PAPER B
Purpose: For Decision

Committee

EXECUTIVE

Date

14 JULY 2016

Title

COMBINED AUTHORITY – GOVERNANCE REVIEW

Report to

THE LEADER AND EXECUTIVE MEMBER FOR
RESOURCES, ORGANISATIONAL CHANGE AND
CHILDREN’S SERVICES

EXECUTIVE SUMMARY
1.

To seek approval from the Executive as to the Solent Governance Review and its
conclusions. If agreed, to approve in draft the Combined Authority Governance
Scheme. This will then be subject to a detailed consultation period with the public and
other stakeholders, which will then be reported back to the Executive in the autumn.

2.

A similar report and recommendation is being considered by Portsmouth City Council
and Southampton City Council.

BACKGROUND
3.

Council has previously discussed the issue of devolution at its September 2015 and
March 2016 meetings and have agreed:
(a)
(b)
(c)
(d)

4.

THAT the prospectus for a devolution deal for Hampshire and Isle of Wight as
the basis for negotiation with government be supported.
THAT the final devolution deal must ensure the financial security of Isle of Wight
and availability of public services to its communities be confirmed.
THAT at this stage [September 2015] the council is making no commitment
beyond continued involvement in the development of a potential deal, be noted.
THAT the fullest possible consultation with the Isle of Wight community,
including consideration of a referendum on any devolution deal document that
the council is considering accepting, be agreed.

Last summer the expectation was that the devolution proposals would be based on an
Hampshire & Isle of Wight geography. However as the work on these proposals
progressed, and the Government insisted that it would be necessary to have a directly
elected mayor, it became apparent that it would not be possible to secure an
agreement on the governance arrangements that would be needed to have a
combined authority covering 15 local authorities, 2 national parks and 2 local
enterprise partnerships.
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 5.

HM Treasury then invited representatives from authorities in the Solent area to explore
whether it would be possible to agree a devolution deal for the Solent area. The hope
was that a deal could be announced at the March Budget. A draft deal was agreed
very quickly and this provided significant opportunities for authorities in the Solent area
although as part of the deal the authorities had to agree to set up a Combined
Authority with a Directly Elected Mayor (DEM). The draft deal included.
(a)
(b)

(c)
(d)

(e)

(f)
(g)
(h)
(i)

£900m funding for the area over 30 years (£30m p.a.) to invest in economic
growth and housing.
Keeping all business rates generated in the area (approximately £400m) in
exchange for the current system of government funding for local councils meaning the area would have better control of its own financial future and
piloting the new approach
Powers over strategic planning, such as future spatial plans
Increase productivity and create more jobs and better jobs by simplifying and
strengthening support for business growth, innovation, and global trade and
investment
Control of the budget for adult education and training in the area, enabling a
focus on the skills businesses want people to have, therefore people get jobs
and businesses prosper
Development of a new programme to help the hardest to help claimants back
into work and provide them with support
Delivering 52,000 homes in the area by 2026
Control of a dedicated transport budget, franchised bus services and the
network of local authority roads
Innovative and integrated approaches to public service reform, including health

6.

The expectation was that the deal would be announced by the Chancellor of the
Exchequer at the Budget in March. Initially the deal was agreed by representatives
from Hampshire County Council, the three unitary authorities and the five district
councils in the Solent area. Unfortunately before the deal was announced Hampshire
County Council (HCC) changed its position and stated that they were no longer
prepared to sign up to the deal. The Government asked the Solent authorities to work
with HCC in the hope that a deal could be agreed with all partners allowing a deal
announcement to be made. Despite the best efforts of partner authorities it has not
proved possible to persuade HCC to sign up to the deal and the creation of a Solent
Combined Authority. Indeed the County Council has now made it very clear that they
oppose the creation of a combined authority in either the south or north of Hampshire.
Without HCC's agreement to be part of the Solent Combined Authority it is not
possible for the Solent district councils to be part of the formation of the Solent
Combined Authority. The District Councils outside of the Solent area were also seeking
to create a Combined Authority (the Heart of Hampshire Combined Authority) and
negotiate a devolution deal. HCC were actively involved in these discussions from the
start but still felt unable to support the final proposition.

7.

In this situation, encouraged by central government, the three unitary authorities within
the Solent area (Portsmouth, Southampton and the Isle of Wight) are looking to create
a Solent Mayoral Combined Authority to deliver on the draft devolution deal. The first
stage in creating a combined authority is to undertake a Governance Review and
approve a Scheme for the combined authority. The Scheme has to be approved by the
Council's Executive.
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 COMBINED AUTHORITIES
8.

A combined authority is a legal structure that may be established, via an Order issued
by the Secretary of State, at the request of two or more local authorities. The
combined authority’s executive consists either of one representative of each member
authority; or one representative of each member authority plus a directly-elected
mayor (hence a ‘mayoral combined authority’).

9.

The legislation on combined authorities can be found in sections 103-113 of the Local
Democracy, Economic Development and Construction Act 2009, which has been
substantially amended by the Cities and Local Government Devolution Act 2016. The
power to set up a combined authority extends to England only (but not to London).

10.

There are multiple routes to establishing a combined authority.

11.

Under the original procedure from the 2009 Act, a local authority or authorities may
carry out a ‘governance review’, which must publish a ‘scheme’ recommending the
creation of a combined authority. Publication of the scheme requires the consent of the
local authority areas included in the scheme. The Secretary of State may then agree to
create a combined authority by Order under the 2009 Act.

12.

Alternatively, via the 2016 Act, the Secretary of State may decide to establish a
combined authority, if the councils in the relevant area consent. The Secretary of State
must hold a public consultation, unless one has already been carried out locally and a
‘scheme’ has been published. The Secretary of State must be satisfied that the
establishment of a combined authority is likely to “improve the exercise of statutory
functions” in the area in question.

13.

An existing combined authority may be changed into a mayoral combined authority via
a further Order from the Secretary of State. All the member authorities must consent to
this. However, the 2016 Act provides that any authorities that do not consent must be
removed from the combined authority when the elected mayor is established

FUNCTIONS
14.

The 2009 Act originally provided that a combined authority could only undertake
functions related to economic development, regeneration, or transport, or other
functions that its member authorities agreed to transfer upwards to it. The 2016 Act
removes these limitations, and permits the Secretary of State to transfer statutory
functions or the functions of public bodies to combined authorities. This is to be done
via an Order for each individual combined authority. The powers of the Secretary of
State in this regard are wide, though the 2016 Act includes a number of qualifications
with regard to the transfer of health service functions.

15.

As well as statutory functions, the devolution deals agreed so far provide for the
transfer of a number of Government-funded programmes to combined authorities.
Where such programmes are not statutory, they will not be covered by the combined
authority’s Order, and can be transferred as soon as the Government and the relevant
combined authority can agree on terms. In Greater Manchester, which was the first
area to agree a devolution deal, many programmes have already been transferred.
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 MAYORAL COMBINED AUTHORITIES
16.

The 2016 Act permits a combined authority to establish a directly-elected mayor. This
can be done by either a new or an already existing combined authority.

17.

Of the five existing combined authorities, four (Greater Manchester, Sheffield, NorthEast and Liverpool) have agreed to establish a directly-elected Mayor as part of their
deal. The new combined authorities proposed for Tees Valley and West Midlands will
also do so, making a total of six mayoral combined authorities. The draft ‘North
Midlands’ deal also includes provision for an elected mayor. The Mayors will be
elected using the Supplementary Vote system, used for local authority Mayors and the
Mayor of London. The Government currently anticipates all seven mayoralties holding
their first elections in 2017.

18.

The Mayor will chair, and be a member of, the combined authority. The mayor will be
able to allocate ‘Cabinet’ portfolios to each of the combined authority members The
‘Cabinet’ will be the existing executive board of the combined authority, made up of
representatives from the member local authorities. They may receive expenses but
may not be paid. The Mayor will have no control over who these representatives are;
thus an incoming Mayor would only be able to reshuffle a ‘cabinet’, not change its
personnel without their consent.

19.

The Mayor must appoint a deputy mayor, who must act if the Mayor becomes
incapacitated. Where a Mayor is also a Police and Crime Commissioner they may
appoint a ‘deputy PCC mayor’, separate from the deputy mayor. This person will be
able to take on most of the mayor’s PCC functions. So far, only Greater Manchester
(plus the draft ‘North Midlands’ agreement) has agreed to the elected mayor becoming
the PCC. This will not be possible for the Solent CA given its geography.

20.

The Order setting up the combined authority may confer functions solely on the Mayor
or on the combined authority. Subject to any limitations in the Order, the Mayor may
delegate functions to Cabinet members, committees, or officers of the combined
authorities. Regulations may also be made permitting agreements with other
authorities to exercise functions jointly, under section 101 of the Local Government Act
1972.

21.

Each devolution deal provides some outline details of scenarios when the combined
authority membership may overrule the Mayor. For instance, in each deal, the
combined authority membership may reject the Mayor’s budget on a two-thirds
majority. In some deals, the Mayor’s ‘strategies’ may also be amended on a two-thirds
majority. These provisions can be anticipated in the Orders setting up the mayoral
combined authorities.

FINANCIAL POWERS
22.

Mayoral combined authorities will have a number of powers to raise small quantities of
additional funding:
(a)

Elected mayors will be able to raise a precept on constituent authorities’ council
tax bills, providing that the Order establishing them allows them to do so.
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 (b)

(c)
(d)
(e)

(f)

23.

Combined authorities (with or without Mayors) may raise a levy on their
members, for any of their functions. This constitutes a shift of funding between
tiers rather than a means to introduce ‘new money’ into the system
A number of devolution deals include permitting local retention of 100% of
business rate growth above an ‘agreed baseline’
Elected Mayors will have the power to raise an additional 2p in the pound on
business rates, subject to the agreement of the Local Enterprise Partnership.
Combined authorities will have the power to borrow money under the local
government prudential borrowing regime, though the authority’s Order must
specify for what purposes the money may be borrowed
Many of the devolution deals provide combined authorities with an investment
fund (£30 million per annum in most cases).

The powers and functions that are to be transferred to combined authorities are likely
to come with existing funding streams, but this is not a statutory requirement. Future
levels of funding for these activities will be dependent on Government decisionmaking.

OVERVIEW AND SCRUTINY
24.

The 2016 Act requires each combined authority 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 combined authority
whilst it reviews them. It will be able to require members and officers of the authority to
attend and answer questions. A majority of members of an overview and scrutiny
committee must come from member authorities. Its members cannot hold executive
positions in those authorities. The chair of the committee must come from a different
political party from the combined authority Mayor (or the combined authority’s majority
party, if there is no Mayor).

25.

The 2009 Act did not require combined authorities to establish overview and scrutiny
committees. Of the existing combined authorities Sheffield, West Yorkshire, Liverpool
and the North-East are required to do so by their Order, but there is no such
requirement in Greater Manchester’s Order. The GMCA has established a ‘scrutiny
pool’, made up of three backbench members from each of the constituent local
authorities.

26.

There is no requirement in either Act for the overview and scrutiny committee to reflect
political proportionality across the combined authority area – though combined
authorities have done this so far. Brandon Lewis, then Minister for Local Government,
stated during the debate on the 2014 Orders that “Good governance practice will
mean that such committees will be politically balanced, enabling appropriate
representation of councils’ minority parties”.

THE GOVERNANCE REVIEW
27.

The first stage in the process of creating a new Combined Authority is for the relevant
authorities to carry out a Governance Review. The purpose of the review is to
determine whether the existing governance arrangements for economic development,
regeneration and transport in the area are effective, or whether the area would benefit
from changes, including the establishment of a new Combined Authority. In
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 undertaking such a review, councils look at economic development and regeneration
landscape in the round, including the activities of other arrangements. However, the
review is required to focus on the governance arrangements for local authority
functions that might be addressed in the formation of a new sub-regional body and not
the functions and performance of those other bodies.
28.

The relevant legislation require that the authorities, in undertaking such a review must
address the issue of the effectiveness and efficiency of arrangements to promote
economic development and regeneration in particular within the area to be covered by
the review and, therefore, to be covered by the Combined Authority. This is because a
review has to be carried out before the governance scheme (covered later in this
report) can be considered, and the review will need to have shown before a
governance review can be considered, that the creation of (in this case a Combined
Authority) would be likely to improve:
(a)
(b)
(c)

29.

The exercise of statutory functions relating to economic development,
regeneration and transport in the area;
The effectiveness and efficiency of transport in the area; and
The economic conditions in the area.

The outcome of a governance review should, therefore, be:
(a)

(b)

(c)

An assessment of the effectiveness and efficiency of existing governance
arrangements for economic development, regeneration and transport across
the area;
An analysis of the options available for making changes to these governance
arrangements, such as leaving governance unchanged, strengthening or
restructuring existing governance arrangements, establishing an Economic
Prosperity Board and establishing a Combined Authority; and
A view as to which option is likely to be most beneficial.

30.

Stakeholders are considered to be an important source of evidence of how well the
existing arrangements in the area are functioning and whether there is scope for
improvements to be made. As part of the governance review, local authorities are
required to identify who their relevant stakeholders are and consult with them. This
includes representatives of the business community, service providers and other
delivery partners, relevant regulatory bodies and relevant public bodies, including
Government advisors on the natural and built environment and rural champions.
Consultation with stakeholders is part of the governance review process and the
consultation exercise is addressed later in this report (under the heading
Consultation).

31.

A copy of the Governance Review document as sent out to stakeholders is appended
at Appendix 1.

32.

A list of the stakeholders to whom the document was sent, is set out in Appendix 2.

OUTCOME OF THE GOVERNANCE REVIEW
33.

The feedback from the stakeholders will be reported at the meeting on the 14 July.
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 GOVERNANCE SCHEME
34.

The second stage in the process of creating a new Combined Authority is the
preparation and publication of a Governance Scheme for the new body. The scheme
will be the basis for the creation of the new body and will contain information on the
area it will cover, its membership, voting and any executive arrangements, its function
and the way in which it will be funded. These details will be included in the statutory
order that is needed to create the new body.

35.

The draft Governance Scheme (set out in Appendix 3) contains the following key
elements:
(a)
(b)
(c)
(d)
(e)

(f)

36.

A directly elected Mayor with a term of office of 4 years
A cabinet of [1/2] members from each local authority
An overview and scrutiny function
Voting to be by simple majority save on certain key matters where the Mayor
will require 2/3 majority to support his / her policies
Arrangements for an interim Mayor for the period between the establishment of
the CA and the first Mayoral elections with suitable constraints upon his/her
exercise of Mayoral powers during the interim period
Non constituent membership from the Solent LEP, Fareham BC, East Hants
BC, Eastleigh BC, Gosport BC and Havant BC

Subject to the approval by the Executive, the draft Governance Scheme will now be
subject to a period of public consultation.

NEXT STEPS
37.

Subject to the approval by the Executive of the Governance Review, and the adoption
of the Governance Scheme there will now be a further period of wider consultation for
6 weeks. The outcome of this will be reported back to the Executive in the autumn for
a decision as to whether to proceed with the proposed devolution. Following this and
the Secretary of State being satisfied that the public consultation fulfils the necessary
criteria under the legislation, the Government will draft the orders creating the
Combined Authority.

38.

The Orders will then be passed through to each of the councils who will need to
formally agree them, and this approval will need to be made by the Full Council.

39.

Orders (regulations) are then laid in Parliament as secondary legislation. Timing of
how long these orders take to pass is, of course, dependent upon their content,
Parliamentary timetable and other factors.

CONSULTATION
40.

The initial consultation with the key stakeholders has already commenced and a list of
these is set out at appendix 2. The outcome of this consultation will be reported to the
Executive on 14 July.

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 STRATEGIC CONTEXT
41.

In its document, “A country that lives within its means: Spending Review 2015”,
published in July 2015 the government has identified its intention to, “look at
transforming the approach to local government financing and further decentralising
power, in order to maximise efficiency, local economic growth and the integration of
public services”.

42.

The council has a priority, expressed in the corporate plan 2015 to 2017, of, “ensuring
that all resources available to the Island are used in the most effective way in
achieving the Island’s priorities”. One of the actions contained in this priority is to work
with partners with a view to achieving, “better outcomes for the Island’s community
and which can mitigate the potentially damaging impacts of the significant challenges
that the council faces. Within its corporate (2015-17) plan objective to, ‘support growth
in the economy, making the island a better place and keeping it safe’, the council has
an approved action to, “Actively engage in discussions about the creation of a new
combined authority for economic development and integrated transport to ensure the
Island’s best interests are represented in any models which may emerge in response
to the devolution agenda”. This paper brings together the current position in respects
of these discussions.

43.

Full Council has debated the issue of devolution at its meetings on 2 September 2015
and 16 March 2016 and have agreed:
(a)
(b)
(c)
(d)

THAT the prospectus for a devolution deal for Hampshire and Isle of Wight as
the basis for negotiation with government be supported.
THAT the final devolution deal must ensure the financial security of Isle of
Wight and availability of public services to its communities be confirmed.
THAT at this stage [September 2015] the council is making no commitment
beyond continued involvement in the development of a potential deal, be noted.
THAT the fullest possible consultation with the Isle of Wight community,
including consideration of a referendum on any devolution deal document that
the council is considering accepting, be agreed.

44.

The decision at this stage is NOT around any proposed devolution bid but is seeking
authority to carry out the required consultation on a governance review and a potential
governance scheme. These are essential pre-requisites before any formal deal is put
forward by the Government. As they are for consultation that are in accordance with
the expressed wish of Full Council in ensuring that there is full consultation on the
process.

45.

Members will also be aware that the one strong message following the Secretary of
State’s visit to the Island on the 14 June was that in his view a devolution deal for the
Island was a significant component of a possible solution to the funding issues on the
Island.

FINANCIAL / BUDGET IMPLICATIONS
46.

At this stage there is little direct financial implication to the Council as this is about
agreeing the consultation on the governance review and proposed governance
scheme.
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 47.

The actual consultation (pending the Executive’s decision on 14 July) is expected to
cost less than £10,000 and will be met from within existing economic development
budgets.

48.

The potential financial powers for a combined authority are detailed at paras 21 and
22 above.

LEGAL IMPLICATIONS
49.

The legislation on combined authorities can be found in sections 103-113 of the Local
Democracy, Economic Development and Construction Act 2009, which has been
substantially amended by the Cities and Local Government Devolution Act 2016. The
power to set up a combined authority extends to England only (but not to London).

EQUALITY AND DIVERSITY
50.

The council as a public body is required to meet its statutory obligations under the
Equality Act 2010 to have due regard to eliminate unlawful discrimination, promote
equal opportunities between people from different groups and to foster good relations
between people who share a protected characteristic and people who do not share it.
The protected characteristics are: age, disability, gender reassignment, marriage and
civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual
orientation.

51.

At this stage the decision is seeking to agree to the consultation in the Governance
Review and the Governance Scheme and as any proposed combined authority will not
directly provide services to the community (as it will be a strategic body) there will be
no direct impact on those with protected characteristics. Should there be a change in
any actual service delivery as a consequence of the establishment of a combined
authority an Equality Impact Assessment will be undertaken at that time.

52.

However by establishing a formal strategic body that aims to better co-ordinate the
provision of things like housing and transport across the agreed area of the final
devolution solution this will make it easier for ensuring that the concerns and issues of
those with protected characteristics are taken into account when determining
strategies and approaches.

OPTIONS
53.

Are:
(a)

To not undertake this process (and hence not propose a Combined Authority)

(b)

Note the report;

(c)

Endorse the findings of the Solent Governance Review and its conclusion that a
Mayoral Combined Authority is in the best interests of the Isle of Wight;

(d)

To approve, in draft, the Solent Combined Authority Governance Scheme for
consultation;
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 (e)

To delegate to the Chief Executive any actions necessary to fulfil the resolutions
in this report.

RISK MANAGEMENT
54.

The main risk is that unless the proposed governance review is undertaken over the
summer then this will delay the implementation of any possible devolution deal by up
to a year. As the basis of which the Council has approached a devolution deal is to
ensure the Council’s financial stability we need to put ourselves in the best possible
position to be able to implement any deal as soon as is possible (subject to the
devolution deal achieving that objective).

EVALUATION
55.

This report has been brought forward within this timeframe following discussions
between the Leaders of Southampton, Portsmouth and IOW Councils to enable a
decision to be made on the Governance Review and draft Governance Scheme and to
enable the subsequent commencement of formal consultation with the public over the
draft Governance Scheme.

56.

There are significant benefits for the Island and the wider Solent area in being part of a
CA with Southampton and Portsmouth. To create this Combined Authority we need to
undertake a governance review and approve a Governance scheme. The
recommendation enables the Council to fulfil this requirement. We will then need to
consult extensively on the scheme, in conjunction with the other participating councils,
and report back to Executive with the results of this consultation.

57.

The June meeting with the Secretary of State for Communities and Local Government
confirmed that government will not provide any funding relief to help the council
address its challenging financial position. The Secretary of State was particularly keen
to point to the opportunities offered by, devolution in particular, the local growth fund
and increased collaboration between local authorities. The creation of the combined
authority is a necessary vehicle to securing a devolution deal when it is confirmed by
government. The recommendations in this paper allows the three councils to ‘get
ahead’ of the work necessary to establish a combined authority and be able to exploit
and receive the benefits of the devolution deal at the earliest possible opportunity. This
will almost certainly be before the impact of the fair funding formula review is
completed although this could only ever be part of the solution for the council and it
will still need to increase its tax base to become more sustainable.

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 RECOMMENDATION
58.

Note the report;

59.

Endorse the findings of the Solent Governance Review and its conclusion that a
Mayoral Combined Authority is in the best interests of the Isle of Wight;

60.

To approve, in draft, the Solent Combined Authority Governance Scheme for
consultation;

61.

To delegate to the Chief Executive any actions necessary to fulfil the resolutions in
this report.

APPENDICES ATTACHED
62.
63.
64.

Appendix 1 - Copy of the Governance Review document as sent out to stakeholders
Appendix 2 - List of the stakeholders to whom the document was sent
Appendix 3 - Draft Governance Scheme

Contact Point: John Metcalfe, Chief Executive
 01983 821000 e-mail john.metcalfe@iow.gov.uk

JOHN METCALFE
Chief Executive

COUNCILLOR JONATHAN BACON
The Leader and Executive Member for Resources,
Organisational Change and Children’s Services

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