Friday, January 27, 2017

News: Devolution delay creates budget headache for SCR

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Delays to a devolution deal between the Government and the Sheffield city region (SCR) has meant that any of the £900m "gainshare" funding is unlikely to be handed over anytime soon.

The deal includes an envelope of £30m a year for 30 years – giving the SCR the power to use new funding to boost local growth and invest in local manufacturing and innovation. In return, the Government will require a directly elected mayor to hold accountability for the new powers.

The SCR will not receive its gainshare investment until the Mayoral Combined Authority powers order, which gives the area the legal tools it need to deliver the deal, has received consent through Parliament.

Following a legal challenge, local authority leaders have stated that it is not possible to hold a Mayoral election in May 2017 as planned and that they would now work towards elections in 2018.

The delay has meant that the LEP, which is responsible for a number of economic development and business support programmes, is set to scale back activity and look at its structure until the guaranteed money from the Government comes through.

Officers are preparing budgets on the basis that no devolution monies will be received, a task made more difficult by the "volatile" income streams such as retained business rates from the SCR Enterprise Zones which are hard to predict. The other main source of income, apart from the Government, are subscriptions paid by local authorities. With the amounts frozen, Rotherham Council is set to pay £226,000 for 2017/18 for LEP and transport-related activities.

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The SCR Executive, which carries out work for the CA and LEP, has recently undergone a major restructuring exercise that would see staffing numbers grow from c. 30 posts to 97 if fully staffed. The capital programme has also grown rapidly, from £0 in 2014/15 to £97m in 2016/17.

With staffing costs an estimated £4.9m (up from £2.6m), the new structure is "not affordable without devolution monies" and work has been carried out on a new draft structure based on 69 staff.

A report on the draft budget goes before the Combined Authority next week. It states: "It is not now anticipated that the region will receive gainshare in the near-term as uncertainties persist. Accordingly, a medium-term budget will be prepared that allows us to take a longer-term view of existing resource. Activity plans will now be scaled back to meet resource, whilst proposed programme growth will be considered in the context of the capacity of the existing staffing structure."

Council leaders are being warned about the "significant potential growth in revenue programme activity in the skills and employment area in future years, and the concerns around the Authority's ability to adequately resource the activity without gainshare resource.

"Without gainshare the Authority must seriously consider its funding mix and the call upon partners for resource."

Even with a further £37m recently announced from the Government's Local Growth Fund, the LEP's capital spending will require management. The capital funding programme, which totals over £300m, is at risk of clawback from the Government and remains prudently "over-programmed" as projects have a tendency to underspend.

The report also highlights that the region is exposed to "unpredictable costs as the issues around the judicial review and devolution consultation have shown." The SCR Combined Authority has set aside some £200,000 to cover Derbyshire County Council's legal costs and has spent £131,000 to date on its own legal counsel and associated activity, with a further £50,000 expected.

In addition, £104,000 was spent on the flawed consultation that will now have to be carried out again. Budgets for 2017/18 include £320,000 for devolution consultation and £400,000 for legal cost provision.

Sheffield City Region LEP website

Images: SCR LEP


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