www.pwc.co.uk Final Solent Authorities Devolution and the future of local government Confidential November 2016 Devolution and the future of local government in the Solent Final Contents Important notice .......................................................................................................................... 1 Executive summary..................................................................................................................... 2 1. Introduction .......................................................................................................................... 11 1.1. Purpose of this report 11 1.2. Hampshire and the Isle of Wight 11 1.3. Solent authorities 13 1.4. Local Economies 14 1.5. Local government in Hampshire and the Isle of Wight 17 1.6. The recent evolution of local government 19 1.7. The case for change and the Solent Devolution Deal 23 1.8. The path to devolution 24 2. Unitary authority options ...................................................................................................... 27 2.1. The unitary authority options considered 27 2.2. Status quo (baseline) 28 2.3. Three unitary authorities 28 2.4. Five unitary authorities 29 2.5. Commentary 30 3. Providing value for money and delivering positive outcomes ............................................... 31 3.1. Approach 31 3.2. Baseline 31 3.3. Disaggregation of County Council income and expenditure 33 3.4. Economy and efficiency 34 3.5. Summary Results 35 3.6. Payback period 37 3.7. Council tax harmonisation 38 3.8. Summary and conclusions from value for money and cost of transition analysis 38 4. Strong local leadership and accountability........................................................................... 40 4.1. Local government reform and the opportunity to strengthen leadership and accountability 40 4.2. Clarifying accountability 40 4.3. Ensuring simplicity 46 4.4. A Mayoral combined authority 46 4.5. Summary and conclusions 46 Devolution and the future of local government in the Solent Final 5. Strong local leadership and accountability........................................................................... 48 5.1. Introduction 48 5.2. Current baseline position 48 5.3. Future opportunity 49 5.4. Developing the better service tests 50 5.5. Appropriate scale 52 5.6. Citizen centricity 53 5.7. Connected government 55 5.8. Empowered to deliver 56 5.9. Delivering the promise 58 5.10. Continuously innovate 59 5.11. Summary 59 6. Summary of findings and key conclusions ............................................................................ 61 6.1. Summary of findings 61 6.2. Key conclusions 63 Appendix A: Technical financial information ........................................................................... 64 A.1. Three unitary option 64 A.2. Five unitary option 66 A.3. Council tax harmonisation 68 A.4 Disaggregation of Revenue Support Grant (RSG) 76 Devolution and the future of local government in the Solent Final Important notice This document has been prepared by PricewaterhouseCoopers LLP (“PwC”) for Basingstoke & Deane Borough Council acting on behalf of Portsmouth City Council, Southampton City Council, Isle of Wight Council, East Hampshire District Council, Eastleigh Borough Council, Fareham Borough Council, Gosport Borough Council, Havant Borough Council (all collectively referred to as the “Solent authorities”) in accordance with the order form (CGP47) dated 02 June 2016, as varied by the order variation form (001) dated 08 August 2016. Accordingly, the contents of this document are strictly private and confidential. This paper contains information obtained or derived from a variety of sources as indicated within this document. PwC has not sought to establish the reliability of those sources or verified the information so provided. Accordingly no representation or warranty of any kind (whether express or implied) is given by PwC to any person (except to the Solent authorities under the relevant terms of the Engagement) as to the accuracy or completeness of the report. Moreover the report does not absolve any third party from conducting its own due diligence in order to verify its contents. For the avoidance of doubt this Engagement is not an assurance engagement and PwC is not providing assurance nor are the services being performed in accordance with the International Standard on Assurance Engagements 3000 (ISAE 3000). PwC accepts no duty of care to any person (except to the Solent authorities) for the preparation of this report. Accordingly, regardless of the form of action, whether in contract, tort or otherwise, and to the extent permitted by applicable law, PwC accepts no liability of any kind and disclaims all responsibility for the consequences of any person (other than the Solent authorities on the above basis) acting or refraining to act in reliance on the briefing or for any decisions made or not made which are based upon such report. In the event that, pursuant to a request which the Solent authorities have received under the Freedom of Information Act 2000 or the Environmental Information Regulations 2004 (as the same may be amended or re-enacted from time to time) or any subordinate legislation made there under (collectively, the “Legislation”), the Commissioning Councils are required to disclose any information contained in this report, it will notify PwC promptly and will consult with PwC prior to disclosing such report. The Commissioning Council agrees to pay due regard to any representations which PwC may make in connection with such disclosure. If, following consultation with PwC, the Council discloses this document or any part thereof, it shall ensure that any disclaimer which PwC has included or may subsequently wish to include in the information is reproduced in full in any copies disclosed. Private and Confidential 1 Devolution and the future of local government in the Solent Final Executive summary Devolution and future of local government in the Solent Across Hampshire and the Isle of Wight local government is at risk of turning inward as a result of fallout from failed discussions on a devolution settlement for the Hampshire & the Isle of Wight area, which sought to devolve power from Whitehall. This has brought to the surface tensions which are symptomatic of concerns about the longer term sustainability of existing arrangements for local government. Since then the parties involved in the previous Hampshire and the Isle of Wight devolution prospectus have been considering their next steps as follows: Hampshire County Council has developed and consulted on its own options for unitary solutions; Solent authorities are focussed on securing a combined authority to bring new funding and new powers to support the economy of the area as the first step on their devolution journey; and Heart of Hampshire authorities want to ensure their residents and businesses have the same opportunity to benefit from devolution as the rest of Hampshire. Purpose of this document This document was commissioned by the Solent authorities, who have sought advice on options for the most effective and efficient form of local government in the context of opportunities for devolution, combined authorities and the prospect of further unitarisation. The authorities intend to establish a strong case for improved governance and devolution which will support the delivery of sustainable services and improved outcomes for local residents. In this report we have provided an independent assessment of various options for unitary solutions across the Solent. The report does not make specific recommendations but it offers views on the suitability of arrangements for the Solent authorities. The provision of local government in the Solent needs to be addressed as part of a 'whole system’ of local government in the area which extends across the existing geography covered by Hampshire County Council and the 11 district councils. This report is part of a suite of reports using common methodology that analyses the impact of potential unitary authority options across the geography. The analysis within this report supports the following conclusions: Business as usual does not look sustainable from a financial viewpoint for the majority of councils. This exacerbates the case for change. When you add the benefits from reorganisation and transformation the budgets are hugely improved, however some configurations still display deficits. Status quo without a recalibration of district and Hampshire County Council relationships is undesirable. An enhanced status quo utilising a combined authority for Solent would be an attractive outcome and would provide a strong foundation for joint working and accountability to improve the design and delivery of services for residents If any future unitary configuration is desired, the 3 unitary authority options appears to have the most strengths and least weaknesses. On devolution, the Heart of Hampshire authorities support the ambition of the Solent combined authority. It is clear that all of the councils would be stronger working together on a local consensus to secure devolved powers, control and resources from national to local bodies, while respecting the differences within Hampshire and the Isle of Wight. Any solution will require local consensus and it is clear relationships need to be strengthened to enable a focus on better serving residents and businesses. All parties agree the status quo needs to change. Private and Confidential 2 Devolution and the future