The Solent Devolution deal.
Is it right for the Island?
Anyone who takes the time to digest the 200 page report that went to Council will find more
concerns than I will outline here. I will confine this paper to reminding us why the deal
started in the first place and commenting on each of the 9 key “benefits” that are listed in the
report which was presented to Council on 19th October and considered by Executive on 24th
October.
The background to devolution.
Devolution has two main aims.
The first was, and is, to placate the very large authorities in England who saw additional
powers handed to Scotland and Wales, but objected to Whitehall retaining all control in
England, despite regional differences and them having legitimate claims to run more of their
own affairs. The rationale for the process was part of George Osborne's “northern
powerhouse” idea, and the route to achievement was paved by the Localism Act. The first
deal signed was with Manchester. The ten constituent authorities were all metropolitan
boroughs within the greater Manchester region. The combined population is around 3 million,
about the same size as Wales.
Secondly, without being explicit, the Treasury were, and are, looking for ways of cutting
government's own costs (certainly not to spend more) by devolving some of it's
responsibilties.
Locally a deal was being considered which involved Hampshire, it's constituent Districts, as
well as Southampton, Portsmouth and the Isle of Wight, together with the two Local
Enterprise Partnerships, two National Park Authorities, the Hampshire and Isle of Wight Police
Authority and the Hampshireand Isle of Wight Fire and Rescue Authority. Together, in scale
and resources it was close to Wales and Greater Manchester.
Dicusssions on that proposal foundered when Hampshire expressed severe reservations about
the governance arrangements, particularly having a single Mayor covering the whole. It
would have been a bit like having a single Mayor for Wales!
Subsequently the idea for a different arrangement came, not from the three Councils in this
proposed Solent MCA, but from Lord O'Neill, who was then the Minister responsible for
devolution. Following differences between him and the present government he resigned last
September. So we now have the strange arrangement of two crowded rival cities 14 miles
apart and a rural offshore Island deciding that they have so much in common they ought to
be bolted together. Really?
This is the deal about which there was a seriously flawed consultation. A consultation should
present both sides of the argument equally, explaining both the potential benefits and the
potential pitfalls. Once that has been given, then a recommendation can follow, leaving the
reader to decide whether to reject or accept that recommendation. The information given in
the consultation document was scandalously one-sided. Even so, about one in every three
respondees was not convinced and wrote to oppose it.
Turning to the specific financing and responsibilities proposed for transfer outlined on page 6
of the report they are:

 1. £900M funding for the New Mayoral Combined Authority.
The £900M is not all at once. It is simply the cumulative total of the annual amount of £30M
pa. It is to fund, or part fund, the responsibilities which will be transferred from government.
It's not to fund or support existing services. It is shared by the constituent authorities of the
MCA. It is not to be used to fund existing services already under strain, such as Adult Social
Care.
We do not know what the basis of sharing will be.
It may be according to need, though that would be a difficult exercise invoving competing
bids and making judgements of the risks and benefits to each consituent authority associated
with each bid. It may be according to population. This would probably be easier and fairer.
Depending upon the projects in hand and accepting that some years we may get a little more
than our calculated share, other years a little less, it works out like this:
The population of the three Councils in total is about 660,000 comprising Portsmouth
270,000, Southampton 250,000, Isle of Wight 140,000. Our share of £30M based on this
would be £6,460,000. Changes in population would increase or diminish this share. It's
worth noting that Portsmouth is one of the fastest growing cities in the UK. It's population
has increased by 65,000 in the last 5 years, which is equivalent to the populations of Ryde,
Newport, Sandown, Shanklin and Ventnor combined.
Of the annual funding, 75% (c. £4.8M) would be capital and 25% (c £1.61M) revenue.
It has been suggested that we could borrow against this annual income to give us a greater
amount immediately. This hasn't been the case in other areas. If government gave approval
to all MCA's to do this, the UK public sector borrowing would escalate rapidly. Government
wants to reduce, or at least stabilise borrowing, not increase it.
There are some critical unknowns:
No analysis has been done to determine whether this is the amount the MCA would likely
need to manage these services. The amount offered is similar to that offered in other MCA
deals with no attempt to fit the amount to an assessed requirement.
We don't know what government has spent on the devolved services over each year of, say,
the last 5 years.
We don't know whether the funding is all new money or whether some will come by transfer
from existing organisations. If so the 'new' amount will be a smaller offer than we have been
led to believe.
The money is promised for 30 years, but no government can tie it's successor. If we go down
this route how will certainty be delivered?
We don't know if the amount will be inflation proofed. And if so, for how long – the whole of
the 30 years? If not, the amount on offer is trivial and almost certainly less than the costs of
providing the new services.
The three Councils at present levels of spend have a budget of around £15 Bn, with inflation
at 2% over the same period that will be closer to £30Bn.

 This devolution money, in context, is small change.
If the amount of funding offered proves insufficient at some point over the next few years,
the MCA will be able to precept from the constituent Councils to fund it's schemes. That will
add to the rate burden.
If these uncertain financial promises were not on the table would we be the slightest bit
interested in being a part of this new Local Authority, with a new elected Mayor ? I doubt that
Islanders want that, and in dissussions with colleagues it is apparent that when residents
have had enough information to form a view, it is to object. As Councillors, we need to reflect
their views.

2. Keeping all business rates generated in the area.
This was described by Chancellor Osborne as a devolution revolution. In the sense that what
goes around, comes around, it is. Councils used to retain all business rates until in 1990 they
were taken by government. Now they make a virtue of giving them back. A new MCA deal
will allow 100% retention by the participating councils. At present we have 50% retention.
Any growth in business rates can be kept. The aim is that those councils generating more
rate income, share the growth with those worse off. But we know that we will retain the
whole of the business rate by 2020 anyway. I'm not convinced that for the Island Council this
is a benefit. At the moment, because our business rate income is below the national average
we get a top up from government. The proposed change to 100% retention is fraught with
problems. A government Select Committee looked at the issues in June this year. They are
analysed in the Committee's 74 page report.
Amongst other concerns they identified the problems arising from the recent change from
zero to 50% retention. Businesses apppealing against their rates bills have caused significant
concerns, with refunds far exceeding the authorities income from the growth in rate income.
Some form of transitional arrangement will need to be introduced. We don't yet know what
that will be. Adding a further complication by sharing rate income growth (or losses from
appeals or closure of business) with Portsmouth and Southampton seems unwise.
3. Powers over strategic planning, such as future spatial plans.
For those not familiar with the latter term, this is a label increasingly applied to what used to
be called land-use plans. Spatial plans tend now to also include resource allocation and
investment proposals within the plan. This is not a process which requires an MCA before it
can be carried out.
Usually, when several authorities (not just councils) are preparing spatial or strategic plans
the core areas within the plan are contiguous. When they are not it adds to the difficulty.
Councils not in the plan area but affected by it will have to be consulted and will expect their
interests to be taken into account. It is complex and quite costly to manage. Area and
regional plans have in the past been prepared by authorities working jointly where they have
a clear common aim. Usually these sort of plans cover a significant regional area. Managing
that between two rival cities and an offshore Island will be the most unusual grouping for
such a plan. The Island Council is of course responsible for strategic planning across the
Island anyway and we don't have to consult with Portsmouth or Southampton to do it.

 4. Increasing productivity, creating more and better jobs, simplifying and
strengthening support for business growth, innovation, global trade and
investment.
Reads like an advertisement doesn't it? Just as meaningless without a huge amount of
research and investment. I don't think £6.4M a year will crack it even if the whole of the
money could be devoted to this alone. But we'll probably get some excellent glossy reports.

5. Control of the budget for adult education and training in the areas, enabling a
focus on the skills businesses want people to have.
Let's be clear, we don't get control of the budgets of Southampton City College, Highbury
College or Isle of Wight College or any of the other smaller HE institutions. If any of those
institutions thought they would be giving up their autonomy there would already be a huge
row. The MCA will be able to consult, offer to support specific courses, work with business to
achieve the kind of outputs it would like to see. We can of course do that now. But by far the
best way of gaining influence is to fund specific arrangements. The combined annual
expenditure of just these three institutions is already around £55M each year so what extra
the MCA might offer will not buy much influence.
6. Development of a new programme to help the “hardest to help” claimants back
into work and provide them with support.
A laudable ambition. But this is the most difficult area of unemployment to tackle. These
programmes currently run under the “jobcentre plus” banner. So if we take over that
responsibility do we commission them to keep doing it, or set up our own organisation? For
sure it will soak up lots of funding. Do the cities have worse problems than us in this
respect? Certainly just based on population size one would expect that. So it's likely that the
share of the £30m devoted to this is likely to go more to them than us.

7. Delivering 50,000 homes in the area by 2026
Homes aren't the problem, affordability is. So is finding the sites when every site put forward,
big or small, meets local opposition. What we really want from government is the freedom to
use innovative ways of funding and delivery. At the moment we are hamstrung by rules. The
Local Government Association has campaigned for greater freedom for councils to do this. We
don't need a new authority, just a removal of restrictions on existing ones. Then we'll get on
with the job. I welcomed Julia Baker-Smith's motion at the last Council meeting supporting
innovative processes for housebuilding.
It's also worth looking at how the new authority would meet it's housing target.
Southampton has a population of c 250,000 in 52 sq. km. Portsmouth has 270,000 in just 40
sq km. It's the densest populated city in the UK and still growing. We have 140,000 people in
384 sq km. The housing issues in the two cities are distinctly different from ours.
Will our space be looked at enviously? I think so. If we are expecting to share any growth in
rate income there will be a quid pro quo.
8. Control of a dedicated transport budget, the opportunity to franchise bus
services and control of the key network of local authority roads.
We already have a transport budget of £5m a year. Most is spent on statutory free bus
passes. A House of Lords amendment to the Bus services Bill, if it is incorporated as an Act,
will give Isle of Wight Council the ability to manage transport franchises. We will not need to
be part of an MCA to do that. In any event, there has to be an appetite from bus companies
to compete for a franchise. There's no sign of that for the Island. We are a rural community

 with lengthy routes and few passengers. We have only a handful of routes that are profitable,
unlike the cities with short routes and plenty of passengers.
It would help if government amended the Labour introduced (in 2008) law to exempt us from
the requirement to fund free travel for non-Island residents - if you visit the Channel Islands
you pay for your ticket, as you do if you cross the border into Wales. We spend about £1M a
year on that alone. Puts the £1.6M revenue from this new offer into context doesn't it?
And control of our network of roads? We already have that. What might any new money be
spent on? Portsmouth has already mentioned the idea of light rail joining the two cities.
Innovative and integrated approaches to public service reform -including health.
We are already beginning to integrate Public Health, CCG and NHS. It is taking time and it's
hard work, but we will get there. I cannot see how we will integrate other public services with
Portsmouth and Southampton.
We do already share service provision with other authorities, for Police, for Education, amd
for Fire -this latter originally with Surrey and now with Hampshire. We share a Treasurer with
Portsmouth. Where it is more cost effective we outsoiurce requirements and buy through
competitive bidding with the private sector, Audit Services are good example of that, as is our
Waste Contract.
We don't need an MCA to enable us to continue to do these things.
Finally, the new MCA has to have it's work done by existing Officers. It's not expected that it
will directly employ its own staff, or have it's own premises. So where will it be based and
who will do the work? The Island has no spare Officer capacity - especially in Planning which
is cut to the bone. So if this comes from Southampton or Portsmouth there just might be a
bit of bias? Do we even know if they have the capacity to do it effectively?
For all these reasons the time for talking about a governance structure on this particular deal
is long past and we should cease now.

Stuart Hutchinson
Ward Councillor: West Wight
Deputy Conservative Group Leader
Chairman: Audit Committee
31/10/16