Devolution Act gets Royal Assent

The Cities and Local Government Devolution Act 2016 has now received Royal Assent. The Bill has been much amended and extended during its controversial passage through Parliament, and amendments were still being moved in the Bill's final throes. In addition, many of the provisions amend other primary legislation so the Act cannot be read on its own.

Devolution framework

The Act provides a framework for the devolution of powers that will be applied to individual areas by secondary legislation. It:

• enables an elected mayor for the combined authority’s area who would exercise specified functions individually and chair the authority; 
• enables the mayor to undertake the functions of Police and Crime Commissioner for the area in place of the PCC; 
• removes the current statutory limitation on functions that can be conferred on a combined authority (currently economic development, regeneration, and transport) and geographical limitations; 
• provides for the creation of Sub-National Transport Bodies (such as Transport for the North);
• enables public body functions (including those of Government Departments) to be devolved to local authorities and combined authorities facilitating health devolution; and 
• enables local authority governance to be streamlined, including allowing the Secretary of State to change the constitution and membership of local authorities and make structural and boundary arrangements that may not be agreed by all councils.

The provisions are deliberately generic and recognise the fact there is a different appetite for change and a different local momentum in places; they are not intended as a one size solution that fits all. They are intended to be a blank canvas, and will enable changes by regulations to the constitution, membership, structure and boundaries of local authorities for devolution deals where a combined authority might not be appropriate.

Sadly the Government has, in our view, left too many things to secondary legislation through regulations and orders so that even the powers of general competence under Part 1 of the Localism Act 2011 need an order of the Secretary of State before they will have effect.

Mayors and Combined Authorities

The Act amends Part 6 of the Local Democracy, Economic Development and Construction Act 2009 to enable new combined authorities to be established with no restrictions on the functions that can be transferred. The existing five (covering Greater Manchester, West Yorkshire, South Yorkshire, Liverpool and the North East) will need to change their constitutions to receive the wider functions. There are several more in the pipeline including Tees Valley, D2N2 (Derbyshire and Nottinghamshire/East Midlands) and the West Midlands where combined authorities are in the process of being established.

The constituent authorities of a combined authority no longer need to be geographically contiguous, nor are they prevented from forming a doughnut shape around another local authority or authorities. However, in such cases, the Secretary of State must consider the likely effects of such a combined authority on the exercise of equivalent functions in neighbouring areas.

The mayoral combined authority (subject to an order) has a power to precept under s.40 of the Local Government Finance Act 1992 and increased powers to raise a levy are also contained in the Act. The mayor may appoint a deputy mayor, and must have an Overview & Scrutiny committee and an Audit committee.

One contentious area in the Bill's passage through Parliament concerned the Secretary of State's power to require a combined authority to adopt an elected mayor and to remove a dissenting council. This provision was removed by the Lords but after much argument was put back in when the Bill was debated in the Commons. It has since been further amended so as to allow such an order to be made even when more than one constituent council (as opposed to just one) does not consent to a mayor; providing that at least two of the constituent councils (and the combined authority) do consent.

If any council does not consent, then it can be removed from the combined authority.

The Secretary of State can also order that a combined authority takes on the functions of another public authority in the same area, either in place of that authority, concurrently or in partnership, again provided that the combined authority and at least two constituent councils consent. This removal of restrictions on combined authority functions opens the way for the Greater Manchester combined authority and others to take on health functions.

However, no consent is needed if the Secretary of State later revokes an order that transferred health functions, so that the combined authority no longer exercises those functions.

A change introduced by the Lords on "Devolving health functions" prohibits the transfer of the Health Secretary's core health duties and regulatory functions held by national bodies (e.g. the CQC) and ensures that transferred NHS services "adhere to national service standards", so as to "safeguard" the NHS's national characteristics.

Structural and governance changes

One of the more controversial aspects of the Act is the ability of the Secretary of State to change the constitution and membership of local authorities and make structural and boundary arrangements.  For parts of England where there is no strong drive to establish combined authorities, or no consensus, the Act enables the Secretary of State to make regulations that fast-track changes to local authoritiesʹ governance, structural or boundary arrangements, or electoral arrangements.

When the Bill was first introduced, such structural or boundary changes could only be made with the consent of all the relevant councils. However, there were concerns that a council could effectively veto any proposals that might lead to the fast-tracking of any kind of structural or boundary change so this was removed at Report stage. The Act now enables the Secretary of State to make regulations about structural or boundary change in relation to a two-tier council area without the need for the unanimous consent of the affected councils. These changes were proposed to allow re-organisation where, for example, the county would object to loss of a district which may choose to merge with a neighbouring council and create a new unitary or vice versa where a district objected to becoming party of a new unitary county. The arrangements will be piloted for a three year period, expiring on 31 March 2019.

Any such regulations are subject to affirmative Parliamentary procedure and the Secretary of State has to lay a report in Parliament explaining what the regulations do, describing why they are made, including details of any consultation taken into account, any representations considered, and any other relevant evidence or contextual information. This section applies to London (unlike the provisions on combined authorities and Economic Prosperity Boards) and may therefore enable the boundaries to change, including paving the way for merger of London Boroughs if authorities were so minded.

Sub-national transport bodies

A new clause was added at Committee stage in the Commons that inserts a new Part 5A into the Local Transport Act 2008 enabling groups of authorities (including combined authorities) to establish Sub‐national Transport Bodies (STBs), which will operate at a sub‐national level on transport matters with the aim of furthering economic growth in their area. This will enable the Government to set up Transport for the North, Midlands Connect and all future STBs as statutory bodies with appropriate statutory powers to better co-ordinate and invest in Transport on a regional basis.

Details of the governance arrangements, functions, powers and boundaries will be set out in regulations. The STB's main function will be to prepare a transport strategy for its area; the Secretary of State may transfer other local transport functions to the STB, along with other public functions provided that they relate to transport.

Action

The Secretary's powers to make regulations come into effect immediately, the imperative being the need to make provision to omit the requirement for Police and Crime Commissioner elections in Greater Manchester, since the combined authority will take over the Police role, probably through a nominated deputy mayor for policing. The remainder of the Act comes into force in two months' time, i.e. on 28 March 2016.

The Government has indicated that it expects plans for new combined authorities to push through in a very quick timescale, given that several Devolution Deals have already been done. Baroness Williams said that "time would be of the essence in getting these matters through" so the Government should deal with the consultation process and the regulations fairly quickly.

Now that the Act is published, local authorities should be thinking about the sort of provisions they would like the Secretary of State to include in the many and varied orders and regulations that will need to be made under the Act and feed these through to the LGA and Government, particularly since provisions will need to be bespoked to the specific combined authority, devolution deal and area.

Local authorities that have not yet agreed to have combined authorities or devo deals may need to get their collective act together so that they do not miss out on the funding and opportunities presented, not least the opportunity to precept for mayoral combined authorities, but the boat may be missed if consensus cannot be achieved.

Many of the functions that could be devolved to combined authorities may be exercised jointly with local authorities or the public body/government department that devolves the function, concurrently or individually and so there is scope to be involved without full devolution.

How far does the authority wish to pursue structural or boundary changes and what would be the constitutional implications of say creating a new unitary – what form of governance would be appropriate and what case can be made to the Secretary of State, even if all affected councils do not consent?

The time is ripe for the authority to consider updating the Constitution in readiness for adoption at Annual Council. What governance arrangements need to be introduced to deal with new structures like combined authorities?  For example who will represent the Council on the combined authority's overview and scrutiny committee and how will that appointment be made (since nominations to outside bodies is a local choice function under the Local Authorities (Functions and Responsibilities) (England) Regulations 2000 – who will be appointed as an independent person to the audit committee, and how?

Who will exercise authority to delegate functions and money to a combined authority and what decisions will need to be made if a local authority exercises functions jointly with a combined authority – there may be a need to act quickly.  Should the Chief Executive in consultation with the Leader be authorised to take decisions to approve the draft Orders required to implement the Act on behalf of the council and in relation to the exercise of some functions (others may need the approval of the Executive or Council/a committee)? Who has authority to second staff to the combined authority (again section 113 is a local choice function)?  How will the arrangements to elect the combined authority mayors work and who will lead/co-ordinate the arrangements in each combined authority area?

We will provide further briefings as the detail works through, in alerts and in our regular newsletter – click here if you wish to subscribe.

The text of the Cities and Local Government Devolution Act 2016 is available on the Government's Legislation website.