolved health powers over time. In some instances, CAs can override the powers from local authorities – in December 2015 central government added an amendment to the Housing and Planning Bill which enables the Secretary of State to ‘invite’ a CA to call-in any local authority development and CAs have been given new Housing Funds, albeit relatively small sums as this Sheffield City Region case study in this issue shows. However, are they staffed up and financed to develop capacity in these major areas of Social Housing and Energy, for example?

Mayoral CAs will have several powers to raise small quantities of additional funding. Elected mayors will be able to raise a precept on constituent authorities’ council tax bills. Where the Mayor is also the Police and Crime Commissioner and thus raises a precept in that capacity, the funds must be kept separate. CAs (with or without mayors) may raise a levy on their members, for any of their functions. This constitutes a shift of funding between tiers of government rather than a means to raise ‘new money’ locally. Several devolution deals permit local retention of 100% of business rate revenue growth above an ‘agreed baseline’. Furthermore, several areas are piloting full retention of business rate revenue. Reports after the 2017 election indicated that the England-wide introduction of 100% business rate retention, planned for April 2019, had been ‘suspended indefinitely’. Elected mayors were to have the power to raise an additional 2% ‘levy’ on business rates. CAs will have the power to borrow money under the local government prudential borrowing regime. Many of the devolution deals provide CAs with an investment fund. The over-riding problem, however, is how to get better devolved powers for finance and investment into the CAs for the decade ahead and to get CAs taken seriously in the major Spending Review ahead.

According to the NAO, evidence that investment, decision-making and oversight at CA level are linked to improved local economic outcomes is mixed and inconclusive (NAO, 2016, 2017). CAs often assume in their plans that there is a strong link between investment in transport and economic growth, but evidence on the added-value that governance at this level can bring to economic growth is mixed. There have been variable levels of success as each CA tries to link spending priorities with outcomes and impact, and the quality of their monitoring and evaluation plans also vary in quality, because of the lack of regional data and intelligence, or the over-reliance on easily available data.

A lack of co-terminosity between the administrative boundaries of CAs, means that coverage does not necessarily match functional economic areas, or the existing boundaries of LEPs. This all adds to fragmentation and ambiguity. Not only that, but economic development priorities that cross existing administrative boundaries can add to the confusion. Powers, functions and funding are not uniform across all CAs, because each CA has evolved over a different time frame, and on a different basis, mainly resulting from separate devolution deals negotiated individually between central government and LA leaders.

CAs add to an already complex structure of Local government in England. Whereas London has the Greater London Authority (GLA) and governance at Borough and GLA level, with a London-wide mayor, across the rest of England there are now multiple levels of governance, and CAs are adding another layer of bureaucracy to this complexity. CAs also need to work in partnership with major stakeholders and other organisations to achieve their objectives, and this muddies the waters even further. To achieve economic development priorities, they need to work with other agencies (public, private and quango) on issues such as housing, skills, transport and land availability, for example. Spatial coherence is difficult to achieve, especially when we add in the need for joint working across other parts of the public services such as the health and social care sectors, education, police, fire and rescue, and others. Boundaries are not co-terminous in all policy fields which makes overall coherence all but impossible in some parts of the country.

CA boundaries may not cross those of district or unitary authorities. However, they can cross county council boundaries. This allows CA boundaries to reflect ‘functional economic areas’, meaning that they are not bound by traditional local government geographies. Some district councils have therefore sought to join CAs outside their county areas. The 2009 Act gave county councils a veto over district councils doing this. The 2016 Act removed this veto: so, a County cannot now be prevented from joining by its district councils, and a district cannot be prevented by its County Council.

Where a district joins a CA, but a county council does not, the 2016 Act also permits county powers for the district’s area to be transferred to the CA. Similarly, the 2009 Act prevented CA including ‘exclaves’, i.e. areas that are geographically detached from the main body of the authority. This prohibition was also removed by the 2016 Act. In practice, these flexibilities have not been used to date. In West Yorkshire, attempts to include some district councils within the North Yorkshire County Council area foundered on county opposition. Now there is a proposal to merge the Leeds LEP and the North Yorkshire LEP arising out of the governments LEP review. In several localities, CAs do not share boundaries with the LEP, creating an additional obstacle to joint working. This is the case in the West Midlands, West of England and Cambridgeshire and Peterborough. There have been further attempts since 2016 to resolve these problems and the Cambridge CA has restructured and absorbed its previous weak LEP and brought it under CA control as worries about financial control were paramount (House of Commons Public Accounts Committee, 2018).

Some CAs took on ‘associate members’ alongside their ‘full members’. Five district councils from Derbyshire and Nottinghamshire are currently ‘associate members’ of the Sheffield City Region, and York City Council (an exclave) is an associate member of the West Yorkshire CA. The West Midlands has several district councils as associate members. LAs may not be members of more than one CA, but there would appear to be nothing preventing a local authority being a member of one and an ‘associate member’ of another but this itself has created problems, as the Barnsley experience shows. Dual loyalties are difficult to live with.

Capacity issues are a critical problem across most CA and local authority areas, and resources and capabilities are limited and varied. The problems are compounded because each CA has a different staffing and recruitment model, and as relatively new and evolving bodies they were initially established with a limited resource base. Consequently, both CAs and LEPs have relied on their influencing role in persuasion or by secondment of professionals from existing public agencies. Some have drawn their staff complements from incorporated transport authorities or from the relevant constituent authorities. As activities have evolved since inception, and the range of powers and responsibilities extended due to specific devolution deals, capacity issues are becoming more evident in several important ways, not least of which is an over-reliance on funding and bidding to the exclusion of public communications.

The 2016 Act requires each CA to set up at least one overview and scrutiny committee. The committee must publish a plan indicating how it will exercise its powers, and it will have the power to suspend decisions of the CA whilst it reviews them. It will be able to require members and officers of the authority to attend and answer questions. The overview and scrutiny role that LAs are expected to perform vis-à-vis the spending and activities of CAs is also proving to be problematic in some areas, because local councillors are expected to fulfil this role above and beyond their existing LA roles and activities.

Public awareness of the evolving governance arrangements for CAs is limited, and despite a plethora of consultation documents published at national and sub-national about governance changes, few members of the general public are aware or understand how their local areas are now being governed. Public consultations have taken place, and in the case of the Mayoral hustings, many debates were digitised and televised, but despite attempts to raise the profile of Mayoral CAs there often seems little appetite for further knowledge on these evolving arrangements.

BREXIT and post BREXIT arrangements – Stalled local economies?

BREXIT is a crucial issue for CAs in those areas where there has a been a reliance on European funding, and where the economy is weak. There is the issue of the developing scenario for successor arrangements to EU Regional Funds which end in December 2019. In April 2018 an ALL-Party Parliamentary Group (APPG) on Post Brexit Funding for Nations, Regions and Local areas, 2018 chaired by Stephen Kinnock, MP.

The 2017 Conservative manifesto promised to set up a new UK Shared Prosperity Fund to replace the EU funds. The shape of the UK SPF is thus a critical issue and the detailed consultation paper is still awaited in 2019. The intention is that the new Fund will ‘reduce inequalities between communities across our four nations’ and it is claimed that the Fund will be ‘cheap to administer, low in bureaucracy and targeted where it is needed most’ (AAPG, 2018).

BREXIT could further heighten the divisions between sub-national locations across the country and between North and South. Central Government is focused on the wider BREXIT negotiations and it appears to have set against the regions and core cities being involved in the process and negotiations and taken their eye away from devolution and cities/regions linkages into Europe post BREXIT. Post BREXIT – what happens to agriculture, environment, fisheries, economic development and transport policy regimes, supply chains, skills and labour market needs, immigration, and public service delivery are all crucial? What if Nissan decides to leave the North East or more City financial institutions relocate from London to Amsterdam, Paris, Frankfurt or Berlin?

UK regions have been significant beneficiaries of European structural and investment funds for over 30 years, and many have been able to leverage in other public/private investments to support the restructuring of their regional and local economies. Support for regional innovation and inter-regional collaboration, as well rural and agricultural programmes will be affected by BREXIT. As local government sources of finance have declined, European Programmes for 2014–2020 have been a source of matched finance for Regional and Local Growth Funds. BREXIT may potentially close off a range of funding regimes to support regional economies and raises questions about the sustainability of venture capital and investment funds, many now operated by the LEPs.

The UK wide Shared Prosperity Fund, on which central government has introduced a pre-consultation process, is not a straight replacement for ESIF and ERDF and there are considerable questions unanswered on its overall scope and scale, and appropriateness of its objectives and priorities. Moreover, these concerns are on whether it is robust enough to address existing spatial imbalances, as well as the methods to be introduced to allocate and deliver resources and the capacity of sub-national organisations to administer such resources. Balancing strategic economic and social priorities in deprived areas will be a huge challenge, and UKSPF offers a possible new opportunity to create a streamlined and integrative framework to suit regional conditions, and to replace existing and very fragmented EU funding instruments but it remains to be seen if an adequate funding consultation takes place on the new Fund and its objectives (see the Industrial Communities Alliance, 2018).

There are plans also to strengthen the UK Industrial Strategy, originally first published before the General Election in June 2017 (BEIS, 2017). BREXIT makes the industrial strategy more difficult to implement and has created a new urgency for UK industries to compete on the world stage, as well as maintaining or seeking greater participation in transnational production networks. It has the potential to change and damage exports, disrupt existing supply chains and mobility of skilled workers. Retaining skills is likely to remain challenging as the global economy becomes increasingly inter-connected and the identification of industries and technologies that will be important in the future is an imprecise art, not always best left to politicians, civil servants or government advisors. No one can easily predict how the global economy will evolve in the medium to long term, and the five pillars of the industrial strategy – productivity, innovation, people, infrastructure, places and the business environment (Greg Clark, BEIS, 2018) may all prove to be barriers to achieving the grand aims. The fact is that the CAs and the CORE CITIES have so far been poorly considered in any BREXIT and Industrial Strategy.

The Industrial Strategy as a Government wide approach to spatial imbalancing will impact on institutions such as Innovate UK, the Department for International Trade and other key economic departments of state – many distribute resources to regions outside of the South east, but thus far there is no regional footprint of clear relationship with local and sub-national bodies responsible for fostering economic growth. The Industrial Strategy White Paper had triggered a review of all sub-national arrangements with a more proactive role envisaged for institutions such as LEPs and CAs. The emergence of Mayoral CAs has significantly altered the geography of LEP functional areas, and in many cases created confusion and ambiguity on the role, functions and operations of each LEP.

The Industrial Strategy can only succeed if developed in tandem with wider domestic government policy agenda, and without substantial government support. It will be impossible to bridge the gap between R&D and production, without a resurgent manufacturing and services base and a more skilled work force. The lack of access to international markets could make the problems of exporting insurmountable, regardless of how productive the economy becomes.

The UK economy has persistent weaknesses on poor productivity performance, low investment in R&D, weak diffusion of innovation, chronic poor trade performance stagnation in wages and regional inequalities. Despite the rhetoric that the Government will re-negotiate trading relationships across the world, beyond Europe, without addressing some of the deep-seated structural problems across the UK, beyond the South East and London, these aspirations may not be fulfilled. Unlocking the potential of places, rather than sectors, needs several key issues to be addressed. There needs to be adequate and strategic investment in infrastructure (transport, energy and digitalisation), clean energy and broadband, a sustainable health and social care system and attack on child and in work poverty, unlocking of long-term investment for housing, support for high value industries and building export capacity, and facilitating growth in all parts of the UK.

The capacity to continue to attract inward investment and skilled workers is a key regional strategy for many regional leaders and having the long-term public sector investment to deliver on priorities such as supporting businesses with finance and other resources and increasing international trade. However, the fact is that resources for trade and inward investment in the regions are at present thin.

Government needs to create the conditions for growth in a regulatory system that enables innovation to flourish and be diffused, but without adequate infrastructural investment social integration and living standard and future economic success could be jeopardised. And the period 2020–2022 now looks likely to produce much instability and uncertainty even if new funds do kick in, post BREXIT.

Conclusions

There is a clear purpose to the existence of the new strategic bodies of Mayoral and non-Mayoral CAs, particularly in the core metropolitan areas dealing with the cross-cutting issues such as transport and economic regeneration, housing and skills. The newly elected mayors are providing city-regions with a greater voice on the national and potentially the international stage and have the potential to improve accountability and services. However, with the introduction of CAs, inherently complex structures have been introduced into England’s already complex local government structures. For Mayoral CAs to deliver on promises and achieve real progress, as well as being different from many earlier attempts at driving economic growth and sustainable social justice and equality, they will need to demonstrate more responsiveness and transparency and engage with the public in more meaningful ways. As part of a public sector reform programme they will need demonstrable outcomes and impacts to show how they are improving across their areas. In Greater Manchester, an area with a long history of joint working, devolved powers have been grafted on to the existing joint working arrangements, but not all local authority areas have these capacities and resources to drive sustainable change on the Greater Manchester model. A proper evaluation of CAs can only be assessed after more rigorous research into all local authority areas where different socio-political and economic circumstances prevail (see ONS, 2018). Only then can a clear assessment of the how effective these new governance arrangements and policy changes will be in bringing about sustainable results across the whole country. More research is needed on the nine CAs which are emerging.

An additional issue which has now emerged since 2017 is the need to clarify the relationship between the CAs and the new meso-regional level initiatives which have been established by central government: of the Northern Powerhouse, the Midlands Engine, the Western Powerhouse and the Cambridge–Oxford Corridor and to be clear on objectives as well as resources to be applied to the new pan-regional structures (see Berry and Giovanni, 2017). New regional quangos, like Transport for the North, are appearing which need to be more widely understood if the public is to support a further tier of meso regional governance and the allocation of major financial resources to them (TFN, 2018).

Future research priorities for English CAs

We would argue that there are six priorities for consideration by CAs in the medium-term period ahead:

CAs need to be more proactive, in responding to central government’s changing policy agendas and BREXIT, in line with local needs to bring forward BREXIT plans post-transition. There will be a need to revamp economic strategies for the decade ahead including new skills and employment strategies from 2020 and the debates on priorities for investment and new industries will only get more pronounced as consultation papers are produced. CAs need to be in the lead wherever possible.

CAs need to commission more research and evaluation to assess existing successes and failures and show how CA activities are ‘adding social and public after value’ alongside the new areas of Energy. Housing and Culture and Sport, a more inclusive growth strategy is needed. CAs are in a strong position to encourage inclusive growth priorities.

A review of current fractured organisational infrastructures to remedy lack of co-terminosity, organisational stress, complexity, and fragmentation and aim for integration of delivery mechanisms and achieve better public understanding need to proceed apace and a plan for the County areas needs to be brought forward. There is also a need to build capacity by working across organisational boundaries on cross-cutting issues to reduce duplication of efforts. Moreover, it will be imperative to identify key priorities, who does what and ways to strengthen the role of Anchor organisations across City-regions need to be more of a priority for the CAs (JRF, 2017).

CAs must involve broader stakeholders (business, civic and community) to build trust, bridge democrat deficit, ensure transparency and accountability, foster ‘inclusive growth’, and clarify reporting and accountability mechanisms upwards and downwards. The third and community sector has been somewhat frozen out of the current growth agenda and the University and Further Education role needs to be strengthened. There is arguably too little attention now to the role of Universities in the knowledge economy and in city-region economies. There is a widespread misunderstanding of the role and capabilities of Universities and the HEFCE agenda has been disrupted by further changes in national higher education structures. CAs need to think much more about how they progress their wider Civic roles.

Central government needs to clarify ideas on the new distribution mechanisms such as the UK Shared Prosperity Fund, UK Industrial Strategy and how other funds will be allocated. There will be an expectation of the need for collaborative rather than wasteful bidding processes and a continued debate on better Single Pot Integration of funding streams. The need to articulate the continued role of European funding post BREXIT will be a major challenge but local authorities will in any event need access to some European funds and these will have to be clarified. A common purpose for economic growth with partners and developing relationships across areas where there is no history of joint working will be essential, as well as a need to be clearer about the type of growth aspirations (inclusive growth, green economy, environmental growth and development).

CAs need to do more to deliver better capacities to deliver the functions agreed in the devolution deals, support economic growth and the government’s industrial strategy, and provide more scrutiny and oversight to their activities. Finance and banking and venture capital investment funds are key strategic issues. Creating a CA research and intelligence capacity across England and with the devolved nations may be a final priority and is essential if the CAs are to be turned into a better force for change in the decade ahead.

The papers in this special edition have all focused on new governance arrangements in an English context, but there is a growing body of literature on Place Leadership with an emphasis overcoming local economic isolationism (Beer et al., 2019; Bowden and Liddle, 2017; Sotaurata, 2016; Sotaurata et al., 2017). The findings from all of the contributions lead us to conclude that in a post BREXIT world there is an even greater imperative for Britain’s cities and towns to adopt global strategies. Important as the North/South divide is within the country, we argue for a continuous and stronger focus on thinking locally and globally. If local economies are to survive the onslaught of internal and external changes, city leaders must think more than ever about how to orchestrate their economic development strategies to transform their economies.