Agenda item

Report of the Chief Executive

The Cabinet considered a report of the Chief Executive, which sought approval of proposals to ensure that the West Midlands Combined Authority (WMCA) would be able to raise income via a Supplementary Business Rate scheme to assist in funding its Investment Programme.

The WMCA was required to develop funding plans through new financial mechanisms to the value of £3 billion to support £2 billion of investment and associated debt finance costs within the £8 billion Investment Programme agreed as part of the first Devolution Deal for the West Midlands.

The report set out how the new funding mechanisms intended use by the WMCA Board were planned to contribute to the overall funding of the Investment Programme.  In a number of cases, the securing of these income streams were based on the WMCA working together with Constituent Authorities to obtain or exercise new powers, including Business Rate Supplement.  It was noted that specific sources of income had not been allocated to each scheme and so all projects were, to some degree, exposed to risks around the WMCA not being able to generate the required level of income.

The Business Rates Supplement Income, totalling £900m, was initially intended by Central Government to be obtained through powers extended to elected Mayors of Combined Authorities to raise funding of up to an additional 2% on businesses to fund infrastructure investment through a new power contained in the draft Local Government Finance Bill of 2016/17.

A planned implementation date of 1^st April 2018 was set out in the first Devolution Deal.  However, due to the lead time to implement the charge, the date could no longer be achieved and work was being undertaken to confirm the impact that the delay may have on the Investment Programme’s Funding Position if a replacement scheme could not be put in place for a 30 year period a envisaged in the original modelling.

The Local Government Finance Bill 2016/17 was drafted to provide Mayoral Combined Authorities with two potential routes to generate this funding, the first of which being a Supplementary Business Rate (i.e. a scheme which is equivalent to existing powers which Local Authorities possess) and a Mayoral Infrastructure Supplement. The Mayoral Infrastructure Supplement was essentially similar to a Business Rates Supplement but with a small number of key differences, which were outlined in the report.

It was intended for these new powers to be provided to Mayors following the passing through Parliament of the Local Government Finance Bill 2016/17. Around the time of the General Election in 2017, however, the Bill fell.  As part of the discussions relating to the proposed second regional Devolution Deal, the West Midlands Combined Authority set out to Central Government the potential impact that the withdrawal of the Local Government Finance Bill would have on the West Midlands Combined Authority’s ability to fund and deliver the Investment Programme. During these discussions, it was suggested that a possible solution would be to simply extend to the West Midlands Combined Authority the equivalent and current powers that Local Authorities, including the seven Constituent Authorities and the Greater London Authority already have to raise a Supplementary Business Rate.

Following the region’s second Devolution Deal it was confirmed by Central Government late in December 2017 that it intended to apply the equivalent powers to Mayoral Combined Authorities to allow a Supplementary Business Rate to be raised under the existing scheme available to Local Authorities and the Greater London Authority.  The Department for Local Government and Communities had contacted West Midlands Combined Authority and the respective Chief Executives of the constituent Local Authorities to agree a process that would see legislation amended during March 2018.

Central Government therefore required all Constituent Local Authorities to consent to the powers being applied to the West Midlands Combined Authority by the end of February 2018.

RESOLVED that the Cabinet approve the proposal that the West Midlands Combined Authority is given the authority to raise income via supplementary business rates and to give delegated authority to the Chief Executive, following consultation with the Section 151 officer together with the Monitoring Officer to approve the amendment to statutory regulations which amend the West Midlands Combined Authority powers as set out in the report submitted.