PARLIAMENTARY DEBATE
Draft Combined Authorities (Finance) (Amendment) Regulations 2024 - 29 April 2024 (Commons/General Committees)

I beg to move,

That the Committee has considered the draft Combined Authorities (Finance) (Amendment) Regulations 2024.

It is a pleasure to serve under your chairmanship, Ms Nokes. The draft regulations before us today will, if approved by Parliament, complete the legislative framework for the funding of new combined county authorities. In recent months, similar secondary legislation has been made to provide rules for the election and by-election of combined county authority Mayors, and for their overview, scrutiny and audit committees. Today’s statutory instrument is the last key building block in the architecture of legislation for combined county authorities as a category. The regulations will provide for Mayors of the new combined county authorities to set budgets for the costs of their functions, and raise a precept for these costs, subject to consideration and a vote by the combined county authority. They also provide for a mayoral fund.

As with preceding legislation, we are following the principle that provision for combined county authorities should be the same as that for combined authorities. The regulations do this by amending the Combined Authorities (Finance) Order 2017, to apply its measures to combined county authorities. The 2017 order provides for an effective process, aligned with the wider local government budgeting timetables, including robust arrangements for scrutiny and challenge of the Mayor’s spending proposals by the combined authority. The effect of that application to combined county authorities is essentially identical, and is as follows.

First, there is a requirement for combined county authority Mayors to submit by 1 February a draft budget to their combined county authority for consideration. Secondly, the combined county authority must recommend any amendments to the draft budget by 8 February, and the Mayor must consider these amendments and respond with a further proposal if they choose to do so. Ultimately, the constituent members of the combined county authority may impose amendments to the Mayor’s draft budget, if supported by a significant—usually two thirds—majority. In the absence of this majority, the Mayor’s proposals are deemed to be accepted by the combined county authority. The combined county authority must set a mayoral budget on the Mayor’s behalf, if the Mayor fails to submit a draft for consideration by 1 February.

The Mayor may fund mayoral functions through a precept. The standard local government finance regime applies so that precepts must be issued by 1 March. Mayoral costs are itemised separately on council tax bills. Where the Mayor exercises police and crime functions, those are also listed separately. To further aid transparency, the Mayor is required to maintain a fund in relation to the receipts and expenses of the Mayor’s functions, excluding police and crime commissioner functions, for which there is a separate police fund.

Before introducing the original 2017 order for combined authorities, the Government undertook informal consultation with officers of constituent councils of current and prospective combined authorities, including via a working group of senior finance officers. Our inquiries with finance officers of existing mayoral combined authorities during the development of these draft regulations found no operational difficulties with the existing set-up. The regulations therefore simply extend the application of the existing provision in line with the broader policy of parity between combined county authorities and combined authorities.

This delegated legislation provides for a precept to be set. Can the Minister tell me what the mechanism is by which an upper limit for such a precept would be set, so that councils or Governments of a different colour would not necessarily be given a mechanism to fleece taxpayers?

I will come back to my right hon. Friend on that point, but I would say that Conservative Mayors charge zero mayoral precept, whether that is Ben Houchen in the Tees Valley or Andy Street in the West Midlands. Contrast that with the Mayor of Greater Manchester, for example.

I would just like to pursue the point made by my right hon. Friend the Member for North Somerset (Sir Liam Fox). The issue is not what a particularly good Mayor from a good political party would do. These regulations relate to constitutional changes, which I know because the explanatory memorandum says so. It says that the combined county authorities have a slightly different constitutional structure from the combined authority model before, being designed to be better suited to non-urban areas—quite how, it does not say. Surely the issue is, regarding my right hon. Friend’s question, how are limits put upon the power to raise tax? If there are not any, can we be told, now, during this Committee?

I shall make sure that I give my hon. Friend the answer to his question by the end of this Committee. However, to conclude my speech, these regulations will apply the regime, which is already in place for combined authorities, to combined county authorities to support their Mayors to fund their functions through a precept, where they chose to do so. They prescribe a tried-and-tested budget-setting process that allows for effective challenge and robust and transparent scrutiny by the combined county authority. I commend them to the Committee.

It is a pleasure to serve under your chairmanship today, Ms Nokes. I will start by confirming that we do not intend to divide the Committee on this statutory instrument. We agree that there is a financial and democratic need for transparency in the funding of combined authorities and in granting equal powers to mayoral combined authorities and combined county authorities in this regard.

The regulations are intended to extend the existing provisions for the funding of mayoral combined authorities to those of county combined authorities. The new model of county combined authorities, we accept, is more appropriate for non-metropolitan areas where two-tier governance is in place, and this model recognises the geographically specific issues that non-urban areas face, and that local governments then must reflect that different identity and accommodate it where possible.

Can the Minister answer, though, why it has taken so long for the Government to address this difference? There has been a great deal of frustration from our counties, which feel very strongly that they have been required—demanded, in fact—to mirror the model in urban areas, when it just did not fit their geography or their political structures. It would be interesting to know why it has taken so long to reconcile that.

Combined county authorities have shown great progress for English devolution, but there are legitimate concerns over the process and the way in which the SI has been handled. Therefore, can the Minister answer how this change would be communicated with the combined authorities, and their component councils, as this is rolled out?

Labour supports devolution and believes that having the right powers in the right places is important, and that precepts are an important way of achieving that. However, the Secretary of State for Levelling Up, Housing and Communities made a point in the Chamber, during oral questions only last week, of criticising the use of precepts in some areas. We heard some of that today, where the political argument is used that Labour Mayors choose to exercise their powers of precepts in a way that Conservative ones do not.

I think that we need to accept that there is no free ride on this—a Mayor is not free; the money comes from somewhere. It comes from a subscription that local authorities pay, from a levy that is required of the local authority, or is done via a precept. Surely the most transparent way is that Mayors of county combined authorities say to the public, on their council tax bills, “This is how much this particular function costs.”

The hon. Gentleman looks at me in a slightly accusatory way, as if I might disagree with anything he is saying. I do not think you get a free Mayor either. I believe that it is good that it is transparent. I believe that it is good that it is broken up on a bill, so we can see what council tax payers are having to pay for this. On these matters, we are in violent agreement. The only question I had—and I think my right hon. Friend had—was, “What is the upper limit, and how is it imposed?” We know that district councils, if they wish to put up council tax above a certain amount, have to go to a referendum. I am asking—and I think my right hon. Friend is—“What, if any, limits are there here?”

I will avoid answering the Minister’s question for him, but we need to accept that different Mayors have different powers. Some are police and crime commissioners, while some do not have those powers, and some take on the fire authority powers, the powers of the transport authority, and the rest of it. Therefore, their funding models, and their precept and levelling-up funding, are very different.

However, in each of those circumstances, it will be for the Secretary of State to determine, by legislation, what the upper limit for any increase will be, whether that is a percentage applied to the council tax, or even a cash limit —£5, £10 or whatever—applied to mayoral combined authorities. That is in the gift of the Secretary of State. There is no precept increase in England that has been done without the explicit consent of the Secretary of State, and I think that that is an important point to make here.

We know that councils are facing a perfect storm of rocketing demand in adult and children’s services, adult social care and temporary accommodation, and a rise in borrowing costs, but, at the same time, the core grant has decreased alongside neighbourhood services. The sticking-plaster approach to devolution is part of the problem.

Local growth plans will be made in conjunction with businesses and local authorities to ensure that precepts will be adequately funded, planned and supported, therefore maximising economic potential across the whole region under consideration. More needs to be done, however, because local authorities are, in the end, the foundation of combined authorities. Combined authorities do not exist in isolation, and if the foundation on which they rest is not secure or firm, that will have an impact on them.

Labour is the party of devolution: it created the Scottish Parliament, the devolved Parliament in Wales, the Northern Ireland Assembly and the office of the Mayor of London, and it introduced the Localism Act 2011. Labour Mayors and Labour councillors are leading the charge across the country and, together, have made the case for further devolution.

We propose more stable, longer-term, single-pot settlements across all our combined authorities to reward those who make good progress and are good custodians of public money. It is a fact that, under the Government, working people are paying more and more for less and less, so it is time for a fresh start, which can be achieved only with a Labour Government.

I am grateful to the hon. Member for Oldham West and Royton for expressing support for the regulations.

On the questions from my right hon. Friend the Member for North Somerset and my hon. Friend the Member for South Norfolk, there is no upper limit. The mayoral precept is not subject to the same referendum principles as council tax. As I said, however, mayoral budgets are subject to challenge and amendment by a significant majority on the combined authority or, in these cases, the combined county authority. I would suggest that local decision makers are best placed to determine what is right for their local area. As I outlined, it is made clear on council tax bills what the mayoral precept costs taxpayers, so taxpayers can hold the Mayor to account for charging an unwieldy mayoral precept in those circumstances.

Would my hon. Friend consider changing that in future, particularly for the new county devolution deals? Unlike most prior devolution deals, they have not been accompanied by any local government reform, so our council tax payers could be paying precepts for the town, the district, the county, the PCC and the new combined authority. Value for money is questionable in such a case.

I understand my right hon. Friend’s point. I am happy to take that away and look at whether something similar could be established for mayoral precepts. It is not currently the Government’s intention to do so, but he makes a valid point.

On the point made by the hon. Member for Oldham West and Royton, combined county authorities are a direct result of the Levelling-up and Regeneration Act 2023. This statutory instrument is required by that Act. He asked why it has taken so long, but the Act was passed only at the back end of last year in direct response to the request of counties to have a devolution model that fitted them, so I would say that his frustration at the time that it has taken to get to this point is misplaced.

I do not particularly disagree, but I would ask for an acceptance that there is a natural tension in the devolution programme between the need to have devolution for a purpose, such as jobs, housing, the economy or transport, and the need to represent local identity. The Government have struggled in the past where there have been conflicting identities—for example, where counties with distinct identities have been forced to merge to create a combined county authority with a Mayor who did not fit. Part of the delay that we have seen comes from trying to get that through but it not working.

As the hon. Gentleman says, we have been flexible in our approach. We have the traditional combined authority model that previous combined authorities have adopted. On Thursday, we will see a new Mayor for York and North Yorkshire elected using the traditional combined authority model, as well as a new Mayor for the East Midlands being elected using the new combined county authority model. We have listened, we have been flexible, and we have met local needs as and when they have arisen.

In conclusion, the regulations are essential to ensure a robust legislative framework for combined county authority mayoral finances for budget-setting, precepting and the mayoral fund. I commend them to the Committee.

Question put and agreed to.