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Devo Investment Funds aren’t bespoke – just off-the-peg and a lousy fit

Devo Investment Funds aren’t bespoke – just off-the-peg and a lousy fit

🕔14.Apr 2016

‘Pig’s breakfast’ – ‘something unattractive or unappetising; a mess, a muddle’, as defined by the Oxford Dictionary. In using the metaphor to enliven the title for a recent CF post about devolution and Combined Authorities (CAs) – ‘Devolution Deals: informal governance or a pig’s breakfast?’, Chris Game says he was thinking mainly of the mess/muddle bit.

It was, I suggested, the process – its top-down, secretive, apparent haphazardness – through which CAs had negotiated, or gratefully accepted from George Osborne’s Treasury, their respective devolution deals, that resembled the porcine brekkie, rather than the deals’ actual contents.

Had I focussed more on content, it’s since occurred to me, the unattractive/unappetising part of the definition might have been more relevant – certainly from a West Midlands viewpoint.

For in one crucial respect these devolution negotiations and deals were the very opposite of a mess or muddle. Financially, they were and continue to be crudely formulaic.

Remember last November when, after weeks of leaks, we were finally vouchsafed details of the WMCA’s toughly negotiated and ever so secret devo deal.

The popular media headline was about the elected mayor – that the deal was dependent on the six CA council leaders having accepted, in some cases with gritted teeth, that from 2017 the CA will be overseen by a directly elected executive mayor.

We Chamberlain Files cognoscenti, though, had known that all along. We knew it was really all about the money – and Paul Dale duly obliged, his headline putting the big pound sign right up front: ‘£8 billion West Midlands metro mayor devolution deal gets Government approval’.

As Paul’s opening sentence strongly hinted, the £8 billion figure wasn’t the Government’s, nor was it anywhere in the deal document.

Rather, it was from the WMCA’s own summary document, which parcelled up every available monetary figure – the £4.4 billion HS2 Growth Strategy, a £200 million land remediation fund, various locally funded investment vehicles – to produce “an £8 billion ten-year investment plan to get the West Midlands moving and drive local growth”.

There seemed some confusion about whether the plan was a ten-year or 30-year one. But, either way, it meant almost marginalising the really key statistic in the WM’s and every CA’s devolution deal: the Government’s new, annual, long-term revenue contribution to the CA’s Investment Fund, which in the WMCA’s case was £36.5 million p.a. over a 30-year period, or nearly £1.1 billion.

To get within touching distance of the £1.2 billion mentioned in Paul Dale’s post earlier this week, it’s necessary to add in the entirely separate £97 million for an extension of the metro tram system from Birmingham city centre to Adderley Park.

The extension’s important, as obviously are the other and widely varying contents of all the so far nine announced deals – the devolved powers over transport and infrastructure, planning and regeneration, skills, health, energy and the environment.

But every council leader in every CA negotiating team recognised that the core and potential clincher of their deal was the Investment Fund.

As the Local Government Chronicle (LGC) put it last week:

These multi-million pound investment funds were the prize: the jewel that makes the crowning of a metro mayor palatable to local politicians and sellable to the public.

But here’s the thing – the thing that prompted that LGC quote. Of all the elements in these supposedly individualised, ‘bespoke’ deals, the one that seemingly was NOT up for discussion was the size of the Investment Fund.

The model, like so much else about these devo deals, was set by Greater Manchester (GMCA) – back in March 2012, while other city regions were barely aware of what a Combined Authority was, let alone what it might do.

The GMCA leaders agreed a scheme whereby their councils would collectively invest £1.2 billion up front in infrastructure improvements. In return, the Government would allow a maximum of £30 million p.a. to be ‘earned back’ from the Treasury over a 30-year period.

The actual ‘earn back’ would be determined by the city’s ‘growth performance’, measured by changing commercial rateable values across the city region.

It was a genuine fiscal innovation, and the first glimpse of councils’ radically changed financial future, in which their income will reflect the economic growth they generate, rather than the assessed service needs of their residents.

More importantly here, the ‘30 x 30’ formula – the Government’s £30 million p.a. over 30 years – had been set, if not in stone, then in some pretty heavy clay.

Of the eight subsequent devolution agreements, five – Liverpool and Sheffield City Regions, North East, and most recently East Anglia and West of England – have not just the same 30 x 30 formula, but even near-identically worded clauses:

Control of a new additional £30 million a year funding allocation over 30 years, to be invested in [the CA’s Single Investment Fund] to boost growth.

In fairness, sometimes – WMCA’s is one case – growth is driven, rather than boosted, but that’s about as bespoke as it gets.

Liverpool and Sheffield CAs have barely half Greater Manchester’s population, but they nevertheless qualify for 30 x 30.

800,000 appears to be the current threshold. Below 800,000 and, like Tees Valley and Greater Lincolnshire, you drop, equally formulaically, to 15 x 30.

Which brings us to the West Midlands, the combined population of whose seven constituent member boroughs is around 2.8 million, rising to 3.6 million with the current five non-constituents (Cannock Chase, Nuneaton & Bedworth, Redditch, Tamworth, Telford & Wrekin).

These numbers, added to the political recognition that the WMCA’s driving responsibilities also extend to the Midlands Engine for Growth, evidently qualified for a unique XXL 36.5 x 30 Investment Fund contribution – £3.65 million p.a. over 30 years, and thus “the largest investment package in the country”, as Cllr Bob Sleigh, Solihull Leader and Shadow WMCA Chairman, was quick to claim.

Cllr John Clancy, elected a couple of weeks later as leader of Birmingham City Council, was less impressed, describing the deal as being “at the bottom end of expectations”. And you can see what he might have had in mind.

Local Government Chronicle produced last week a table that I at least hadn’t seen before, showing what the various CA investment fund totals represent per head of population.

LGC table

The LGC didn’t list the precise populations on which it based its calculations, so, for ease of reference, I’ve added some very recent ones.  On which basis, as you’ve probably already calculated, the West Midlands value per head should be much closer to £400 – a bit fairer, but not much.

It’s still, as I suggested earlier, an unattractive picture in comparative terms, but the LGC’s greater concern was the overall apparent arbitrariness and inequitability of this supposedly bespoke tailored process.

Personally, I’ve not owned a suit of any kind for at least three decades, but I do know basic tailoring jargon. And it seems to me that this crucially important Investment Fund part of the devolution process, far from being bespoke or even made-to-measure, is a straight off-the-peg job – and, in our case, a pretty lousy fit.

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