The West Midlands Combined Authority declined to approve mayor Andy Street’s budget. What happened?

Tory mayor of the West Midlands Andy Street last year. Image: Getty.

A Birmingham Labour councillor on the budgetary rows in the Midlands.

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 – “It’s 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.

 
 
 
 

The number being helped by Help to Buy is at a record high. That’s not a good thing

Help to Buy, Bristol, 2013. Image: Getty.

James Brokenshire the secretary of state for the Ministry of Housing, Communities and Local Government (MHCLG) has been having a busy week. On Monday, the department published its rough sleeping strategy, while Tuesday saw the release of the long awaited social housing green paper.

Neither has filled commentators or the housing sector with much confidence – not least because they offer no new support for genuinely affordable homes. This is a problem because, well, there aren’t enough and building more will cost money. 

Since 2010, affordable housing funding has taken a significant hit. Financial support for building social rented homes, where rents are linked to local earnings, has been cut in favour of rents set at 80 per cent of market rents. As a result the supply of new homes at social rent has dwindled dramaticallyIPPR research has shown that, across the country, the so-called affordable rents which have replaced them are simply too expensive for many households on low incomes.

This lack of a support stands in marked contrast to government’s approach to homeownership, as figures released today on sales through the Help to Buy show. Help to Buy loans, in which government lends a household 20 per cent of the value of a new build home (40 per cent in London), are at a record high. To date, around 170,000 homes have been sold through the scheme.

But the Help to Buy policy has two key problems. Firstly, far from supporting those who otherwise couldn’t afford to buy, the scheme is instead assisting households who would be able to buy at some point without support; lower income households continue to be priced out. The government’s own analysis shows that many of those buying through the scheme would have been able to buy at some point in the future without the scheme.

At the same time, the data released today shows that more than a third of those who have made use of Help to Buy to date have household incomes of £50,000 or higher. Around 1 in 10 of those who have bought through the scheme have a household income of over £80,000.

Secondly, far from improving affordability, Help to Buy worsens it. Research by the housing charity Shelter has shown that, through boosting demand for scarce housing, Help to Buy has inflated house prices. 


The main beneficiaries of this are the developers who have factored the scheme into house prices and as a result have seen a significant increase in their profits. Take, for example, the excessive bonus paid to the CEO of Persimmon Homes earlier this year of £75m (originally £100m), which stoked such shareholder and public fury: that was linked to a surge in profits driven by the Help to Buy scheme.

Both of these critiques demonstrate that government is currently not putting its balance sheet to best use. To date, Government has leant out £8.9bn through the Help to Buy. In 2017 alone, the money could have been used by councils to build somewhere in the region of 22,000 homes for social rent, over 400 times the amount actually built in 2016-17.

Letting councils borrow to build affordable housing would make significant steps towards delivering the 145,000 affordable homes which are needed each year, tackling poor housing conditions, over-crowding and poverty. At the same time, it would generate a return for councils, which could in turn be used to invest in more affordable homes and improve existing ones.

Yet, our absurd national accounting rules currently prevent this from happening. Help to Buy lending is not counted towards the deficit. This is because, asGeorge Osborne boasted when launching it, the Help to Buy scheme is a financial transaction, and therefore the taxpayer would be “making an investment and getting a return”.

By contrast, under rules imposed by the Conservative Government of 2010-15, councils are subject to a debt cap on what is called the housing revenue account. This prevents them from borrowing prudently against future rental streams to build council homes. This is despite cries from the Local Government Association that councils want to get building in order to tackle the housing crisis.

On a more positive note, the social housing green paper indicates that the government is starting to budge on this. It has already lifted the borrowing cap slightly in areas with pressure on affordability and is using these schemes to test the possibility of going further. 

This is welcome, but as the social green paper shows warm rhetoric on its own is not enough. Government should commit to changing the borrowing rules, lifting the local authority debt cap and phasing out help to buy.

Darren Baxter is a Research Fellow at IPPR he tweets @DarrenBaxter.