MEETING / CABINET MEMBER: EDUCATION AND DECISION MAKER: INFRASTRUCTURE DATE: 17 JANUARY 2013 TITLE OF REPORT: Major Scheme Funding REPORT BY: Steve Burgess, Head of Transportation and Access CABINET SCRUTINY COMMITTEE FINAL CALL IN DATE: 22 MEMBER(S) ONLY JANUARY 2013

DATE DECISION MAY BE IMPLEMENTED: 23 JANUARY 2013

1. Classification

Open

2. Key Decision

This is not a key decision

3. Wards Affected

County-wide

4. Purpose

To advise Cabinet Member on government’s proposed changes to the major scheme funding programme and seek its agreement to the proposed governance arrangements outlined in this report to establish the Marches Local Transport Body.

5. Recommendation(s)

THAT: The Cabinet Member

a) “Agrees to the establishment of a Marches Local Transport Body.

b) Authorise the Assistant Director Law, Governance and Resilience to finalise the terms of a joint committee as indicated in the report.

c) Authorise the Director of Places and Communities to conclude arrangements with the Department of Transport, including the identification of an accountable body.” Further information on the subject of this report is available from Steve Burgess on Tel: (01432) 26 0968

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6. Key Points Summary

• Government consulted on the devolution of its major scheme funding programme for the next spending round period (2015-2019) earlier in 2012, signalling its intention to devolve the programme to ‘local transport bodies’. The consultation also indicated the likely move away from a bidding approach to a formula based allocation of the programme.

• Council and the Marches LEP responded directly to the consultation. The two responses broadly welcomed the consultation proposals but raised concerns that a formula approach might reduce the level funding available to large rural areas such as that covered by the Marches. Copies of the responses are available as background papers.

• Government has now published the results of the consultation and proposed next steps, confirming key elements of the consultation proposals. These include:

o The need to formally establish ‘Local Transport Bodies’ based on the existing Local Enterprise Partnership geographies which will be responsible for allocating and managing the devolved major scheme funds. These, as a minimum will need to comprise the relevant local transport authorities, but may also comprise LEP representation subject to local decision.

o The devolved funding will be allocated through a formula based on population size. This replaces the current allocation system which is based on appraisal of individual scheme business cases. The national programme for current spending period (2010 to 2014) is c£1.5B. Government has promised to provide indicative funding outlines for LTB areas later in October. It is anticipated for the Marches area that this will be in the region of £20M.

• Guidance issued November 2012 requires the 3 transport authorities in the Marches area to confirm the following:

o Details of the ‘Assurance Framework’ for the Marches Local Transport Body. This will need to clarify the local approach to governance, financial management, accountability and testing value for money. Government needs confirmation of these arrangements by the end of February 2013.

o A provisional list of prioritised schemes which will need to be submitted to DfT by July 2013. Whilst these schemes will not be required to have been subject to a full major scheme business case assessment, DfT will require an assessment of economic and environmental impact and deliverability.

• Whilst the devolution of the programme to local transport bodies is likely to result in savings for central government as it no longer needs to administer, manage and appraise major transport scheme proposals it does not propose to provide any additional funding to assist the local transport bodies which will be required to take over these tasks. In view of the relatively low level of funding which the Marches is due to receive as a result of a population based formula, the resourcing of the local transport body will be key issue for the Marches local transport authorities.

7. Alternative Options

There are alternative options around the composition of the Local Transport Body (LTB). Formal Report Template DRAFT 3Oct12

Herefordshire and the Marches Local Enterprise Partnership (LEP) confirmed a preference during the original consultation which was that the LTB would comprise of the 3 local transport authorities with the Marches LEP being represented in an advisory capacity. The outcome of the consultation appears to allow for this arrangement to proceed, however, other options are available including the LEP having a formal voting role on the LTB or leading the LTB. Given the existing consensus amongst the Marches transport authorities and the LEP there is no justification to review this position.

8. Reasons for Recommendations

To ensure that the Marches local transport authorities can continue to access funding to improve transport facilities in the area and support economic growth and sustainable development.

9. Introduction and Background

The major scheme funding programme has been in place for many years and provides funding direct to local authorities for transport schemes over £5M. Government manages the programme centrally and has established a detailed process for appraisal which is set out in a web based appraisal tool called WebTAG. Typically, this programme has funded highway schemes and larger sustainable transport schemes such as new bus stations.

Whilst focused on transport, the major scheme programme is separate to the local transport plan capital grant and is also separate to the Highways Agency’s capital funding.

Herefordshire Council has never secured funding through this programme. Whilst it sought funding for the Rotherwas Access Road, the major scheme business case was eventually rejected by DfT and it was subsequently funded as a regeneration scheme with funding from Advantage .

Whilst securing major scheme funding can provide an area with significant external investment, the process of securing the funds is extremely resource intensive and lengthy. For smaller projects (nearer the £5M minimum threshold) or for authorities such as Herefordshire Council with limited resource/capacity, the nature of the major scheme process has proved something of a deterrent in itself.

10. Key Considerations

Key Tasks Resulting from the ‘Devolving local major transport schemes: Next steps’ paper

The government published ‘Guidance on Local Transport Bodies’ in November, 2012 confirming the outcome of a consultation earlier in 2012 and proposals for devolving its major scheme programme from 2015. The authorities will need to provide assurance by the end of February 2013 on governance, democratic accountability, financial management and value for money. By July 2013 they will be required to submit a provisional list of prioritised schemes which will have been subject to at least a high level appraisal and agreed by the LTB.

Proposed Governance for the Marches Local Transport Body

Herefordshire Council and the Marches LEP responded to the original consultation and were in agreement that the LTB should be comprised of the 3 local transport authorities. The LEP would have an advisory role in relation to the LTB and hence would not have

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formal decision making powers. As was evidenced by the responses to the consultation, there were concerns that the future administration of the fund would need to remain subject to democratic accountability.

The LEP has not finalised its own governance arrangements to the extent that any representative can be lawfully mandated to respond to funding proposals on its behalf. Some kind of corporate vehicle is perhaps the most suitable solution. Equally, for the LTB some authorities (outside of the Marches area) have proposed a corporate structure. This would potentially allow full participation for the LEP’s representative as a voting decision maker rather than a consultee/observer. The corporate structure would also potentially admit bodies such as Network Rail. However, it is suggested that at this stage a joint cabinet committee would be the most appropriate solution. This proposal has been discussed and agreed at officer level with officers of and Telford Councils. It is proposed that the committee would:

a. comprise 6 cabinet members, 2 from each authority one of which would be responsible for transport strategy and/or infrastructure. This committee would be empowered to determine the funding priorities in relation to the devolved major scheme funding programme. Over time and subject to further devolution of powers from central government, it may take on additional functions;

b. invite appropriate representation from the Marches Local Enterprise Partnership to inform its decision making. At present the LEP does not have a clear constitution and this would limit its role to advisory and would preclude any voting rights. This could be reviewed if the status of the LEP changed;

c. be serviced by appropriate legal/governance officials. Further consideration will be required to asses the resourcing implications of this new activity and whether or not the function might rotate between the 3 authorities or if pooled resources would assist one authority maintaining the role over a longer period; and

d. be serviced by a formal technical officer group which would be established to fulfil the technical requirement of the devolved major scheme funding programme and present reports for the joint committee’s consideration. This group would be responsible for ensuring appropriate engagement with external stakeholders in respect of any decisions which would be considered by the joint committee.

Implications for Scheme Appraisal

The consultation also sought comments in respect of how schemes should be appraised post devolution. Both the Marches LEP and Herefordshire Council requested that appraisal could be determined locally particularly in the event that a LTB received a relatively small allocation (which is likely to be the case for the Marches area). Unfortunately, government has indicated that it will retain the present system of appraisal as a mandatory requirement. This is based on a web based appraisal tool, WebTAG. There are concerns that this tool is resource intensive, difficult to navigate and equally difficult to appraise. On top of this, currently appraisal is carried out centrally by a permanent team of experts based in the DfT. In the new proposal, appraisal will be carried out by the LTB so this will generate the requirement locally for resource to independently appraise schemes within the Marches area. Government has indicated that WebTAG can be applied in a way which is flexible/proportionate. The Marches LTB will need to explore how best to resource this new requirement.

Implications for Financial Management

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In the present system, individual local authorities are responsible directly to government for the appropriate financial management of a major scheme project. The new arrangements (where there is more than one local authority comprising the LTB) will require one to act as the accountable body. This will result in additional resource requirement for the authority in the Marches area which agrees to act as the accountable body. Officers will consider the best way to take this forward and this may result in a further report to Cabinet.

Funding Details and Implications for the Marches

Government has reviewed the current threshold for major schemes which is set at £5M. It is proposing to remove this specific threshold and allow LTBs to set their own. However, it wishes the distinction between major scheme programme and local transport scheme programme (LTP) to remain and will encourage LTBs to ensure that an ‘effective distinction’ between the two is maintained. In addition, it confirms as indicated at paragraph 11 that funding from the LTB will need to be subject to a WebTAG appraisal so this might dictate the type/scale of schemes which can be considered.

Government has also confirmed that the allocation will be made on the basis of population (per capita). An indicative allocation is promised for October 2012. A rough estimate has been calculated locally which suggests that the Marches LTB might receive an allocation of around £20M for the period 2015-19. If allocated equally amongst the three authorities this would provide around £1.7M extra a year over the period. Given the relatively low sums anticipated it will be important for the Marches LTB to establish an assurance framework which is proportionate and preserves as much of the funding as possible for the delivery of schemes.

11. Community Impact

None as a result of this report.

12. Equality and Human Rights

None as a result of this report. 13. Financial Implications

The requirement to establish an accountable body to be responsible for the devolved programme across the Marches area is likely to have resource implications. In addition, there will also be resource implications in respect of the servicing of the joint committee and the discharge of new responsibilities in respect of scheme appraisal. It will be sensible to review these requirements in the light of more detailed guidance from DfT and to consider options with Shropshire and Telford Council. .

14. Legal Implications

The proposed joint committee as described at paragraph 10 addresses the legal/constitutional requirements relating to the establishment of the Local Transport Body

15. Risk Management

Initially, key risk is around not establishing appropriate governance arrangements and scheme list by deadline set down by government. This may impact on ability to access the fund. This risk has been managed through a series of cross authority meetings to develop Formal Report Template DRAFT 3Oct12

a joint approach which will be considered by the 3 partner authorities.

In the longer term there will be risks around ensuring the programme is well managed and that it enables the delivery of high quality transport schemes. We are likely to have a relatively small allocation and we will need to ensure that our process of management and appraisal is proportionate whilst adhering to the minimum standards set down by government.

16. Consultees

The LEP Board was consulted with respect to original proposals set out by government. That consultation and the response in respect of the make-up of the Local Transport Body has informed this report and its proposals.

17. Appendices

None

18. Background Papers

DfT Publication – Guidance for Local Transport Bodies, November 2012

Herefordshire Council response to the Government consultation on Devolving Major Scheme Funding

Marches LEP response to the same consultation

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