Published on CityMetric by Claire Spencer

At its last meeting on 12 January, the West Midlands Combined Authority (WMCA) board voted that it was “not minded to approve the mayor’s budget, including a Council Tax Precept of £10.80”.

This was a first for the board, which is made up of regional council leaders – a vote that had split down party lines. And while the revised Budget proposals demonstrate that a compromise has been reached in the intervening weeks that the vote was lost has not been without consequences for the WMCA, the relationships that underpin it or the region’s investment plan.

In our response to the Budget, the WMCA Overview & Scrutiny Committee said:

The current situation where the CA Board refused to agree the proposed mayoral budget does not resonate with the level of partnership and collaboration required for the Combined Authority to achieve its strategic objectives.

It’s easy to scoff at this – “its politics!” – But trust matters, even in political organisation. Collective investment from partners across the region – in cash or in kind – unlocks value, and locks in commitment. When trust dies, partners are less likely to collectively invest in that way.

That doesn’t mean that there shouldn’t be political battles on how resources are raised and used, particularly while Council Tax endures as a way of funding places. But the basic principle is that we work together to create a bigger pie to divide up. My fear is that the events of the last few weeks run the risk of the pie shrinking.

Let’s look at how the budget proposals have changed in the last month. The easiest starting point is the Mayoral Precept, a slight addition to council tax intended to fund the mayor’s office. That was projected to raise £7.5m. Now, there will not be one in 2018-19.

Part of the slack has been picked up by the Transport for West Midlands Levy – which the seven constituent authorities of the WMCA invest into collectively. Having underspent in 2017-18, all seven were due to share a rebate of £265,000, but they will now invest this straight back into the mayor’s office. The rest of the mayor’s office will be funded by drawing on the part of the £2m Mayoral Capacity Fund that had been destined to bolster the operations of the wider WMCA, and by removing a further £47,000 from the operational budget.

This will see the mayor’s office funded to £832,000 – 7 per cent lower than last month’s proposal of £888,000, firmly in compromise territory. This arrangement cannot be repeated – the Mayoral Capacity Fund is otherwise destined to help the West Midlands deliver its industrial strategy, and there is no guarantee of a levy underspend/increase to create the headroom.

The precept was also due to fund ‘Network Resilience’, to £572,000: this will now be covered by an increase in the transport levy of the same amount. Birmingham, the most populous of the Constituent Authorities, will pay £225.000 of that increase.

With the mayor’s office and resilience covered, that leaves the most substantial segment left to cover: £6m that was destined for the investment programme, which is now deferred until next year.

To summarise, instead of raising new local money from citizens via the Mayoral Precept, the money has either been replaced – broadly speaking – with the money that citizens have already invested via Council Tax, Business Rates and general taxation; or the spending has been deferred until 2018-19. In a year when many councillors in the Constituent Authorities are facing local elections, you can understand the tactical rationale for voting down the precept – but it hits the bottom line of already stretched council budgets.

We can also conclude from the above that the WMCA’s ability to deliver its Strategic Economic Plan will be hampered by a lack of capacity within itself and a short-term reduction in its investment income – although the board has been assured that this doesn’t put the wider capital programme at risk in the round.

However, there is a risk that the Treasury – which factored in a “local contribution” (that is: the precept) when striking the first devolution deal, may claw back some of the ‘gain share’ revenue after the first gateway review – a funding stream currently coded as ‘amber’ in the Investment Programme, with the associated capital projects:

So whatever their reasons for voting down the precept, it is vital that the leaders of the constituent authorities and the mayor work together to secure the funding. With a potential ‘no deal’ Brexit looming, the challenges for the West Midlands are for us all to face.

Claire Spencer is Labour councillor for Moseley & Kings Heath on Birmingham City Council.