The Cities and Local Government Devolution Bill – evolution or convolution?

Bevan Brittan

The Cities and Local Government Devolution Bill aims to implement the new government’s key manifesto commitment to devolve powers and budgets to boost local growth in England. As it passes through Parliament there has been hectic activity as councils seek to submit proposals before the 4 September 2015 deadline set by the Chancellor of the Exchequer.

The bill is a permissive piece of potential legislation that is likely to facilitate a restructuring of local government. The main initial headlines were in relation to Greater Manchester Combined Authority (GMCA) and initially the imposition of a ‘metro mayor’. However, as amendments have been sought in the House of Lords the landscape continues to change. The bill has grown in size significantly – the original 14 clauses had grown to 25 by the time the bill passed to the House of Commons on 21 July 2015. Perhaps more fundamentally, the legislation is permitting local authorities to submit proposals to government seeking devolution of powers, with the press reporting significant activity and a volume of applications being made to government for devolution deals.

Devolution of powers

The bill provides a framework for the devolution of powers that would be applied to individual areas by secondary legislation. It:

  • enables an elected mayor for the combined authority’s area who would exercise specified functions individually and chair the authority, although that is currently no longer a requirement;
  • enables the mayor to undertake the functions of police and crime commissioner for the area;
  • removes the current statutory limitation on functions that can be conferred on a combined authority, which are currently economic development, regeneration, and transport; and
  • enables local authority governance to be streamlined as agreed by councils.

Most requests have focused on powers to support economic growth, the skills and employment agenda, the integration of health and social care.

The provisions are deliberately generic and recognise the fact that there is a different appetite for change and a different local momentum in places. They are not intended as a one size solution that fits all. They are intended to be a ‘blank canvas’, and will enable changes by regulation to the constitution, membership, structure and boundaries of local authorities for devolution deals where a combined authority might not be appropriate. This is apparent in the content of devolution deals being sought.

A checklist of some popular requests include:

  • health and social care budgets;
  • retention of business rates;
  • transport powers, including bus franchising;
  • emergency services integration;
  • housing delivery models; and
  • skills agenda or work programme.

Accountability

The bill initially provided that the Secretary of State could also require an existing combined authority to adopt an elected mayor and could remove a dissenting council. However, this requirement was removed by the House of Lords, which added a new sub-clause that prevents the Secretary of State from using such an order ‘as a condition for agreeing to the transfer of local authority or public authority functions’. This is a direct challenge to the Chancellor of the Exchequer who stated in May that any transfer of powers ‘has to involve a city-wide elected executive mayor’ and there is likely to be a battle for the government on this new issue when the bill is debated in the House of Commons. We are aware of numerous requests for devolution deals that are not proposing mayors.

It is worth noting that a concession was originally included for non-urban areas that there may be somebody similar to a mayor appointed to deal with the geographical boundary. For example, somebody akin to a leader could be the accountable person for an area that would include the county together with any boroughs or districts or city councils within it.

Additional functions

As current requests suggest, local authorities are leading the way in taking advantage of what the bill allows in seeking a broader set of functions than economic development, regeneration and transport. Councils are considering that the proposed changes would improve the exercise of their statutory functions. This replaces the previous tests for a combined authority under the Local Government, Economic Development and Construction Act 2009.

The Secretary of State can also order that a combined authority takes on the functions of another public authority in the same area, either in place of that authority or in partnership. This removal of restrictions on combined authority functions opens the way for the Greater Manchester Combined Authority and others to take on health functions.

A change introduced by the House of Lords is a new clause 19 on ‘Devolving health functions’. This prohibits the transfer of regulatory functions held by national bodies and ensures that transferred services ‘adhere to national service standards’, so as to safeguard the national characteristics of the NHS.

It also potentially opens up opportunities for wider public sector reform, especially in relation to health and social care, welfare, housing and planning. It remains to be seen whether that will actually be the case though, as the restrictions could still be limited to taking more control of a ‘broader pool’ of local authority functions.

Other amendments

Other changes introduced by the House of Lords include:

  • the Secretary of State must present an annual report to Parliament on the progress of devolution;
  • when introducing new legislation into Parliament, a minister must publish a devolution statement confirming that the provisions of the bill are compatible with the principle that powers should be devolved;
  • there are reporting requirements on the Secretary of State when proposing new regulations that transfer powers or that relate to the governance, constitution, membership, structure and boundaries of local authorities;
  • amendments to provisions about overview and scrutiny committees, and a new requirement for combined authorities to have an audit committee; and
  • the bill also removes the restriction that prevented areas which had voted in a mayor, from holding a further referendum on the issue. This would apply to Bristol, – the only city that voted in favour of introducing a mayor, giving the electorate the opportunity for a new mayoral referendum.

Framework and guidance

The Department for Communities and Local Government has made it clear that there will be no guidance issued by central government to local authorities and that it is a very permissive environment, with the Devolution Bill intended to merely be a facilitation tool. The three major things that they will be looking for in any local government proposals are:

  • objectives: local authorities will have to explain why they are seeking a deal, and if this is based on economic growth and efficiency then that needs to be spelt out;
  • governance: the decision-making will have to be better supported by an economic rationale and accountability be very clear; and
  • deliverability: can potential combined authorities explain the benefit of offering powers locally? Why are the powers needed? Pooling of programmes and budgets is likely to be encouraged.

We are already seeing initial devolution deals being returned with fresh challenges. There are no rules. However, collaboration will be needed when it comes to delivery. Devolution deals are the first step and, as the Department for Communities and Local Government already knows, seeking to put in place the procurements, contracts, finance and details with central government to deliver on the devolution deals requires considerable work and innovation. Once governance is resolved, the delivery is likely to require considerable legal input.

New ways of working

Many local authorities are already seeking to work in different ways such as through shared services, through the local enterprise partnerships or otherwise, and these devolution deals are yet another opportunity.

Greg Clark has been a long-time advocate of local enterprise partnerships and they will continue to have a role. In the current timeframe there has been limited engagement but that will need to change especially in relation to skills, where the private sector are likely to create the training and employment opportunities, and in economic growth. It has been reported that the Local Government Association is inundated with requests for support from authorities looking to create combined authorities or develop a proposal for a devolution deal. Their support in developing delivery mechanisms would be well received.

Conclusion

The immediate devolution timeline is tight. Pressure has increased with the Chancellor of the Exchequer’s announcement in the summer budget that proposals should be submitted by 4 September 2015 – long before the legislation is finalised.

In the meantime the Communities and Local Government Committee has announced that it is to hold an inquiry into the Cities and Local Government Devolution Bill, ‘looking at the lessons which can be learned from City Deals, whether the Manchester devolution deal provides a model for other areas, and how the Devolution Bill will build on local accountability’.

Whether the legislation does radically alter local government in England, as the government claims, will depend on how much appetite authorities have for change, how well they work together to push through their planned deals and the models they adopt for actual delivery – much of which has not been taken in hand yet.

What is certain is that the country will look very different over the next few years.

David Hutton
Partner
0370 194 8927
david.hutton@bevanbrittan.com

Claire Booth
Associate, professional support lawyer
0370 194 1705
claire.booth@bevanbrittan.com