Agenda item

To consider the report of the Executive Director of Corporate Services and the Portfolio Holder: Policy, Reform and Resources.  

Metro Mayor S Rotheram presented his budget proposals to the LCR Combined Authority and in doing so wanted to provide further explanations behind some of the key announcements.

Before doing so, the Metro Mayor placed on record his thanks to John Fogarty, Executive Director of Corporate Services and his team for their work in supporting the development of the budget. He also paid tribute to the efforts of all staff, from across the Combined Authority estate.

The Metro Mayor reported that the budget reflected where the authority was, as a public body, in the aftermath of Covid. As the Leaders and City Mayor could attest local government finances had been hit hard again by the pandemic and the Combined Authority was no exception. It had had to contend with uncertain levels of patronage on the public transport system, soaring inflation, rises in supply chain costs, reductions in revenues and a growing gap between income and expenditure.

Furthermore, his first priority as Metro Mayor was to ensure the safe running of services to the public. Therefore, given the economic challenges the pandemic had presented to the Authority, measurers were required to balance the budget and move to a more financially stable model in the medium term. The Metro Mayor explained that the financial implications of Covid, particularly on the transport network, had negatively impacted upon the pre-pandemic assumptions in the forecasting. Therefore, as the financial circumstances had changed the Authority had also had too to respond to the pressures created.

The Metro Mayor explained how he had tasked Katherine Fairclough, Chief Executive with a modernisation strategy to update some of the practices within the Combined Authority. As part of this an ‘efficiencies drive’ had been embedded to secure marginal gains, one example, was the move away from cash handling within the business.

He further explained that the Authority was also looking at mechanisms such as ‘top-slicing’ to support programme delivery. As well as consideration being given to increasing commercial revenues i.e. advertisements, sponsorships, contracts etc.

However, due to the growing budget deficit and the fact that reserves had already been used to bridge the Covid gap there were measures that needed to be taken to remedy the situation and submit balanced budget proposals.

Therefore, the budget proposals included an increase to tunnel tolls. The Metro Mayor noted that this was first increase in five years and was in response to budget pressures and increasing maintenance costs of the tunnels.

The second rise related to the Transport Levy, which had not had a significant rise for around eight years. During that period the Levy had seen a £30m reduction whilst costs associated with running transport had increased. The Metro Mayor noted that the City Region had the most generous Concessionary Travel scheme in the country. With Under 5’s having access to free travel, those aged 6 to 19 could benefit from the My Ticket offer, apprentices could get half price travel and the over 60’s in Merseyside qualified for free bus, rail and ferry travel. However, with an aging population this meant that fewer people were paying full fares. Therefore, a 2% increase in the Transport Levy was proposed which increased income from £97.4m to £99.35m.

If the desire was to create a London-style integrated transport system in the City Region, and to create the modal shift to get people out of their cars, then it was necessary to see proper, sustainable investment in transport over a long-term period. The rise in the Levy represented the first step to a financial model that would deliver better services and outcomes for residents in the years to come.

The Metro Mayor explained that the current Mayoral precept was around £15 per year which equated to about 32 pence per week for 95% of households in the City Region. He was therefore proposing to freeze the precept in order to avoid putting extra financial pressure on residents.

The Metro Mayor explained that he had presented the draft budget to the Overview and Scrutiny Committee the previous day and they had asked some challenging questions around the Transport levy increases but overall commended the proposed budget.

Similarly, the Transport Committee had also considered the proposed Tunnel Tolls at their meeting and on this point the Metro Mayor proposed an amendment to recommendation (i), in which it he requested that the fast tag element for non-City Region residents be frozen to £1.80.

The Metro Mayor invited John Fogarty, Executive Director of Corporate Services, to summarise the technical detail of the proposed budget. 

John Fogarty stated that Covid had continued to cast a shadow over the Authority’s financial situation, particularly in relation to passenger transport, which had meant that the Combined Authority had been very exposed financially to the impact of the pandemic. He explained that in setting a budget for this year there had been some related but distinct challenges around how the Combined Authority returned to a position of financial sustainability, particularly when the transport network required growth and maintenance when revenues had reduced, ensuring significant funding packages which had a value of over £1billion could be delivered against a budget gap which had developed over a number of years but especially in the last two years when income and costs had diverged.

John Fogarty explained that steps had been taken to address this through savings and efficiencies, but it had been necessary to fall back on reserves mainly as a result of Covid. As such this year’s budget restored that link and the proposal was for a 2% increase in the Transport Levy for the next financial year. Furthermore, the increase had been identified through consultation with each of the constituent Local Authorities, however, for historical reasons Halton Council remained outside of this increase.

Members were advised that the Combined Authority would undertake further action to secure efficiencies and value for money, whilst also looking at contracts and processes. Furthermore, a significant element of Combined Authority running costs were met through the Mayoral precept and it was proposed to freeze this for next year as external funding did provide some scope to offset some of those Combined Authority running costs.

John Fogarty reported that whilst it had never been more important to have a strong and attractive public transport offer it had never been more difficult and  challenging as revenue had fallen away from the sector and to some extent this had exposed the flaws in the current commercial model for both bus and rail. What was known was that in the short term this would require more public sector funding to address and to prevent reductions in the network. A further risk was that the Authority would be introducing a new fleet of rolling stock into this very different and challenging environment in 2022/23 and until rail revenues recovered sufficiently to meet the cost of the new trains this would continue to be a financial risk.

Members were also advised that the budget proposed an increase in tunnel tolls and whilst increasing tunnel tolls had been deferred during the covid period, maintaining those historically low level of tolls in the current environment was not possible to sustain and the Transport Committee had also considered the new schedule of tolls for next year. 

In conclusion, John Fogarty highlighted that the final challenge related to managing the capital programme for the next year and beyond with limited revenue capacity. He noted that a strong pipeline of schemes was required and therefore significant resources directed at delivery, not just within the Combined Authority but also within local authorities, was needed. Therefore, to find this capacity meant that it would be necessary to capitalise project management costs and top slice funding awards. As more information was available from Government, Officers would be coming back to the Combined Authority to present proposals as to how this issue could be addressed.

Councillor Graham Morgan explained that unfortunately Councillor David Baines could not be present for this meeting, however, he had spoken to him earlier and he wished to place on record his full support of all the recommendations presented.  

In respect of the amended recommendation (i), Jill Coule, Monitoring Officer clarified that the amendment related to table 6 set out in the report. It was proposed to change one figure which was currently set out at £2.00 for non-Liverpool City Regions and be amended to £1.80 for non-Liverpool City Region residents.

RESOLVED that:

(a)    the report be noted;

(b)    the Mayoral Budget as presented at Table 2 of this report be agreed;

(c)    it be agreed to freeze the Mayoral precept at its 2021/22 level equivalent to £19 per year for a Band D property and £12.67 per year for a Band A property;

(d)    the composite Combined Authority budget for 2022/23 as presented at Table 3 be approved;

(e)    a 2% increase in the Transport Levy to £99.352m for 2022/23 be approved;

(f)     the payment of an operational grant of £95.827m to Merseytravel to cover its operational costs and the revenue project costs associated with the Rolling Stock project as detailed at paragraph 5.1.2 be approved;

(g)    the delegation to Merseytravel to develop and implement the proposed concession administration charge for certain concessionary passes as detailed at paragraph 5.3.6 be approved;

(h)    the level of ‘authorised tolls’ for the Mersey Tunnels as determined in the County of Merseyside Act 1980 (as amended by the Mersey Tunnels Act 2004) with details on calculation methods explained in section 5 of this report be noted;

(i)     the Liverpool City Region Combined Authority implement the amended schedule of tolls contained in Table 6 below with effect from Friday 1 April 2022 be approved:

(j)     the discounts and concessions as detailed at paragraphs 5.4.2 and 5.4.3 be approved;

(k)    the request for an operational grant of £21.892m in respect of the operation of Mersey Tunnels for 2022/23 as detailed at paragraph 5.1.2 be approved;

(l)     the capital programme as detailed in Table 7 and Appendix Three be approved;

(m)   a grant of £140.04m to Merseytravel to support the delivery of capital schemes be approved;

(n)    the differential levy payable by Halton as £3.235m be recognised;

(o)    a corresponding grant from the Combined Authority to Halton of £3.235m in order that Halton could continue to provide transport services in Halton on behalf of the Combined Authority in 2022/23 be agreed;

(p)    the Treasury Management Strategy 2022/23 incorporating the Minimum Revenue Provision and associated Treasury Limits and Prudential Indicators as detailed at Appendix Four be approved; and

(q)    the Capital Strategy as detailed at Appendix Five be approved.