TEES VALLEY GOVERNANCE REVIEWThe Borough Councils of Darlington, Hartlepool, Middlesbrough, Redcar & Cleveland and Stockton-on-Tees present this governance review and draft scheme to the Secretary of State so that he may carry out due process leading to the creation of a Combined Authority for the Tees Valley.

This review addresses the conditions as set out in the Local Democracy, Economic Development and Construction Act 2009, namely the four statutory tests, and our proposal reflects the identities and interests of local communities and secures effective and convenient local government.

We look forward to working with Government, businesses and our communities to bring about a Combined Authority and a better economic future for the Tees Valley.

Cllr Bill Dixon, LeaderDarlington Borough Council

Cllr Christopher Akers-Belcher, LeaderHartlepool Borough Council

Ray Mallon, Elected MayorMiddlesbrough Council

Cllr Mary Lanigan, LeaderRedcar & Cleveland Borough Council

Cllr Bob Cook, LeaderStockton-on-Tees Borough Council

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CONTENTS

Section Title Page

Section 1 Introduction 3Our Ambition for the Tees Valley 7Our Approach to the Governance Review 9

Section 2 The Tees Valley: Review of Economic Evidence 12Overview 12Our Economy 19Sectors and Supply Chain 22

Section 3 Current Governance Arrangements and the Case forChange 28Current Arrangements 28Creating the Right Governance for Growth 30Opportunities for Economic Growth 32Maintaining our Capability to Compete 41Relationship between the LEP and Combined Authority 41Identities and Interests of Local Communities 43Effective and Convenient Local Government 43Scrutiny Arrangements 44Summary – the Case for Change 45

Section 4 Original Options Appraisal 46

Section 5 Consultation 52

Section 6 Conclusions 53

Appendix 1 Tees Valley Scheme 54

Appendix 2 Consultation Report 55

Appendix 3 Original Options Appraisal 56

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SECTION 1 - INTRODUCTION

The Governance Review

1. This governance review is the culmination of considerable work in the Tees Valley. It builds on the work that led to the Tees Valley’s Statement of Ambition which was agreed in 2012; the Tees Valley City Deal in 2013; the Strategic Economic Plan in 2014; and our own recent review of governance around the operation of Tees Valley Unlimited. It was prepared to inform our widespread consultation on proposals to create a Combined Authority for the Tees Valley which took place in December 2014 and January 2015.

2. This report has been prepared by the Tees Valley Unlimited Governance Group on behalf of the Leaders and elected Mayor of the five Borough Councils in the Tees Valley: Darlington, Hartlepool, Middlesbrough, Redcar & Cleveland and Stockton-on-Tees.

3. The Governance Group is led by the Chief Executive of Redcar & Cleveland Council and involves senior representation from all five Boroughs and Tees Valley Unlimited, covering professional areas of regeneration, legal, finance and policy.

4. The report is the culmination of a review undertaken of governance arrangements in the Tees Valley in accordance with Section 108 of the Local Democracy, Economic Development and Construction Act 2009 (the 2009 Act).

The Purpose of the Governance Review

5. In accordance with Section 108 of the Local Democracy, Economic Development and Construction Act 2009 a governance review in relation to a potential combined authority must address the effectiveness and efficiency of: (a) transport within the area covered by the review and (b) arrangements to promote economic development and regeneration within the review area.

6. The purpose of this review, therefore, is to:

a. Determine whether the area covered by the local authorities in the Tees Valley (Darlington, Hartlepool, Middlesbrough, Redcar & Cleveland and Stockton-on-Tees) can properly be seen as constituting a functional economic area for the purposes under consideration in the review. (Please refer to section 2 of this report)

b. Determine whether the existing governance arrangements for economic development, regeneration and transport in the area are effective or would benefit from changes, specifically, whether the establishment of a Combined Authority is likely to improve the following (the “four statutory tests”)

the exercise of statutory functions relating to transport in the area, the effectiveness and efficiency of transport in the area,

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the exercise of statutory functions relating to economic development and regeneration in the area, and

economic conditions in the area

(Please refer to section 3 of this report)

c. Examine the various options available (Please refer to section 4 of this report)

d. Consider the feedback from consultation carried out in December 2014 and January 2015 across the Tees Valley. (Please refer to Section 5 of this report.)

Legal Context

7. Part 6 of the Local Democracy, Economic Development and Construction Act, 2009 (the 2009 Act) enables the creation of economic prosperity boards (EPBs) or combined authorities (CAs). These are new sub-national structures that have separate legal personality to the Local Authorities who come together to create them. The new bodies are available to support the effective delivery of sustainable economic development and regeneration and, in the case of CAs, transport.

8. The 2009 Act sets out the process for the creation of EPBs and CAs and establishes certain principles relating to their constitution and organisation. The legislation is not prescriptive however and the detail of how these bodies will operate and what their functions will be is left to be determined locally, subject to final approval by the Secretary of State.

Delegation of Additional Powers

9. The Localism Act 2011 (the 2011 Act) contains powers for the Secretary of State to transfer powers between authorities (including Combined Authorities) and also to transfer ministerial functions to such authorities. Property, assets and liabilities relating to those functions can also be transferred. Notably, transfers and delegations of additional functions under this legislation can be made at any time and independent from the procedure to create EPBs or CAs.

Transport

10. A CA is differentiated from an EPB due to the inclusion of transport functions. There are intended similarities between Part 6 of the 2009 Act and part 5 of the Local Transport Act 2008 (the LT Act) which provides for Integrated Transport Authorities (ITAs). When a CA is established in an area where an ITA already exists, the ITA is dissolved and the CA assumes all the functions of the ITA for the area.

11. There is no existing ITA in the Tees Valley, unlike in every other CA which has so far been created, where an ITA has covered part or all of the area and has been subsumed within the CA.

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12. Whilst there are differences, the process for review is broadly similar under both Acts. In preparing a scheme under the 2009 Act, regard must be had to the provisions of the LT Act as well as any guidance published by the Government relating to both pieces of legislation.

The Three Steps to Creation of a Combined Authority of an Economic Prosperity Board

13. The process for creating an EPB or CA involves 3 main steps:

First, a review of existing governance arrangements (this report) for the delivery of economic development, regeneration and transport. This must lead to a conclusion that there is a case for changing these arrangements based on real improvements;

Secondly, drawing up a scheme (Appendix 1) for the new body, upon which the authorities are required to engage widely to seek common support amongst stakeholders. All constituent councils are required to approve the scheme for submission to the Secretary of State for Communities and Local Government;

Finally, the Secretary of State will consider the scheme and undertake a formal consultation. If he is satisfied with the proposals a draft order will be laid before both Houses of Parliament for adoption by affirmative resolution.

14. To approve a scheme the Secretary of State must be satisfied that (in accordance with section 91(5) (for EPBs) or 110(1) (for CAs) of the 2009 Act) that improvements are ‘likely’ if the scheme proposed is adopted.

Flexibility and Control

15. Once established both CAs and EPBs have wide general powers. However, the mechanisms by which those powers can be exercised, the functions to be discharged and the resources available will all be determined by the parent local authorities (with the consent of the Secretary of State) through the drafting of the Scheme, which sets out the legal framework specific to each CA or EPB.

16. A CA or an EPB is not a merger or a takeover of existing local authority functions. Instead they seek to complement local authority functions and enhance the effectiveness of the way they are discharged. In particular, it is the enhancement of decisions and information at a strategic level that are most frequently cited as the advantages of these statutory bodies.

OUR AMBITION FOR THE TEES VALLEYOur CONTENTS Approach Our LGF Bid Delivery & Consultation17. Councils and businesses are, and continue to be, highly ambitious for the area. The

aim, as set out in the Tees Valley Statement of Ambition 2012 Tees Valley Unlimited Statement of Ambition, is to become a high-value, low-carbon, diverse and inclusive economy. To get there, there are six priorities:

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1. Develop and nurture an innovation culture and positive environment for business growth.

2. Secure the transformation of the Tees Valley into a Low Carbon High Value economy.

3. Secure improved skills levels to address future demand in growth sectors and in existing industries.

4. Secure additional capacity on the East Coast Main Line rail route and improve rail services to major northern cities and within the Tees Valley.

5. Improve air, road, port, land and property infrastructure to enable economic growth.

6. Create and retain wealth by establishing the Tees Valley as a preferred location to live in, work and visit.

18. These six priorities are grouped under four objectives within the Tees Valley Strategic Economic Plan.

1. Support Innovation and Sector Development2. Develop the Workforce3. Develop and Provide Infrastructure4. Attract and Retain Wealth

19. The future vision Tees Valley City Deal sees the area with a thriving and more balanced economy with integrated supply chains that are resilient to economic shocks. A range of skilled job opportunities will be available to local residents and commuters into the Tees Valley and training providers will meet the skills needs of employers in a proactive and responsive way. The area will be home to:

a critical mass of sustainable super sectors in petrochemicals, advanced manufacturing, and new renewable energy with integrated SME supply chains using digital enablement;

integrated activities between companies leading to the development of new business opportunities, and secure carbon reductions in those industries;

research and development that will be commercialised into new products and processes, including the test bed for new and emerging green technologies creating wealth within the UK;

large waste to energy plants turning waste into low carbon products that fuel cars, create energy and produce chemicals that are the building blocks of everyday products such as plastics, paint and textiles;

low carbon investments as the location of choice where efficiencies are exploited, manufactured and exported;

new and complementary activities including subsea and other forms of advanced manufacturing;

rapid growth in the industrial sectors to drive diversification in the rest of the economy; and,

growing and thriving digital and reactive industries and strong supporting sectors, such as businesses and professional services and logistics.

Future Jobs Growth

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20. The Tees Valley Strategic Economic Plan Tees Valley Unlimited Strategic Economic Plan sets ambitious targets for growth in the local economy. Its stated ambitions and plans are to create 25,000 net new jobs (a 10% increase) in the Tees Valley over the next decade, bringing with it over £1 billion of GVA benefits, closing the gap between national employment rates and matching the private sector employment rate in Manchester, Birmingham and Leeds.

21. The Strategic Economic Plan, European Structural and Investment Funds Strategy and agreed City Deal, alongside associated investment, will support the delivery of this headline target. However, there is a real need to accelerate growth in the Tees Valley, and the right governance must be in place to help.

22. Tees Valley Unlimited commissioned independent experts Ekosgen to assess if and how the target figure of creating 25,000 net new jobs over the next decade could be achieved.

23. The table below has been agreed by all five Tees Valley local authorities as building upon the area’s competitive advantages and drive jobs growth to benefit our residents.

Net Job Creation2012-2022Employment

Low Carbon +2,500Advanced Manufacturing +2,500Construction Other Manufacturing -5,000Tourism and retail +4,000Finance and Business Services (ex digital) +8,000Logistics +2,000Digital/Creative +2,000Higher Education +1,000Health (Care) +4,000Other public services +4,000Total +25,000

24. The Tees Valley’s ambition is to contribute to Northern economic growth by creating 25,000 new jobs and over £1bn of investment over the next decade. The Strategic Economic Plan identifies infrastructure constraints as barriers to growth in our key sectors. Sustainable growth hinges on Northern cities and city regions unlocking the potential of economic assets by forging better links between economies across the North – by road, rail and freight – and thus boosting business competitiveness, attracting foreign direct investment and opening up labour markets to access more and better job opportunities.

OUR APPROACH TO THE GOVERNANCE REVIEW

25. The Tees Valley Unlimited Governance Group was formed in 2013. Its purpose was to review current governance arrangements for Tees Valley Unlimited and the LEP

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and consider the best governance arrangements for the Tees Valley going forward to help accelerate delivery of our ambitious vision.

26. Led by Amanda Skelton, Chief Executive of Redcar & Cleveland Borough Council, it reports through the Tees Valley Chief Executives’ Group to the Tees Valley Leaders and Elected Mayor.

27. It is supported by senior officers from all five Borough Councils and Tees Valley Unlimited, covering professional expertise in regeneration, finance, legal and policy.

28. The Group draws on expertise in existing professional groups including the Tees Valley Directors of Place, Directors of Resources, and Legal Officers Group.

29. An Options Appraisal was undertaken early in 2014 to help identify the best governance model that would drive and enhance the delivery of our vision and the 25,000 new jobs. This was done, at the time, to focus on financial and legal issues in relation to various governance models. The option of an Economic Prosperity Board was considered and rejected as this would not include transport responsibilities, and transport is considered to be fundamental to improving the Tees Valley’s economic outlook. The options analysis at that time, which has led to a conclusion that a Combined Authority is the best governance model for the Tees Valley going forward, therefore looked at four potential models overall:

• Enhancement of the status quo;• Joint committee;• Combined Authority; and• Company models

30. These were assessed against criteria including:

• Operational efficiency and effectiveness;• Capability to enhance economic development;• Local authority governance;• Public sector financial management; and• Engaging with the private sector

31. The status quo does not deliver the kinds of improvements needed, the joint committee could be implemented quickly but could not receive new powers in the way a Combined Authority could, and a company model could not recover VAT, there would be issues around Corporation Tax and the company’s autonomy. The Combined Authority option offers more effective, speedy and transparent decision-making, the ability to receive new powers and resources, and the longer-term commitment (as it is set up by Parliament) that would give business further confidence in our economic aspirations whilst remaining within democratic control. The original options appraisal is included at section 4.

32. Since then, things have moved on. The Scottish referendum moved devolution of powers way up the agenda nationally and it is essential that the Tees Valley is best placed to benefit and contribute to the competitiveness of the nation. Also, the UK Government has demonstrated its determination to devolve powers through

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emerging Treasury Agreements with city / sub-regions. All major political parties are very supportive of the Combined Authority model as a means of devolving power and resources from the centre. This endorses our initial preference for a Combined Authority model, as it is the model most likely to be used by Government to devolve powers and resources.

33. A more detailed options appraisal was subsequently undertaken in relation to transport powers (in relation to an ITA), given that this would provide, arguably, the most significant potential benefits for the Tees Valley. This analysis is set out in section 3.

34. Having undertaken the analysis and identified that the Combined Authority would be the best option for long-term economic growth in the Tees Valley, each of the Councils’ Cabinets / Committee received a report in November and December 2014, asking for approval to commence wide consultation. This was agreed and consultation commenced on 10th December, to last until 31st January 2015.

35. There are a range of organisations, groups and individuals which formed part of the consultation arrangements:

Association of North East Councils / North Yorkshire Councils Businesses and Business Organisations Colleges / Schools Durham Tees Valley Airport Government Departments and Agencies Members of Parliament and House of Lords representatives North Yorkshire LEP Parish and Town Councils Ports Regional and Sub Regional Newspaper Editors Residents TVLEP / NE Combined Authority Trade Unions Universities Other partners

36. A range of documents were made available on-line to support the consultation, including:

Frequently Asked Questions Draft Governance Review, including the Options Appraisal Consultation questionnaire Cabinet / Committee report from November and December 2014

37. In total, there were over 1900 responses, of which 1638 were from residents, which is a significant return. Consultation was promoted through the local and regional media, on Council web-sites, social media and through direct contact with partners

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across the five Boroughs. The results are supportive of the creation of a Combined Authority. A small number of people did not answer the question which sought views on whether we should create a Combined Authority, but of the 1828 that did, almost 65% were in favour, with 27% against and 8% don’t know.

38. The full consultation report is at Appendix 2.

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SECTION 2 – THE TEES VALLEY: REVIEW OF ECONOMIC EVIDENCE

OVERVIEW

39. The Tees Valley covers the five Tees Valley local authority areas of Darlington, Hartlepool, Middlesbrough, Redcar & Cleveland and Stockton-on-Tees with a population of around 665,000. The Tees Valley is already recognised widely as a functioning economic area. This is recognised by government in the creation of the Tees Valley LEP and City Deal; it is recognised by our Councils and business in the coming together as a partnership for the Tees Valley; and it is recognised widely by partners and our communities as the term “Tees Valley” has become common parlance.

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40. The area is recognised in several strategies as an economic functioning geography. With 88% of residents working within the Tees Valley the area has a great deal of self-containment, with relatively few commuters crossing the Tees Valley boundary; most people work within their district of residence, with significant proportions travelling between the Tees Valley districts. This is illustrated in the diagram below.

Transport

41. The Tees Valley Infrastructure Plan which now forms part of the tees Valley Strategic Economic Plan demonstrates the need to address transport and connectivity at the Tees Valley level.

42. Connectivity is vital to the Tees Valley economy. It is crucial that, as the gateway to the North and with over 70% of major local businesses internationally owned, the Tees Valley remains globally competitive by offering effective transport links and a resilient infrastructure. Connectivity enables businesses to start, invest, expand and trade; our workforce to access employment opportunities; our young people to get the skills they need; and visitors to enjoy Tees Valley.

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43. The Tees Valley’s key transport assets include the A19, A1(M) and A66 and the East Coast Mainline (ECML) and Transpennine rail routes – which link the advanced manufacturing clusters across Yorkshire and Humber, the North West, Tees Valley and the North East – and the international gateways at Teesport, particularly vital for logistics and bioindustries, and Durham Tees Valley Airport.

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The Evidence

44. Effective transport connectivity is crucial to the future development of the Tees Valley as it will stimulate, support and be a driver for economic growth. Overcoming barriers to get businesses and people moving, trading, working, learning and exporting is therefore essential to achieving the economic aims of the Tees Valley.

Road

45. The Tees Valley comprises a number of commercial centres, all of which are interdependent, so good interconnectivity is vital across all transport modes. The Tees Valley has a number of locally and nationally significant transport assets, with major highways such as the A1(M), A66, A19, A174 and A1053 providing fast communications within the sub-region as well as to the North East region and the rest of the country. These routes, along with other key road links within the urban centres, form our strategic road network, which is critical in supporting key housing and employment sites across Tees Valley. The bus network in the Tees Valley is currently undergoing a significant programme of improvements including prioritisation measures to improve reliability and improved buses, passenger facilities and information. With 34.7 million passenger journeys, bus remains the dominant mode of public transport within the Tees Valley. The Tees Valley has an extensive network of off-road or minor road signed cycle routes, which link many of its major centres.

Rail

46. Our connections on the ECML (with its direct link from Darlington to London and Scotland) and the Transpennine rail routes to Leeds and Manchester are vital for the area. Darlington acts as a critical rail “gateway” into and out of Tees Valley, with over 360,000 annual trips to London stations and is the main interchange hub for national and inter-regional rail connections. Grand Central services provide key connectivity to London from Hartlepool and Eaglescliffe, and a new franchise ‘Inter City Trains’ will see the introduction of direct services between Middlesbrough and London. The ECML supports Tees Valley businesses, with the direct route from Darlington to London producing £3.4m in GVA benefits and £413m of journey time benefits. It provides vital business connectivity to the capital, as well as key cities such as Edinburgh and Aberdeen.

47. ECML is essential for UK PLC as it is estimated that up to 49% of total UK GVA is supported via the East Coast Mainline and there is a clear view that further investment should be made in the line.

48. Links from Middlesbrough, Thornaby and Yarm via Transpennine services to Leeds and Manchester are important to future economic growth given the trading ties our companies have with financial and professional services firms in Leeds and the key connections that Manchester Airport offers businesses. Local rail services are currently provided by Northern Rail and provide good connectivity between centres of economic activity within the Tees Valley, but not such good connectivity beyond.

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Port

49. With good deep water access, Teesport handled over 37 million tonnes of cargo in 2013. It is the largest exporting port by tonnage in England, exporting 20m tonnes,18% of England’s total cargo, including substantial liquid bulk exports and imports. Teesport is an international asset which supports our key sectors that rely upon the international transport of goods. Growth of port centric warehousing, with the presence of Tesco and Asda distribution centres, has already contributed significantly to the local economy and has further potential.

Airport

50. Durham Tees Valley Airport has a long term role in contributing to the competitiveness and prosperity of the Tees Valley, particularly through its regular services to the Amsterdam Schiphol hub and to Aberdeen, important routes for Tees Valley businesses, particularly in the oil and gas sectors. The Airport supports 600 direct and indirect jobs and contributes £37m annually in GVA, including an innovative cluster of businesses on site specialising in fire safety training, freight forwarding and aircraft maintenance, overhaul and repair.

51. The Tees Valley’s population is as follows:

Tees Valley North East Great BritainNumber % Number % Number %

Total resident population (mid-2013 estimates)

665,100 100 2.61m 100 62.3m 100

Working age population 419,200 63.0 1.67m 63.9 39.7m 63.8Population by ageUnder 5 42,500 6.4 151,800 5.8 3.89m 6.25 - 14 years 77,200 11.6 281,300 10.8 7.06m 11.315 – 24 years 86,200 13.0 349,500 13.4 7.95m 12.825 – 44 years 164,200 24.7 643,500 24.7 16.6m 26.645 – 64 years 176,700 26.6 704,200 27.0 15.9m 25.565 – 74 years 64,100 9.6 260,900 10.0 5.88m 9.475 and over 54,200 8.1 219,200 8.4 4.98m 8.0Employee jobs by sector (2013)Primary* & utilities 5,200 2.1 20,000 2.0 542,300 2.0Manufacturing 24,500 9.7 109,200 10.8 2.30m 8.5Construction 13,500 5.4 49,200 4.9 1.18m 4.4Services 209,200 82.9 828,600 82.3 23.2m 85.2Total 252,400 100 1.01m 100 27.2m 100

Source: ONS, NOMIS, Mid-year population estimates, BRES. *Figures exclude farm agriculture

52. The Tees Valley Strategic Economic Plan and Appendices sets out the detailed context of the Tees Valley economy and provides the supporting evidence of the need to address barriers to growth and unlock economic opportunity. A summary of the economic context and growth issues is detailed below.

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OUR ECONOMY

53. Over the past 50 years, our economy has moved from heavy industry towards advanced manufacturing. Today, the business base is shifting once again, with growing expertise in advanced manufacturing, low carbon, logistics and digital and creative industries. For many years our labour market was dominated by a small number of large employers; ICI and British Steel collectively employed over 80,000 people in the late 1960s/70s. In line with national trends, technological advances and international competition have reduced the need for large workforces in such industries, which for decades had provided the bulk of our employment - they became more capital intensive, rather than labour intensive. By the 1980s, employment in chemicals had fallen to just over 20,000 and employment in steel manufacturing had fallen to just below 19,000 and this trend has continued.

54. Although the Tees Valley has retained its strengths in production, between 1971 and 2004 over 93,000 manufacturing jobs were lost in the Tees Valley and communities continue to feel the effects of this economic restructuring. Manufacturing job contraction has, in part, been off-set by growth in our service sectors, but there have not been the same levels of service sector growth experienced elsewhere, and have been over-reliant on employment growth in the public sector. Whilst private sector employment has risen over the past two years, there is still a long way to go to build up economic resilience.

55. The area experiences a number of similar issues and opportunities which do not respect individual local authority boundaries. The geography of these issues and opportunities makes Tees Valley partnership activity an appropriate, and accepted way of working.

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Public sector jobs

Total jobs

Private sector jobs

56. This economic restructuring has fundamentally changed the profile of our economy and labour market. Today, although Tees Valley GVA per hour worked is 90% of the UK average and above that of the East and West Midlands, Yorkshire and Humber, our GVA per head is poor (at 76% of the national average), due in large part to a low employment rate.

57. Our economy supports just 285,000 jobs, serving a working age population of 421,000. Furthermore, our employment rate is 4.3% below the national average, meaning that to close this gap and achieve national levels of employment there would need to be an additional 18,000 jobs:

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Tees Valley

Source: ONS, APS

Great Britain

58. This is particularly acute with claimant count unemployment in Tees Valley at 4.1% compared to 2.1% nationally, and youth employment at 7.4%, both double the national average. There are high numbers of people with significant barriers to work – only 27.2%of residents are qualified to NVQ level 4 compared to 35.2% nationally – while businesses that need to acquire skilled workers can struggle to recruit and grow. Businesses, particularly our 14,500 SME base, face hurdles which keep rates of enterprise, growth and commercialisation in Tees Valley low. Yet the Tees Valley economy makes a significant contribution to the UK economy (with GVA of almost £11bn) and is part of the only region in England with a consistently positive balance of trade in goods. Over a fifth of this contribution is through production and Tees Valley comprises 50% of the UK’s petrochemicals GDP. There is a strong advanced manufacturing sector with expertise across automotive, subsea, renewable energy and engineering design. Such expertise has emerged because Tees Valley is one of the largest industrial areas in the UK with process, energy and industrial technology plants of world scale. The long history of chemical production on Teesside continues today with 60% of the UK’s chemical exports being produced in the Tees Valley.

59. Although our Key Sectors face challenges of remaining competitive against global competition and the need to reduce the impact of CO2, there are significant opportunities. The advanced manufacturing heritage and expertise of the Tees Valley makes us ideally placed to capitalise upon moves towards a low carbon

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economy, supporting our businesses to develop new technologies, export new products and access new supply chains.

60. The Tees Valley is at the vanguard of export-led growth and has seen significant investment in sectors such as subsea, biologics, automotive, oil and gas, digital and creative. These together with transport and logistics, business ICT, finance, business services and healthcare, have real growth potential. Tees Valley’s business base is critical to supplying key UK industries, particularly automotive, oil and gas and aerospace. The Tees Valley has experienced private sector growth, with a net increase of over 11,000 private sector jobs since 2011, and our skilled workforce, excellent connectivity and leading knowledge centres are nationally-recognised. Furthermore, the Tees Valley has a quality of place that attracts people to live, work and visit.

SECTORS AND SUPPLY CHAIN

61. Tees Valley is an area of cutting edge innovation that contributes almost £11 billion to the national economy. It is a major hub for process industries and advanced manufacturing; benefitting from recent major investment in innovative new technologies, such as subsea, biologics and energy from waste. Additionally, the area’s vibrant and rapidly expanding digital and creative cluster supports growth across both manufacturing and the wider service sectors. These sectors are examined in more detail below and are detailed in full in the Tees Valley Strategic Economic Plan.

Advanced manufacturing

62. Tees Valley has recognised strengths in advanced manufacturing, with a cluster of multinational corporations and innovative SMEs developing high level expertise in manufacturing, design and research and development. The Tees Valley is in the vanguard of the UK’s drive for export-led growth and advanced manufacturing, with key strengths and opportunities as follows:

Process engineering – Tees Valley firms, including Darchem-Esterline, Jacobs Engineering Heerema, Tata Tubes, Hertel and Wilton Engineering Group currently supply national and international companies. like Airbus, Boeing, Honda and Jaguar Land Rover;

Offshore / subsea engineering – Our proximity to North Sea infrastructure has enabled us to develop a significant subsea engineering cluster at Hartlepool, Teesport and Darlington (including Deep Ocean, JDR Cables, Modus, Reef Subsea, Global Marine Energy. This has real growth potential linked to the development of offshore wind farms and oil and gas projects; and,

Automotive and rail – A growing supply chain of SMEs and larger businesses supply major Tier 1 and Tier 2 automotive manufacturers, including Cummins (next generation of diesel engines), Mitsubishi Chemical Corporation (chemicals for electric vehicle batteries), Caterpillar (cranes and trucks) and Nifco, Elring Klinger, TMD Friction and others supplying parts to

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manufacturers such as Nissan and Jaguar Land Rover. Additionally, a number of firms, such as Henry Williams, supply the rail industry and there are significant potential supply chain opportunities arising from the nearby Hitachi intercity train facility.

Process industries

63. The Tees Valley has a critical mass of process and chemical firms with over 9,000 people directly involved in the Tees Valley. Many thousands more are employed in the sector through its supply chains:

Petrochemicals – Wilton International is the largest integrated chemicals cluster in the UK, and the second largest in Western Europe.

Polymers - First manufactured at Wilton International, polymers are a key part of the chemical sector in the area. Downstream users include the likes of Nifco, who produce parts for major car manufacturers across the globe;

Energy, including Nuclear – the Tees Valley is home to the Hartlepool nuclear power station and major energy and power plants, such as the Wilton 10 biomass power station, along with significant oil and gas infrastructure, including the BP CATS pipeline. 3.4GW of electricity is produced for the grid, with a further 2.6GW proposed.

Pharmaceuticals and Industrial Biotechnology – the Tees Valley is home to a cluster of firms centred around the operations of Johnson Matthey, Fujifilm Diosynth Biotechnologies, , and key SMEs in the sector (including Fine Organics, Cambridge Research Biochemicals and Hart Biologicals). Darlington will soon be home to the Centre for Process Innovation’s National Biologics Manufacturing Centre, offering major opportunities to grow a cluster of leading biologics firms in the Tees Valley.

Steel primary production and secondary processing – the blast furnace at Redcar produces 25% of total UK steel. In addition, Tata Steel has a major presence in Tees Valley and the supply chain supporting this sector is wide.

Low carbon economy

64. The Tees Valley sits at the centre of the UK’s move towards a high value, low carbon economy having attracted significant investment over recent years and developed a reputation for greening excellence:

Waste processing – the Tees Valley is leading the way on bioindustries and energy from waste, with projects underway from major global companies including Air Products (Ineos Bio, SembCorp and SITA.

Renewable Energy – the Tees Valley is recognised as a Centre of Offshore Renewable Engineering (CORE) as industry leaders including Heerema,

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TAG Energy Solutions and JDR Cables and a growing cluster of leading SMEs are hosted here.

Hydrogen – the Tees Valley produces around 50% of the UK’s hydrogen and already has an established hydrogen pipe network. There is a significant opportunity to produce green hydrogen in the Tees Valley which is capable of supplying the increasing demand for hydrogen fuel cells.

Digital/Creative

65. Digital/creative is a growing Key Sector within the Tees Valley, with over 9,000 people employed. Significant growth has occurred in our digital and engineering design industries:

Digital - The number of digital businesses in the Tees Valley has increased by more than any other LEP area between 2013 and 2014. Over 300 innovative digital firms have been created in recent years, supplying services to the likes of Nickelodeon, Pearson, Superdry, Google and Sony Playstation. The digital sector is not just focussed on gaming and animation as there are a number of growing firms, such as Cleveland Process Designs, providing innovative technology solutions from shutdown, maintenance and plant simulation software for the oil and gas and process industries to financial modelling for the energy sectors.

Engineering design and technical services – Over 5,000 people are employed in engineering design and architecture, particularly focused upon the advanced manufacturing, process and low-carbon industries. Tees Valley has some of the highest levels of knowledge-intensive business services in the area and a host of SMEs in engineering design and technical services, win work across the world.

Culture, arts and heritage – the Tees Valley has a growing culture, arts and heritage sector employing over 4,000 people, with firms ranging from established creative businesses to sole traders.

Visitor Economy - Currently, visitor numbers are dominated by day visitors (64%), but the number of overnight stays is increasing (from 20% in 2008 to 36% in 2010) and there are excellent opportunities to create an offer that is more attractive to overnight visitors.

Business growth and enterprise

66. The Tees Valley’s future economic growth will be driven in large part by our existing and future business base and its ability to start up, innovate, diversify and access supply chain opportunities. Our existing 14,500 SMEs are spread across a wide range of sectors, including the creative and digital industries, professional and business services, transport and logistics, advanced manufacturing, automotive, oil and gas, subsea and the process industries. Most businesses are small, with 86% of all our companies employing fewer than ten people.

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67. This distribution presents a major opportunity to support these firms to grow and expand. Our Strategy therefore focuses upon supporting growth through our SME business base across a number of sectors.

68. The following chart illustrates the Tees Valley’s employment by broad sector.

Advanced Manufacturing, Process, Low Carbon Economy and Digital/Creative

69. These major sectors, where a significant proportion of our business base and SMEs reside, are included above under Key Sectors.

Information Communication Technology

70. There are a number of leading ICT firms based in Tees Valley, such as Onyx, and data centres, including the world’s greenest data centre at Wynyard run by HP. Such businesses provide solutions to a global network of clients, while Tees Valley’s engineering design cluster – including the likes of Phusion, AMEC and Foster Wheeler – depend heavily upon reliable ICT solutions to develop and grow their businesses.

71. A number of enabling industries, influenced by our key growth sectors and wealth-creating industries, provide 72% (203,400) jobs in Tees Valley. There are plans to encourage growth in all sectors of the economy, but there is a particular interest in the following enabling industries where Tees Valley holds competitive advantages.

Professional and Business Services

72. 45,000 people (17% of total employment) are employed, at all levels, across the professional, business, financial and legal services sectors in the Tees Valley and

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over 7,500 people have jobs in contact centre and business process outsourcing activities. There is also a cluster of major legal, business and financial services.

Transport and Logistics

73. The changing face of retail has led to further development of the logistics market, with the Tees Valley now home to major distribution centres of Asda and Tesco, based around Teesport, Aldi at Darlington and Clipper/George at Asda based at Wynyard. Teesport’s port-centric model offers the choice for distributors to go straight from A to B rather than goods being transported to the logistics ‘golden triangle’ in the Midlands for onward distribution.

Retail and Leisure

74. Wholesale, retail and related service industries continue to be a key source of employment in the Tees Valley, employing some 56,000 people. The recession has had a marked impact on our high streets and many branded stores and local outlets have ceased trading, with around 3,000 jobs lost since 2012. A number of our town centres have experienced, or are undergoing considerable investment to improve the leisure, shopping and cultural experience.

Health and Social Care

75. The health and social care sector in the Tees Valley employs 49,000 people, or 19% of the workforce, and employment has increased by over 10% since 2009. 90% of jobs are currently in the public sector but there are over 350 private sector businesses forming part of the sector. The Centre for Process Innovation (CPI) has announced that the new National Biologics Manufacturing Centre will be located in Darlington from 2015, providing major opportunities in this area for Tees Valley.

Public Sector

76. In 2013, 61,000 people were employed across the public sector, which was 24% of all employment in the Tees Valley. This rate was down from 28% of total employment in 2010 but still 5% higher than the average for England.

77. Public sector employment in Tees Valley fell by 15% or over 11,000 jobs between 2010 and 2013, with private sector employment picking up by 4.5% or over 10,000 over the same period. However, being home to a number of government agencies and departments, including the Department for Education, Disclosure and Barring Service and Student Finance England (all in Darlington), there is scope for further public sector relocation to build on the developing hub in Darlington, where DfE are locating.

Summary

78. This section clearly demonstrates that the Tees Valley is a functional economic area. It also highlights the key sectors and the potential for growth.

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SECTION 3 – CURRENT GOVERNANCE ARRANGEMENTS AND THE CASE FOR CHANGE

79. This chapter sets out the current arrangements in relation to the functions that are the subject of this review and seeks to establish if the formation of a CA to carry out these functions is likely to improve, for the Tees Valley,:

the exercise of statutory functions relating to transport in the area, the effectiveness and efficiency of transport in the area, the exercise of statutory functions relating to economic development and

regeneration in the area, and economic conditions in the area

80. In this context this chapter explores whether the opportunity of a CA is one that could lead to further improvement for our communities.

CURRENT ARRANGEMENTS

81. Tees Valley has a long track record of public and private working across the Tees Valley to address strategic economic development, and transport matters. This dates back to 1996 with the formation of the Tees Valley Joint Strategy Unit (JSU). This collaborative, cross boundary approach includes:

area wide strategy and vision development - Tees Valley Vision, Tees Valley City Region Business Case, Tees Valley City Region Transport Strategy, and most recently the Tees Valley Statement of Ambition.

pooling of strategic economic functions – currently covering business engagement, economic strategy and intelligence, inward investment, marketing and promotions, strategic transport, and investment planning (previously through the JSU and the Tees Valley Regeneration Company) and since 2010 through Tees Valley Unlimited - with a permanent staff of 31 and an annual core revenue budget of £2.1m funded by the five local authorities. TVU staff currently support both the Local Enterprise Partnership and provide the strategic economic development, transport and skills functions for the five local authorities.

cross-boundary prioritisation and decision making on spending – Tees Valley City Region Investment Plan, Single Programme Delivery Plan, Housing Market Renewal Business Plan, and most recently Enterprise Zone development, the Growing Places Fund and the Local Growth Fund.

pooling of budgets – the five local authorities through TVU have agreed to pool the business rates uplift and the Enterprise Zone

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(EZ) income from the eight Government Funded Enterprise Zone sites with the first priority for the use of the income to support four locally funded EZ sites. The Tees Valley Investment Fund (TVIF) model with agreed criteria for investment will determine the use of the project EZ income and other funds that are attracted and secured.

more effective and efficient ways of working and achieving more with less – despite the loss of RDA funding for TVU activities and core funding, TVU has worked with 39 businesses to access over £180m (Rounds 1 – 5) of Regional Growth Funds, over £100m more than was accessed by Tees Valley businesses through the previous three years of GBI and other grants available through the RDA. TVU is committed to removing bureaucracies and working more effectively and believes that real local accountability and decision making can help to achieve this.

82. TVU currently operates as a voluntary public / private partnership with an Accountable Body (Stockton Borough Council) and a legal agreement binding the local authorities into the development and delivery of the Tees Valley Statement of Ambition and the Tees Valley Strategic Economic Plan and detailing the modus operandi for the partnership.

83. TVU as the Local Enterprise Partnership operates with a Leadership Board which is well established (it was formed in 2008, prior to LEP status) and has strong private and public sector representation. The Board plays a vital role in setting the future direction of our activities – not just at the board level, but also at the operational level.

84. At TVU there are a number of advisory groups which inform and assist the board in specialist matters, such as transport and infrastructure, business growth, low carbon, skills, and area development. Each group is led by a private sector Leadership Board member; ensuring the Board is well informed on all matters relating to the delivery of our key strategies which sit within the Strategic Economic Plan. This hands-on approach by the private sector works exceptionally well and ensures Tees Valley Unlimited stays at the forefront of industry led initiatives, and that our strategies reflect the needs of businesses in the Tees Valley.

85. The Council Leaders and elected Mayor play a vital role in ensuring that the focus and direction of our strategies and investments are in touch with the needs of local residents. Together with our local councillors, Members of Parliament and Members of the European Parliament, they form a crucial link to the people in the Tees Valley, ensuring the Tees Valley’s needs are centre stage.

CREATING THE RIGHT GOVERNANCE FOR GROWTH

86. The following sections detail the economic growth opportunities and the barriers to growth. It is widely recognised that it is companies and business that create economic growth. The public sector’s role is to create the right environment for the

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private sector to create growth. This includes unlocking growth potential and removing barriers to growth. To achieve this Tees Valley’s local authorities have long recognised the importance of working together across the economic functioning area recognising that businesses do not respect administrative boundaries and that issues are best tackled at the most appropriate geography.

87. It is therefore imperative that the public sector understands these issues and the most appropriate level to deal with them. For many years the Tees Valley authorities have recognised the need to work together on economic development, transport and most recently skills.

88. The most impact will be achieved if the governance structures support the activities that are being pursued – form should follow function, be simple and straightforward and fleet of foot respecting that decision making should not add to bureaucracies but facilitate growth.

89. The Combined Authority proposal will make the current arrangements more fleet of foot and responsive to economic growth opportunities, not least because our plans will combine long-term stability and legality of Combined Authority business in a seamless operation with the LEP.

90. Although the Tees Valley has a long history of partnership working, across all five Boroughs and with business, the arrangement is essentially voluntary. The LEP cannot own assets, employ its own staff, borrow etc. Key decisions have to be made, effectively, six times – by each of the five Borough Councils and the LEP Board. Moving to a Combined Authority would:

Provide business with the certainty of a legally-based partnership, which would support long-term investment decisions.

Speed up decision-making by making the decision once, not six times

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Economic Growth

OPPORTUNITIES FOR ECONOMIC GROWTH

91. The Tees Valley’s key sectors can be boosted through further investment, targeted business support and the provision of transport infrastructure and business accommodation that can unlock key sites and provide the facilities that businesses need. There are opportunities and obstacles across each of the key sectors that a Combined Authority would help to realise and overcome, and deliver greater economic growth. This section of the report details some of the multi-faceted challenges faced across the sectors, and how a Combined Authority would help deal with them. The Combined Authority would create a united, strong and powerful voice, with clear messages for the Tees Valley, for attracting inward investment, and having a bigger impact on large employers and their supply chains to the benefit of the economy.

92. In the process, advanced manufacturing and low carbon economy industries, the future looks bright as, on top of the current energy mix, there is a further £4bn of private sector investment programmed in the next five years. This is across energy, biofuels and petrochemicals, including two large biomass plants, the potential for a new nuclear power station at Hartlepool and wind turbine construction at Hartlepool and South Tees. Investors are attracted by a strong logistics sector, including pipeline and storage infrastructure, proximity to European markets and supporting infrastructure capacity via Teesport and Durham Tees Valley Airport.

93. However, the process sector is subject to competitive pressures, long-term rising energy and carbon costs, and faces significant challenges in terms of re-investment and low-carbon transformation (our industries continue to be the source of high levels of carbon emissions, at 59%, or four million tonnes, of our total emissions, comprising 4.8% of UK industrial emissions).

94. Whilst this presents challenges, it also presents opportunities, in particular the opportunity to exploit innovation and investment in new feedstock produced from biological sources to replace oil, efficient uses for waste heat, and large scale industrial Carbon Capture and Storage (where CO2 could be captured and used to extend the life of the North Sea oilfields and provide power and raw materials for business activities) as set out below.

95. These technologies open up new markets for our existing process and advanced manufacturing industries and the Tees Valley must remain competitive by developing, commercialising and integrating these into the area’s existing asset base. Investment in innovation can help to address the energy intensity of the process industry, develop more efficient and novel processes, including turning waste into chemicals. The ambition for growth in the renewable energy sector is consequently clear because the area is ideally placed to build upon the existing integrated cluster. This is why the primary ambition is to drive the transition from a high-value, high carbon economy to a high value-low carbon economy.

96. In the digital/creative economy, recent engagement with Tees Valley businesses in this sector has highlighted the main obstacles to growth as being; an inability to recruit experienced staff; poor access to angel/venture capital investment to grow a digital or creative business; lack of collaborative opportunities; need for specialist

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business support; and the requirement for bespoke business accommodation. Our goals are to break down these barriers to growth through working closely with these industries, providing specialist support, finance and accommodation and building a skilled workforce able to meet their requirements and a united voice through the Combined Authority will help to coordinate that support. Our interventions highlighted under Business Growth therefore all apply to boosting the creative economy.

SME growth

97. The growth of existing SMEs and the generation of new businesses in Tees Valley will be greatly enhanced by improved, including connectivity, infrastructure and innovation, the availability of skills, enterprise, exports and access to finance. It is clear that ensuring the Combined Authority has the full range of transport powers, with transport policy fully integrated with economic development and regeneration (e.g. through our Strategy Economic Plan – SEP) will help to overcome these obstacles. A united voice through the Combined Authority would support our SME maximise their growth potential.

Enterprise

98. The Tees Valley’s enterprise and commercialisation rates are comparatively low, with our enterprise rate at just 61% of the national average and the lowest rates of patents filed and granted in the UK. However, the number of Tees Valley enterprises has increased in both 2012 and 2013, with the number of firms up 1,155 since 2011 and the number of enterprise births at record highs (2,620 in 2013).

99. Particular growth has been experienced in innovative firms in sectors such as digital, energy, subsea and green chemicals, encouraged by our universities, knowledge centres and increasing number of incubation facilities. There is a critical need, as identified above, for available and affordable finance to enable the birth of new businesses and Tees Valley is keen to encourage a mix of loans (be this venture capital, angel finance or through Local Impact Funds), grants, bonds and vouchers for business support. This can ensure relevant solutions are provided to address the particular issues faced by both existing firms and new starts and forms a major part of our Business Growth Hub proposals. Enterprise is a key focus of Tees Valley’s plan and will be a major contributor to our goal of facilitating 25,000 net new jobs over the next decade.

Exports

100. There is a great opportunity to help realise businesses’ potential for exporting. Only 6.5% of SMEs in Tees Valley are currently exporting outside of the UK according to a recent survey of businesses, with over 50% not trading outside of the Tees Valley. Recent surveys have reinforced this, with just one in five North East SMEs willing to expand overseas, in contrast to 44% of London SMEs who are already internationally active. This provides a significant opportunity for our SME base to promote and sell their products and services to customers across the UK and to penetrate markets in Europe and beyond. Therefore, enhancing the ability of Tees

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Valley SMEs in our Key Sectors and growing industries to be able to export their products and services across the globe is a key thrust of our Plan. Councils will work as a united voice through the Combined Authority with businesses to seek to do this.

101. Finally, the North East’s position as sole English region with a consistently positive trade balance is reliant on the machinery & transport and chemicals and manufactured goods sectors. These two sectors accounted for £11.66bn of the North East’s £12.66bn total goods exports in 2013/14. The North East ran a substantial trade surplus of £4.5bn.

Access to finance

102. The Combined Authority will be well positioned to support our economy to secure access to finance to aid its growth. A 2012 business survey of 400 companies found that 41% of firms said access to finance was not met in full, subsequently resulting in having to scale back expansion plans. This is an issue not just in the Tees Valley, but across the country, with a recent Select Committee report finding that SMEs are struggling to find funding and that more should be done to raise awareness and availability of alternative funding options.

103. Improving the availability and affordability of finance is essential to the growth of the Tees Valley economy, be this through grant, loan or equity provision. Over the last decade, equity and loan provision in the North East through the Finance for Business North East fund of funds (JEREMIE) –including technology, proof of concept and angel funds – have invested over £145m in 1,400 businesses, resulting in the creation or safeguarding of 12,000 jobs, further leverage of over £220m and additional SME turnover of over £400m. An independent report suggested that “in the absence of these funds, it is unlikely that much of this economic activity would have occurred as there is no evidence to suggest the private sector would have stepped in and filled any void.” Such funds are needed to overcome market failure in the availability of funding for SMEs in the Tees Valley, a constraint to economic growth. This is particularly so for early stage and small businesses, who struggle to afford commercial borrowing, are not eligible for larger grant support and have been impacted by the decline and narrow sector focus of venture capital investment.

104. The report found overwhelming evidence for the need for better information and advice for SMEs to get them ‘investor ready’ and enable them to access finance. Such finance can help to support businesses which lack collateral or track record, have new innovative products or who are struggling to access national and international funding. This is why the Tees Valley is working with the North East Local Enterprise Partnership to establish a new JEREMIE fund to support SMEs when the current programme ceases to invest at the end of 2015. It is proposed to establish a £160m fund, drawing upon ERDF, Legacy Funding and European Investment Bank money, to invest over a five year period, with the Tees Valley holding a 25% share. This could create around 1,500 jobs.

105. In addition, community finance and social capital are of particular importance for start-ups, social enterprises and voluntary and community organisations and much

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importance is placed upon them. The recent announcement of a £11.5m social investment fund from the Northern Rock Foundation and Big Society Capital (BSC), is welcomed, the first regional fund with support from the BSC.

Innovation

106. The Tees Valley Innovation Strategy is a fundamental element of our plans to contribute to smart, sustainable and inclusive growth in the UK and Europe. TVU, along with partners, has developed an Innovation Strategy for Tees Valley based upon the principles of Smart Specialisation and the European Commission’s guidance 53 on developing Regional Innovation Strategies (RIS3) and it is embedded in the Tees Valley Strategic Economic Plan and ESIFS.

107. The strategy takes account of the Key Enabling Technologies (KETs) identified by the European Commission under Horizon 2020 and the UK Government through the Industrial Strategies. The KETs have a clear fit with the sectors which have been identified as having growth potential in the Tees Valley, particularly cross-cutting advanced manufacturing technologies. The strategy has identified strengths on which to build, including major opportunities in our key sectors. The key priorities of the strategy include investing in pure research related to key sectors, direct support to businesses and collaborative projects.

108. After a significant fall in 2011, North East business research and development expenditure recovered somewhat in 2012. Higher Education R&D spend also picked up in 2012. Our innovative businesses and nationally-significant innovation assets need to be utilised further to benefit businesses across Tees Valley and increase our low enterprise rates and commercialisation. Additionally, patent applications rank among the lowest in the country.

109. Tees Valley is a classic example of continual reinvention having been a major contributor to the economic performance of the UK over the last 50 years – moving from ironstone mining and steelmaking to chemicals and oil and gas – and now further structural changes are taking place as it evolves into a hub for advanced manufacturing, renewable energy (particularly offshore wind and waste to energy) and the digital economy. This is an area which invented the safety match, produced one of the first major public steam railways in the world, developed products from Perspex and ammonia to polyethylene and nylon and is now home to the UK’s largest hydrogen plant, the UK’s first biomass power station and will shortly be home to one of the world’s largest advanced gasification facilities. However, there are a number of barriers and issues in the Tees Valley which needs to be overcome.

110. By taking advantage of the business and innovation opportunities arising from the transition to a low carbon, diverse economy, the Tees Valley can host one of the most resource efficient and integrated industrial sites in Europe. This will enable the area to compete globally, maximising new industries, and growing developing sectors across the whole area, particularly in advanced manufacturing, process, digital and healthcare.

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111. Central to our Innovation Strategy are a number of nationally significant innovation, R&D and training assets that support smart specialisation in our key sectors and are proactively engaged with our SMEs. These include:

The Centre for Process Innovation (CPI) – CPI is a High Value Manufacturing Catapult, with expertise across a range of areas and hosts nationally-significant assets including:

Materials Processing Institute The National Industrial Biotechnology. National Biologics Manufacturing Centre

Universities – Teesside University has five leading research institutes in Digital Futures, Design, Culture and the Arts, Health and Social Care, Social Futures and Technology Futures. Durham University’s Queen’s Campus in Stockton hosts 2,000 undergraduate and post graduate students, with expertise in GP training, public health, management and accountancy;

Teesside Manufacturing Centre (TMC) – offers a total enterprise integration service in design, manufacturing and business process improvement at Teesside University;

The Wilton Centre – the largest process industrial research centre in Western Europe, which accommodates and supports start-ups and existing businesses; and

The Welding Institute (TWI) – recognised global leader in engineering research with a long history of innovation and knowledge transfer. Its Middlesbrough facility delivers world class services in joining materials, engineering and allied technologies for sectors from oil and gas to aerospace and automotive.

112. However, it is also recognised that Tees Valley businesses access innovation assets across the UK, drawing upon the research strengths, for example, of other TSB Catapults across the UK, the N8 group of universities, the National Renewable Energy Centre in Blyth, Net Park in County Durham, the Institute for Manufacturing at Cambridge University, Newcastle Science City and the Advanced Manufacturing Park in Sheffield. Innovation spans boundaries and partnership working across areas is vital to deliver for businesses in the Tees Valley and across the country.

113. The Combined Authority, comprising council and business leaders, would be uniquely placed to understand the innovation opportunities facing us, and be fleet-of-foot to position strategy and resources to explore and take advantage of innovation.

Skills

114. The Tees Valley economy has sectors which will expand, requiring a highly skilled workforce going forwards. Our current skills base is too weak to meet present and future demands for skilled workers. The Combined Authority will be well-placed to direct, coordinate and commission with businesses, schools and colleges, other training providers, funding agencies and national policy makers to ensure that

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funding and provision of skills changes fundamentally to meet our specific requirements.

115. It is predicted that the number of people over the age of 65 will rise over the next ten years, along with an increase in those aged 55 to 64 (prevalent in process and advanced manufacturing) and a fall in the number of young people entering the labour market. Those aged over 55 are the group most likely to leave our workforce during the lifetime of the SEP, taking their skills and experience with them. The replacement demand in the Tees Valley between 2010 and 2020 could be as high as 120,000 people across all occupations At the same time, the number of young people aged 15-24 will decline, with new entrants to our workforce over the same period diminishing. Our cohort size of Year 11 will shrink over the coming years – by 2017 there will be 900 fewer students in this group than in 2013. The combined effect will produce a huge shift in the profile of the workforce over the next ten years and measures need to be put in place now to reduce the impact upon the economy.

116. The replacement demand projected by the UKCES is illustrated in the table below:

Tees Valley – UKCES predictions of level of replacement demand 2012-2022

Replacement demand required by 2022Low Carbon 4,200Advanced Manufacturing 5,900Other Manufacturing 5,400Logistics 2,300Digital/Creative 3,000Healthcare 16,100Other services 46,900Construction 7,700Professional and Business Services 21,200

Total of Key Sectors 112,700

Source: UK Commission for Employment and Skills, Working Futures Model, 2022 projections, March 2014

117. This replacement demand, together with the ambition of creating an additional 25,000 jobs poses a significant skills challenge for the area.

118. High levels of youth unemployment and young people who are not in education, employment or training (NEET): unemployment amongst 18-24 year olds stands at 6.6%, compared to 3.1% nationally. The numbers of those classified as NEET are also high with around 8.2% of 16-18 year olds in Tees Valley compared to 5.3% in England. Barriers need to be reduced which hold back young people from being consistently involved in education, employment and training opportunities.

119. Scarcity of higher level skills: improvement in Level 2 and GCSE attainment need to be maintained; and relatively low levels of Level 3 and Level 4 achievements need to be increased to boost higher level skills. 71% of 16-64 year olds in the Tees Valley are educated to a level 2 qualification compared to 73% nationally. 53% of 16-64 years olds are educated to level 3 compared to 56% nationally and 27% are educated to level 4 compared to 35% nationally. To be on a par with the national

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average in high level skills by 2022 the following are needed: 26,500 more workers achieving a level 2 qualification or equivalent; 39,900 more workers achieving a level 3 qualification and 53,200 more workers achieving a level 4 qualification. Much of the predicted job growth is concentrated in the higher skills occupations, with the hardest to fill vacancies in the professional, technical and skilled trades. Current estimates suggest that over the next ten years 22,000 people in Professional Occupations and 10,000 Managers and Directors, (most likely to be educated to Level 3 or 4), will leave the workforce, along with 12,000 people in Associate Professional and Technical roles (who are likely to be Level 3 educated), and a further 12,000 people in Skilled Trades.

120. In the Tees Valley only 41% of secondary schools are judged as ‘good or outstanding’ and 43% are judged as ‘requires improvement or satisfactory’. 17% are judged as inadequate. A particular challenge is faced in relation to the literacy, numeracy and communication skills generally, the level of participation and achievement in areas that are at a premium in the area of science, technology, engineering, mathematics and modern foreign languages. Addressing these challenges is a priority.

121. Poor quality and inconsistent labour market information and careers advice. From extensive engagement with employers, schools, local authorities, training providers and other stakeholders, it has been found that there is an inconsistency in the quality of careers information, advice and guidance, particularly for young people. Pockets of good practice exist such as the ‘Foundation for Jobs’ approach in Darlington, and recently launched in Redcar & Cleveland, but it is not available across the whole area. Young people should be able to experience the world of work and understand the job opportunities in the area no matter where they live.

122. This has been a constant theme through engagement with stakeholders and liaison with employers as the Skills Strategy was developed, and through the lesson plan workshops held with school teachers and careers advisors. A particular message is that schools do not currently have the tailored Tees Valley-specific information they need which sets out the opportunities in the area. This is crucial to ensuring that residents know about the Key Sectors in which job opportunities are, and will be, available. Schools do not have coordinated access to businesses across Tees Valley. Research has been reinforced by the recent APPG for Local Growth report which found that “support systems are fragmented. Learners need the information and guidance to ensure they are making informed choices for their skills development” and “LEPs should take the lead in bringing together a robust labour market intelligence and information base.”

123. A Combined Authority would allow us to drive the skills agenda, ensuring a more coordinated approach towards skills funding and provision, negotiating with existing partners (e.g. SFA), so that rules around skills funding can be refined and adapted to support more appropriate apprenticeship and other provision in the Tees Valley. Our FE colleges tell the LEP that the cap on the number of hours for which apprenticeships are funded is inadequate for the technical skills we need in the Tees Valley economy. A strong voice is needed through the Combined Authority to deliver the benefits of a more flexible approach, tailored to the Tees Valley’s needs, which in turn will support UKplc.

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Opportunities for Transport and Connectivity to promote Growth

Addressing network resilience and road congestion hot spots through the Combined Authority will enhance existing employment sites as well as future employment and housing site development. There is significant congestion on localised sections of the trunk and primary road network, particularly at peak times, affecting access to jobs, education, health, leisure and retail. These would be tackled through the deployment of ITA powers through the Combined Authority

Maintaining network resilience is also vital for the area, including the maintenance of links into existing key employment sites

Better sustainable transport connectivity to employment is essential to get local people into the 25,000 new jobs to be created through the Strategic Economic Plan

Long-distance rail connectivity provides vital business links, which is why the Tees Valley is keen to see the electrification of the Trans-Pennine route to Middlesbrough and Teesport

Retention and enhancement of our direct, long distance rail connectivity –such as the vital routes to London, Leeds and Manchester – are essential to the future economic growth of Tees Valley. Access to Darlington station, which is vital for national connections, from elsewhere in the Tees Valley can be restricted and slow (as local passenger trains have to cross the mainline) preventing the opportunity for timetable enhancements or service improvements

Enhanced rail freight through Teesport will boost the growth of container traffic

Devolved powers are required to ensure a level playing-field in relation to Air Passenger Duty and airport infrastructure, especially given our proximity to Scottish Airports, in order to increase aviation growth

124. By assuming the full powers of an ITA, it can be ensured that transport and connectivity is integral to all aspects of economic growth and regeneration.

MAINTAINING THE TEES VALLEY’S CAPABILITY TO COMPETE GLOBALLY

125. Councils and businesses are committed to delivering the vision in our SEP, and re-balancing the UK’s economy. We are already working alongside other, already established Combined Authorities through the Best Together initiative. In order for the Tees Valley to play its full part in regional and national economic growth, it is essential that the Tees Valley Combined Authority would be established with the same basis and powers as others.

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126. The creation of a Combined Authority would assist in terms of visibility of the region on the national and international stage, aiding our competitiveness. It would create the institutional capacity, sometimes alongside other Combined Authorities, sometimes alone, to ensure effective engagement with institutions in the UK and Europe, including potential investors.

THE RELATIONSHIP BETWEEN THE TEES VALLEY LEP AND THE PROPOSED TEES VALLEY COMBINED AUTHORITY

127. It is important as part of any future developments that the excellent delivery and working arrangements that there are currently (through our LEP) are preserved, but that transparency and accountability of democratic decision-making is at its core.

128. The Combined Authority is to be as efficient and effective as possible. One means of achieving this is to make the business and meetings of both the LEP and the Combined Authority seamless. To facilitate and provide for effective governance arrangements going forward, LEP and Combined authority meetings would essentially be one meeting with a two-part agenda.  In other parts of the country where Combined Authorities have been set up, they continue to operate the LEP in a separate, if coordinated, cycle of meetings to the Combined Authority.

129. It would be necessary to ensure that meetings are chaired and managed appropriately. There is a requirement for LEPs to be chaired by someone from the private sector and constitutionally a Combined Authority should be chaired by an Elected Member. Local authorities are involved in, advise and are represented on the LEPs, usually through the Council Leader, and businesses can be involved in, advise and be represented on a Combined Authority. This model brings to decisions the expertise of business in the Tees Valley, and ensures through the Combined Authority that the local authorities are accountable for the money that is being spent. Business members would effectively be expert non-executive directors of the Combined Authority.

130 It would be possible to enhance governance arrangements by ensuring Leaders and the Elected Mayor, when not chairing the Combined Authority, each acts as a spokesperson for a specific theme in a similar way to the current arrangements with the LEP, e.g. a specified councillor speaking on transport issues and with these roles each having a corresponding business “shadow”, maintaining and enhancing the strength of the current arrangements.

131. Decision-making would be structured to ensure that issues of critical importance to the Boroughs, such as those which placed costs or risks on the Borough Councils, were taken only by Leaders and the elected Mayor. The Combined Authority would not have the power to incur expenditure on other authorities, nor would it have the power to place additional risks on other authorities over and above expenditure and risk that is a result of what is agreed by each authority and covered by the Combined Authority constitution, including the investment, business and financial plans (see below).

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132. To retain unity of purpose across work done by local authorities individually and the work of the Combined Authority, joint decision-making on strategy and business planning would be put in place. For example, the constitution of the Combined Authority would set out that decisions would be taken in accordance with the following framework agreed by the Combined Authority AND formally by each local authority individually:

Statement of Ambition: the strategy in accordance with which TVU and the Combined Authority will work

Investment Plan Annual rolling TVU / CA Medium-Term (3-4 year) Financial Plan, including

local authority financial contributions Annual Business Plan Tees Valley-wide Local Transport Plan

133. Beyond these, each matter arising at a meeting of the Combined Authority would be determined by a majority of the votes of the Members present and voting; each representative Member or substitute Member acting in that Member’s place would have one vote and no Member would have a casting vote.

Start-up costs for the Combined Authority

134. It is anticipated that there would be a small additional cost associated with the setting up and operation of the Combined Authority but this would be dwarfed by the potential benefits and resources attracted as part of the devolution agenda going forward.

135. Our existing officer capacity, by working collectively across the five Tees Valley authorities, is proving effective, drawing on the expertise and skills of all our Councils. The bulk of the work to be undertaken by a Combined Authority would be carried out by existing staff that already employed through Tees Valley Unlimited.

IDENTITIES AND INTERESTS OF LOCAL COMMUNITIES

136. The Tees Valley is a natural economic area which reflects the identities and interests of local communities. The five boroughs collectively form a natural sub-region, centred on the River Tees which lends its name to the identity, history and industrial heritage of the area. The Tees Valley, or Teesside, is a phrase in common parlance, used frequently to identify where people feel is their home; it reflects the pride they have in their area.

137. Geographically, the area is bounded to the east by the North Sea and in all other directions by higher ground and the watershed for the River Tees. Communications connect all our settlements. The A19 and A1(M) (north / south) and A66 (east / west) are major arterial routes connecting within and beyond the Tees Valley. Rail routes connect all our Boroughs and provide for the movement of people, goods and services. The area has its own airport and the Tees Valley is reflected in its name.

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138. There is considerable Tees Valley-wide working between many organisations and partners, across the public, private and voluntary & community sectors.

139. The Tees Valley’s identity is already strong. A Combined Authority embracing the name will further strengthen this identity.

EFFECTIVE AND CONVENIENT LOCAL GOVERNMENT

140. The five Boroughs already work closely together and have done for many years. Since local government reorganisation in the 1990s, when the five Boroughs secured unitary status from the former Cleveland and County Durham areas, Darlington, Hartlepool, Middlesbrough, Redcar & Cleveland and Stockton have worked successfully together through Tees Valley Unlimited and its predecessor bodies. The creation of a Combined Authority will deliver effective and convenient local government for certain strategic activities (economic development, transport, skills, regeneration and low carbon) relating to the role of a Combined Authority as set out in legislation.

141. Our governance arrangements across and between the five councils at the Tees Valley level already include:

Tees Valley LEP Tees Valley Leaders and Elected Mayor Tees Valley Chief Executives Tees Valley Directors of Place, People, Resources Tees Valley Heads of HR, Legal etc.

142. Our working at the Tees Valley level supports strategic economic growth which is necessary, especially in times of austerity, to generate incomes for local people (through job creation and skills development) and our councils (as a strong economy supports the generation of business rates and council tax receipts). The Combined Authority, by creating better conditions for economic growth, will therefore complement and enhance delivery of local services by the five Borough councils.

SCRUTINY OF THE COMBINED AUTHORITY

143. Our intended scrutiny arrangements build on good practice of engaging elected Members in policy formulation upstream of decisions being taken, and address the anticipated requirements of forthcoming DCLG guidance.

144. A Scrutiny Panel is proposed, comprising three Councillors from each of the Tees Valley constituent councils. This is consistent with a number of Combined Authorities already set up and would produce a sensible number of Councillors to be a Panel for the Tees Valley. Membership of the Scrutiny Panel must be politically proportionate, with the chair drawn from a minority party.

145 The quorum of the Combined Authority Scrutiny Committee is proposed to be

seven, which must include representatives of three out of the five Tees Valley

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Authorities. There could not be a minority of councils making recommendations on behalf of the majority.

146. Whilst it is anticipated that it would have the ability to ‘call-in’ decisions of the Combined Authority, the work programme of the Scrutiny Panel is intended to encompass upstream work: reviewing, informing and shaping policy and decisions and the direction of the Combined Authority. This would help to ensure that any decisions which are made by the Combined Authority are in line with its agreed policies.

147. The support necessary to run the Combined Authority Scrutiny Committee arrangements (i.e. any necessary resources and staff) is intended to be provided by the Authority of the Chair, and is to rotate annually between the Tees Valley Authorities in the same way.

148. It is intended that by operating the support in this way that the Scrutiny arrangements can be run at little or no extra cost to the Combined Authority, with the support work being absorbed into the relevant Authority’s day to day work.

SUMMARY – THE CASE FOR CHANGE

149. The overarching benefits that would be delivered by a Combined Authority for the Tees Valley, over alternative governance arrangements, are that it would:

combine the strengths of our LEP with potential new powers of a Combined Authority to accelerate economic growth

be responsible for strategic transport planning, ensuring it is fully aligned to our economic vision across the Tees Valley

gain the power to levy in relation to transport functions, should the democratically elected leaders choose to do so

allow us to drive the skills agenda, ensuring a more coordinated approach towards skills funding and provision, negotiating with existing partners (e.g. SFA), so that rules around skills funding can be refined and adapted to support more appropriate apprenticeship and other provision in the Tees Valley

continue to represent the functional economic area of the Tees Valley, but with the certainty that comes with cementing the democratic / business relationship

achieve a non-bureaucratic, seamless operation of the LEP and the Combined Authority going forward

be cost effective – there would be limited additional cost across the Tees Valley to deliver more effective decision-making and delivery of our strategy, and the marginal costs would be dwarfed by the potential gains

provide a more robust governance arrangement whereby it speeds up decision-making (making decisions once instead of five times) by elected Leaders, to help our partnership with business be fleet-of-foot, responding rapidly to opportunities, and to compete globally

ensures speedier decision-making across economic development, transport and skills, in terms of planning, project design and delivery on the ground; and areas of strategy such as rail and infrastructure strategy; strategy for

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business investment, inward relocation, exporting and supply chain development

offer our communities and businesses the certainty that comes with cementing our partnership and the consistency of approach this will bring

allow proper scrutiny of what is done as a partnership in the spirit of openness, transparency and accountability

ensure the consideration of the views of business in a proper, democratically accountable governance structure

manage risk, hold funds and assets, and employ staff place the Tees Valley in the best position to secure the additional resources

and powers that current and future governments may devolve

150. This analysis confirms that the four improvement tests would be met by the establishment of a Combined Authority for the Tees Valley.

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SECTION 4 – ORIGINAL OPTIONS APPRAISAL

INTRODUCTION

151. The five local authorities of the Tees Valley, working together with businesses as the Local Enterprise Partnership (LEP), provide great unity of purpose and is firmly established in the sub-region and on the national stage. The partnership is robust and hugely ambitious for the Tees Valley and its communities. The economy has grown and will continue to grow with councils and business working together. The pace at which change is occurring, however, warrants an appraisal of options to help strengthen decision-making and cement the partnership. In particular:

(i) more money is being secured and it must be spent in line with agreed priorities.

(ii) there needs to be speed and agility to move fast and be fleet of foot to take advantage of opportunities around new powers and resources as they arise.

(iii) the partnership needs to offer communities and businesses certainty and improve competitiveness/delivery.

(iv) there needs to be proper scrutiny, openness, transparency and accountability.

(v) businesses need to continue to be actively involved

152. The Tees Valley wants to be a big player. It has always been ahead of the competition, innovative, collaborative and creative and wants to remain in the premier league and have the ability to benefit from whatever additional powers and resources future governments may make available.

153. It is with these objectives in mind that an options appraisal has been undertaken to determine the most appropriate governance model going forward.

Evaluation Criteria

154. Using the above objectives 11 evaluation criteria (A-K) were determined to assess the most suitable of 4 key governance options.

(i) Enhancement of the Status Quo (enhancement to our current arrangements with Tees Valley Unlimited)

(ii) Joint Committee(iii) Combined Authority(iv) Company Models

155. The option of an Economic Prosperity Board was considered and rejected as this would not include transport responsibilities, considered to be fundamental to improving the Tees Valley’s economic outlook.

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156. The evaluation criteria fall into 4 main categories:

(i) Operational Efficiency and Effectiveness – which considers how each of the 4 options enables our ability to be fleet of foot and to spend wisely on our priorities.

(ii) Enhancing our Economic Development – which in particular considers how the partnership between business and councils can be cemented going forward to bring greater certainty and improved delivery and competitiveness.

(iii) Local Authority Governance and Public Sector Financial Management – which places particular emphasis on scrutiny, transparency, openness and accountability.

(iv) Engaging the Private Sector – which considers how each model would best include and involve our business through seamless working.

157. Further details of the evaluation criteria are provided below. The table provides a summary of our assessment of each of the 4 governance models against the evaluation criteria.

Operational Efficiency and Effectiveness

A. Decision-Making:

How do the options allow for collective decisions to be made in an efficient manner including decisions regarding:

the use of collective funds such as Growing Places Fund, Local Growth Fund, EU Structural Funds, etc.;

the use of funds generated collectively by the LEP as a consequence of activities such as Business Rates uplift from the Enterprise Zone and any transport levies;

the use of funds allocated by the local authorities and other bodies; access of new powers and resources as opportunities arise through

greater devolution from Government?

Do each of the options allow decisions to be made in one place by elected Leaders who are responsible for strategic direction and underwriting risk?

B. Operational matters:

How will each of the options handle operational matters efficiently and effectively such as:

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holding funds; owning assets (land, property financial instruments); make funding agreements of joint venture agreements?

How will each of the options take on responsibility for strategic direction of transport planning?

How will each of the options take on responsibility for funding of major transport schemes, leading to better decision making in relation to transport issues?

C. Efficiency and Cost:

Are the options an efficient use of public sector funds? How will the cost of running the options compare? What facility do they have to levy constituent Councils for expenses and

liabilities which are reasonably attributable to the exercise of functions relating to transport?

D. Practical Pitfalls or Benefits:

Are there any other practical pitfalls or benefits of the options such as VAT, Corporation Tax, Procurement, Pensions, etc.?

Enhancing our Economic Development

E. Ability to deliver:

How will each model reflect the functional economic area or ‘real economy’ of the Tees Valley Region?

How will each formalise links between decision making in relation to economic development (including inward investment, skills and spatial planning) and transport, ensuring decisions are made that secure maximum economic and social benefit?

How will each be prepared, monitored and reviewed?

How will each develop and manage interventions, projects and programmes which respond to the economic strategy of the Tees Valley?

How will responsibility for ensuring that core business advisory services are available to SMEs across the TV region be undertaken?

How will each enhance our coordinated sub-regional approach to attracting inward investment?

F Long-term commitment:

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To what extent will each option produce a commitment to the delivery of a long-term strategy?

Local Authority Governance and Public Sector Financial Management

G. Influence of Councils:

To what extent do each of the options allow Councils (as the democratically elected bodies and principal funders) to influence the overall direction and key decisions?

H Democratic Accountability:

To what extent does each of the options allow Councils (as the democratically elected bodies and principal funders) to scrutinise the work and hold the decision-makers to account?

I. Public Sector Protection:

To what extent does each of the models enable Councils to ensure that public money is used appropriately/in accordance with their fiduciary duty?

J. Public Transparency:

To what extent do each allow the public to be aware of the decisions made?

Engaging the Private Sector

K. Influence of Private Sector:

To what extent can the private sector (Board Members), influence decisions?

THE FULL ORIGINAL OPTIONS APPRAISAL IS SET OUT IN APPENDIX 3.

CONCLUSION

158. Although the Tees Valley authorities and businesses have worked well together through the LEP and status quo would be an easy option, it does not provide the clarity of responsibility and accountability now required, it is not fleet of foot due to the decision-making processes and it does not provide certainty. A Joint Committee could be established relatively quickly. Decision-making would be more transparent than with existing arrangements and it would be more fleet of foot, however call-in and scrutiny could have an impact, certainty also remains an issue. A company model would be complex to establish, it would be more costly, would not be able to recover VAT and there would be issues around Corporation Tax and the company’s autonomy. A Combined Authority model will allow for decision-making which is far more fleet of foot alongside effective scrutiny, transparency, accountability and openness. It provides the level of certainty required and builds on existing arrangements which spends money wisely against priorities. It provides

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the ability to receive new powers and resources as part of the devolution agenda, and the longer-term commitment would give businesses further confidence in our economic aspirations; whilst at the same time remaining within democratic control.

A Transport Options Appraisal was subsequently carried out, based on the merits of the status quo in terms of transport powers versus assuming the full powers of an ITA (as with existing Combined Authorities). This is also set out in Appendix 3.

159. The clear conclusion is that a Combined Authority model best achieves the required objectives for the Tees Valley.

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SECTION 5 – CONSULTATION

160. Consultation was widely undertaken throughout December 2014 and January 2015, with local residents (through citizens’ panels), local businesses, neighbouring authorities and LEPs, schools and colleges, the voluntary and community sector, MPs, housing associations, trades unions and others.

161. A total of over 1900 responses were received which is an excellent response. The majority were from local residents (1638).

In total 1,911 responses were received to the consultation.

74.46% agreed that the partnership approach was important.

64.77% agreed that the Tees Valley should strengthen its partnership approach through a new Combined Authority.

86.39% agreed that Economic Development was an important area of economic growth for the Tees Valley.

90.59% agreed that Employment and Skills were an important area of economic growth for the Tees Valley.

89.55% agreed that Business Investment was an important area of economic growth for the Tees Valley.

89.09% agreed that Transport and Infrastructure was an important area of economic growth for the Tees Valley.

68.14% agreed that Low Carbon was an important area of economic growth for the Tees Valley.

162. This demonstrates that there is strong and widespread support in the Tees Valley for the Combined Authority.

163. The full detail of the consultation is attached at Appendix 2.

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SECTION 6 – CONCLUSIONS

164 This Governance Review clearly demonstrates that the Tees Valley is a functional economic area. It shows how a change in governance to a Combined Authority, with its associated powers, would help to overcome barriers to economic growth and help us create 25,000 new jobs in the Tees Valley. It clearly meets the Government’s four tests for improvement as set out in legislation as follows:

The exercise of statutory functions relating to transport in the area

o Transport Planning across the five authority areas, alongside business, ensuring our long-term transport needs are planned for

o Travel information across our area improved to facilitate movement of people, goods and services

o Quality Contract Scheme / Quality Partnership Scheme coordinated across the whole area

o Any future rail powers that may be devolved

The efficiency and effectiveness of transport in the area:

o Business and local government, working together for the long-term, driving our economy

o Provides for greater control of transport, and better connectivity across the Tees Valley, to deliver stronger economic growth

o Builds on the Tees Valley bus Network Initiative, for a joint approach to scheme development

o Enhances our Quality Partnership Scheme already in placeo Through our engagement in the North East Business Unit and Rail North

The exercise of statutory functions in relation to economic development and regeneration in the area:

o The Combined Authority provides a formal route through which the Duty to Cooperate may be exercised

o Statutory responsibilities in relation to Tees Valley-wide, strategic highways planning and safety may also be better provided for through the combined Authority

Economic conditions in the area:

o Combining functions and responsibilities for transport, economic development and regeneration, in a single approach, helping us to create the 25,000 new jobs as set out in the Tees Valley Strategic Economic Plan

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165. In support of the statutory tests, and the need to reflect the identities and interests of local communities and to secure effective and convenient local government, our proposals offer the following benefits:

combine the strengths of our LEP with potential new powers of a Combined Authority to accelerate economic growth

be responsible for strategic transport planning, ensuring it is fully aligned to our economic vision across the Tees Valley

gain the power to levy in relation to transport functions, should the democratically elected leaders choose to do so

allow us to drive the skills agenda, ensuring a more coordinated approach towards skills funding and provision, negotiating with existing partners (e.g. SFA), so that rules around skills funding can be refined and adapted to support more appropriate apprenticeship and other provision in the Tees Valley

continue to represent the functional economic area of the Tees Valley, but with the certainty that comes with cementing the democratic / business relationship

achieve a non-bureaucratic, seamless operation of the LEP and the Combined Authority going forward

be cost effective – there would be limited additional cost across the Tees Valley to deliver more effective decision-making and delivery of our strategy, and the marginal costs would be dwarfed by the potential gains

provide a more robust governance arrangement whereby it speeds up decision-making (making decisions once instead of five times) by elected Leaders, to help our partnership with business to be fleet-of-foot, responding rapidly to opportunities, and to compete globally

ensures speedier decision-making across economic development, transport and skills, in terms of planning, project design and delivery on the ground; and areas of strategy such as rail and infrastructure strategy; strategy for business investment, inward relocation, exporting and supply chain development

offer our communities and businesses the certainty that comes with cementing our partnership and the consistency of approach this will bring

allow proper scrutiny of what is done as a partnership in the spirit of openness, transparency and accountability

ensure the consideration of the views of business in a proper, democratically accountable governance structure

manage risk, hold funds and assets, and employ staff place the Tees Valley in the best position to secure the additional resources

and powers that current and future governments may devolve

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Appendix 1

Draft Final Scheme for the Establishment of aCombined Authority for the Tees Valley

Background

The findings of the Review of governance arrangements relating to transport, economic development and skills pursuant to Section 108 of the LocalDemocracy Economic Development and Construction Act 2009 (LDEDC) and Section 82 of the Local Transport Act 2008, are that a Combined Authority (CA) shall be created both as the best option for the area going forward because it would be likely to improve:

the exercise of statutory functions relating to economic development and transport in the area;

the effectiveness and efficiency of transport in the area; and economic conditions in the area.

This document is the proposed Final Scheme prepared by the five Tees Valley Authorities (the ‘Constituent Councils’) pursuant to the LDEDC for approval by the Secretary of State by which it is proposed a CA be created.

Establishment of Authority

1. A Combined Authority for the Tees Valley shall be established pursuant to Section 103 of the Local Democracy Economic Development and Construction Act 2009 (LDEDC). It is intended that this shall come into existence from October 2015.

Area

2. The area of the CA shall be the whole area of each of the five Constituent Councils namely:

Darlington Borough Council Hartlepool Borough Council Middlesbrough Council Redcar & Cleveland Borough Council Stockton-on-Tees Borough Council

3. The evidence suggests that the Tees Valley represents a self-contained functional economic market area (FEMA) in its own right and that there would likely be an improvement in economic prosperity should a CA for the area of the Tees Valley be established.

Name

4. The name of the CA shall be the Tees Valley Combined Authority.

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Membership

5. The CA shall consist of a total of five Members comprised as set out below:-

6. Each of the five Constituent Councils shall appoint one of its elected members as a Member of the CA. All appointments shall be for a one year term.

7. The CA will be as efficient and effective as possible. One means of achieving this is to make the business and meetings of both the LEP and the CA seamless. Our intention is to join the meetings together, supported by a single officer team (TVU staff), with a single agenda.

8. Representatives of the business community comprising the members from Tees Valley Unlimited Board (the ‘LEP’) shall also become non-voting board members of the CA, to be appointed for a term of three years.

9. This model brings to decisions the expertise of business in the Tees Valley, and ensures through the CA that the local authorities are accountable for the money that is being spent. Business members would effectively be expert non-executive directors of the CA.

10. In the event that any of the LEP members referred to above cease to be a LEP board member, they shall also automatically cease to be a CA board member.

11.The LEP board members shall also have a right to resign in their own right from the CA board by providing reasonable notice of the same.

12.The Constituent Councils shall each appoint another of its elected members to act as a substitute Member of the CA in the absence of the Member appointed in accordance with the terms above.

13.A council may at any time terminate the appointment of a local authority Member or a substitute Member appointed by it to the CA.

14. Where a local authority Member or substitute Member of the CA ceases (for whatever reason) to be a Member of the council that appointed them, the Member shall cease to be a Member of the CA and the relevant council shall appoint a replacement as soon as practicable.

15.No remuneration shall be payable by the CA to its members other than standard allowances for travel and subsistence.

16. Intention - Recognising that membership of the CA cannot be determined by reference to a particular office of an appointing council, it is nevertheless the intention that the most appropriate membership for the CA would be the five Leaders or the Directly Elected Mayors of the Constituent Councils, as appropriate.

17.The Chair and Vice Chair of the CA shall be appointed annually for a one year term from amongst the representative Members of the Constituent Councils, with

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the intention that the positions shall rotate between the Constituent Councils on an annual basis.

Voting

18.The following voting arrangements will be applied:

a) Un-weighted voting based on one member one vote, with no casting vote for the Chair or Vice Chair.

b) Five representative Members and/or nominated substitutes represent a quorum.

c) Decision-making shall be structured to ensure that issues of critical importance to the Boroughs, such as those which placed costs or risks on the Borough Councils, are taken only by Leaders and the elected Mayor.

d) The constitution of the CA shall set out that decisions will be taken in accordance with the following framework agreed by the CA and formally by each local authority individually:

Statement of Ambition: the strategy in accordance with which the LEP and the CA will work

Investment Plan Annual rolling LEP / CA Medium-Term (3-4 year) Financial Plan,

including local authority financial contributions Annual Business Plan Local Transport Plan

e) The CA shall not have the power to incur expenditure on behalf of other authorities, nor the power to place additional risks on other authorities over and above expenditure and risk that is a result of what is agreed by each authority and covered by the Combined Authority constitution, including the investment, business and financial plans.

f) Beyond the above, each matter arising at a meeting of the CA shall be determined by a majority of the votes of the Members present and voting; each representative Member or substitute Member acting in that Member’s place shall have one vote and no Member has a casting vote.

g) If a vote on any matter referred to at (f) above is tied, it shall be deemed not to have been carried.

Executive Arrangements

19.Executive Arrangements (within the meaning of the Local Government Act 2000) shall not apply to the CA. However, the discharge of the functions of the CA will be subject to the scrutiny arrangements set out in this scheme.

Scrutiny arrangements

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20.The CA shall appoint one scrutiny committee which shall comprise members appointed to it by each of the Constituent Councils. In order to achieve this, it is intended to request the Secretary of State to apply Section 9JA of the Local Government Act 2000 to the CA as it does to a committee system local authority but with these amendments.

The Combined Authority shall appoint one scrutiny committee under s9JA(1); and

The Secretary of State will be requested to make regulations under s9JA(2)(b) with respect to its functions composition and procedure.

Functions of the Combined Authority

21.A great strength of the area has been its ability to demonstrate its unity of purpose in securing a more prosperous economic future. The five local authorities of the Tees Valley, working together with business as the LEP, have firmly established the sub-region on the national stage. An obvious example of our unity is the Statement of Ambition with its clear explanation of the policies to be pursued in achieving sustainable prosperity.

22.Our partnership is robust. It is a matter of great credit acknowledged by the Government, Business Representative Organisations such as Confederation of British Industries, Chamber of Commerce, Federation of Small Businesses, the Manufacturers’ Organisation for Britain (EEF), and Institute of Directors and neighbouring areas that the grasping of opportunities to help implement our economic strategy has only been possible because of the area’s local authorities’ steadfast ability to work together and in concert with the private sector. There is a focussed and proactive approach to growth which is pursued at the sub-regional level. This approach has led to a successful Enterprise Zone and numerous Regional Growth Fund (RGF) awards for local companies.

23.Building on the strengths of the partnership, new arrangements and powers would:

Combine the strengths of our LEP with new powers afforded by a Combined Authority.

Be non-bureaucratic. A Combined Authority which operates as the LEP would achieve this.

Be cost-effective. Our analysis estimates that there is limited additional cost across the Tees Valley to deliver more effective decision-making and delivery of our strategy.

Not re-create the former Cleveland County Council. A Combined Authority would not do this - it would assist decision-making on matters of jointly agreed priorities of economic development, skills and transport across the five Boroughs, and

Ensure continued work in harmony with business.

Transport Functions

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24. In the application of s101 of the Local Government Act 1972 any other transport functions delegated to the CA from time to time by the constituent Councils shall be functions of the CA.

25.This shall include the full range of powers available to an Integrated Transport Authority pursuant to the Local Transport Act 2008.

26.The Power of Wellbeing under chapter 3 of the LTA 2008 will apply to the CA by virtue of that Act.

27. The CA will have ancillary general powers pursuant to section 113A of the LDEDC 2009.

28. Specific transport functions for the CA shall include to:

a) Develop and approve the Rail Strategy

b) Develop and approve the Transport and Infrastructure Strategy including transport topics of significant importance e.g. Rail, Strategic road network and Airports.

c) Manage and develop the successful on-going strategic relationship with the Highways Agency, and other Government departments and agencies (i.e. DfT, Network rail, rail franchise holders)

d) Deliver modelling and analytical support for scheme and strategy schemes in relation to economic development.

e) Approve and submit bids for funding for Tees Valley level transport schemes.

f) Develop, approve and implement in collaboration with the Local Authorities capital project procurement for transport schemes at a Tees Valley level.

g) Represent those Authorities comprising the CA within regional, pan-northern and national for a lobbying for more investment in infrastructure.

h) To approve the Rail Strategy and the Transport and Infrastructure Strategy.

i) To approve and submit bids for transport scheme funding.

j) To approve the procurement of Tees Valley level transport schemes.

Economic Development Functions

29.By virtue of sections 99 and 102A of the Local Transport Act 2008, the CA will have broad well-being powers to promote economic prosperity, which can be exercised together with general ancillary powers granted by section 113A of the LDEDC Act 2009 (as amended by the Localism Act 2011).

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30. It is proposed that the CA will be focussed on strategic economic development issues which shall include a remit to:

a. Prepare, monitor and review the Tees Valley-level economic strategy (Statement of Ambition, Investment Plan, Business Plan, Action Plans etc) for approval by each of the Member Authorities

b. Undertake economic assessment, research and provide an evidence base for economic strategy at the Tees Valley level and at the Borough level.

c. Prepare and submit policy responses to consultations that impact on the economy of the Tees Valley

d. Develop and manage interventions, projects and programmes which respond to the economic strategy of the Tees Valley

e. Prepare and submit funding bids for interventions, projects and programmes which respond to economic strategy at a Tees Valley level.

f. Be responsible for ensuring that core business advisory services are available to SMEs across the Tees Valley, with additional business support services being delivered, in consultation with the Local Authorities, to meet each Borough’s individual sector priorities.

g. To approve the Tees Valley-level economic strategy (comprising e.g. the Statement of Ambition, Investment Plan, Business Plan, Action Plans etc).

h. To approve the submission of responses to consultations.

i. To approve the submission of funding bids.

31.The primary focus of the CA will be to manage a significant programme of investment in transport and economic infrastructure, and to influence and align with government investment, in order to boost economic growth. The related interventions will have differential spatial impacts across the CA area but should aid delivery of key growth projects in the emerging and future local plans of Constituent Councils. Having regard to the duty to co-operate, effective alignment between decision making on transport and decisions on other areas of policy such as economic development, employment and skills initiatives, business investment and low carbon strategies will be a key aim.

Incidental Provisions

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32.The CA shall exercise any function of the Secretary of State delegated to the CA by order of the Secretary of State pursuant to Section 86 of the LTA 2008 and Section 104(1) (b) of the LDEDCA 2009. Such functions shall be exercised subject to any condition imposed by the order.

33.The CA shall also have the following terms of reference and delegated powers in relation to Employment and Skills:

a. Take a lead role in relation to Employment and Skills policy initiatives.

b. Lead on activities to drive the TVU Employment Skills Advisory Group.

c. Lead activities to develop the Tees Valley Employment, Learning and Skills Framework and encourage implementation across the five Local Authority areas.

d. Influence high level content of the DWP Work Programme and FE provision.

e. Develop links and Employment and Skills policy alignment with 14-19 activities.

f. Influence DWP prime provider performance through attending regular reviews and ensuring that TVU priorities are fed through to delivery programmes, and on a borough level depending on need.

g. Engage with DWP providers/employers on the ground to facilitate closer working between partners and create additional/sustainable job opportunities across the Tees Valley.

h. Provide intelligence to providers (including primary and secondary schools) on future skills and labour market requirements, aligned to the growth plan whilst working with colleagues and other learning providers to develop a more labour market focus to their delivery, share emerging markets and skills sector knowledge

i. Work with partners to join up the employer offer across Tees Valley and link with similar regional/local aims to provide dedicated access points for employers (via websites and key contacts).

j. Coordinate the production of Tees Valley materials and resources to support and develop aspirations and choice, working closely with all partners.

k. Co-ordinate a sub-regional network of key partners/providers to manage co-ordinated employer support for multiple vacancies etc.

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l. Work with employers, Sector Skills Councils etc to develop/facilitate sector focussed training opportunities linked to areas of future growth in the labour market.

m. Ensure that employment and worklessness initiatives are effectively targeted at those farthest from the labour market.

n. Ensure that local and national initiatives are coordinated into a coherent programme of support for young people, adult learners and employers

o. Work with partners/key employers to develop more structured opportunities for unemployed people to access jobs.

34.The CA shall also have the following terms of reference and delegated powers in relation to Business Investment:

a. Undertake business engagement and support including SMEs in consultation with the Local Authorities.

b. Develop and approve a strategy and action plans for work of Tees Valley level significance in relation to:

o Investment by both UK and foreign owned companies o Relocation into the Tees Valley from another UK sourceo Investment for the first time by non-UK companies o Exporting by Tees Valley companies o Supply chain development

c. Take responsibility for enquiry and client handling, liaising with clients and public and private sector partners across the Tees Valley; Site allocation, site briefs, identifying business synergies.

d. Identify existing and emerging opportunities, defining marketing targets by industry sectors/sector analysis and developing strategy.

e. Undertake marketing to attract Tees Valley level opportunities into the Tees Valley.

f. To approve a Tees Valley wide strategy for business investment, inward relocation, exporting and supply chain development.

35.The CA shall also have the following terms of reference and delegated powers in relation to Low Carbon

a. Undertake project and financial management of studies linked to the Low Carbon Strategy.

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b. Liaise with Government departments and agencies to address barriers to investment.

c. Coordinate consultation responses to a range of related consultations from Government, including National Planning Statements and energy policy, as well as EU legislation.

d. Provide support to industry to develop low carbon infrastructure such as Carbon Capture and Storage, district hearing, energy hubs, novel waste technologies and energy from waste plants.

e. Assist in the preparation of funding bids for industry projects for national and European funds and the Green Investment Bank.

f. Further developing relationships with NEPIC, CPI and other groups such as PICCSI and other relationships to assist in the delivery of key projects.

g. Help to develop and articulate Tees Valley’s offer as one of the largest integrated low carbon networks in Europe.

h. Examine new delivery vehicles for the key projects.

Funding

36. It is intended that the running costs of the CA shall not in themselves result in any significant increase in the cost of delivery of the functions ascribed to it over and above the current costs associated with the delivery of those functions by the LEP and the Constituent Councils.

37.The running costs of the CA, unless mutually agreed to be amended, shall be apportioned as follows:

DARLINGTON 15.8%HARTLEPOOL 14.7%MIDDLESBROUGH 20.9%REDCAR & CLEVELAND 21.0%STOCKTON-ON-TEES 27.7%

38.The revenue expenditure and funding of the CA shall be agreed on an annual basis as determined at paragraph 18(d) above.

39. Any additional expenditure in excess of that determined at paragraph 18(d) should be apportioned at the time of approval.

40.The CA will have the power to access other sources of funding as they become available.

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Sub structures

41.The CA will act as a strategic decision making body. Therefore in order to fulfil the significant range of operational duties, powers and functions transferred, the Constituent Councils may put in place appropriate arrangements to ensure fit for purpose sub structures.

42.The Constitution of the CA is to include the ability to create the following sub-committees/panels:

transport committee an investment panel

Tees Valley Unlimited Local Enterprise Partnership (LEP)

43.The Review sets out the importance of a strong LEP which effectively brings together the private and public sector in driving the economic prosperity of the Tees Valley.

44.By making provision for continuing to work closely with the LEP, for example by integrating CA and LEP meetings, decisions taken by the CA will more fully reflect business views. These views, both in terms of shaping prioritisation and scheme design, will ensure that any public investment is targeted to maximise local business benefit which is key to economic growth.

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Appendix 2

Proposal for a Tees Valley Combined Authority

Consultation Report

February 2015

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1. Introduction

The five councils have been working together to investigate the potential of a Combined Authority for the Tees Valley. As part of this work they have sought the views of a range of stakeholders across the area on the proposal including the proposed priorities for the Combined Authority. Detail on the consultation process and the responses received will be set out over the following sections:

Consultation Process Summary of responses Responses (detailed) Conclusions Appendix A – Consultation Timeline Appendix B – Consultation Documents Appendix C – Letters received in response to the consultation

As advised by DCLG the consultation has been modelled on that undertaken by the seven councils to the north of the Tees Valley in the development of the North East Combined Authority. This approach was taken into account to enhance response rates through the Tees Valley consultation. This has been effective and a better response rate has been achieved with 1,911 responses received to our consultation compared to the North East Combined Authority total of 650 stakeholders (including over 450 residents).

2. Consultation Process

Consultation on the proposal for a Tees Valley Combined Authority ran between 10 th December 2014 and 31st January 2015 (consultation timeline included as appendix A).

Within this time a range of methods were used to promote access to the consultation in a variety of ways across the five authorities including but not limited to:

Online survey; Reports/presentations to a variety of committees/partnerships/groups; Letters to businesses/organisations/groups providing the link to the online survey; Dedicated webpage on each council website and the Tees Valley Unlimited (TVU)

website which linked through to the online survey; Press releases; Articles in council magazines.

The following information was made available on the websites of each of the 5 councils and Tees Valley Unlimited:

Consultation document Online survey Frequently Asked Questions (FAQs) Draft Governance Review Background report that went to the councils cabinet/committee

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Press releases Video

Links were also provided from the online survey to the consultation document (included as appendix B) and FAQs so that those completing the survey could access them easily to ensure they have the information available to understand the basis for the consultation.

A range of organisations, groups and individuals have been contacted directly during the consultation period including:

Association of North East Councils (ANEC) Businesses and Business Organisations Colleges / Schools Durham Tees Valley Airport Elected Members Government Departments and Agencies Members of Parliament and House of Lords representatives North East Local Enterprise Partnership / North East Combined Authority North Yorkshire County Council North Yorkshire Local Enterprise Partnership Parish and Town Councils Ports Regional and Sub Regional Newspaper Editors Residents Trade Unions Universities Other partners

3. Summary of Responses

In total 1,911 responses were received to the consultation.

74.46% agreed that the partnership approach was important.

64.77% agreed that the Tees Valley should strengthen its partnership approach through a new Combined Authority.

86.39% agreed that Economic Development was an important area of economic growth for the Tees Valley.

90.59% agreed that Employment and Skills were an important area of economic growth for the Tees Valley.

89.55% agreed that Business Investment was an important area of economic growth

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for the Tees Valley.

89.09% agreed that Transport and Infrastructure was an important area of economic growth for the Tees Valley.

68.14% agreed that Low Carbon was an important area of economic growth for the Tees Valley.

4. Responses (detailed)

In total 1,911 accessed the survey. It should be noted that not all of those who looked at the survey answered every question and therefore a number have been identified who skipped each question. The number of responses received was significantly higher than that achieved by the other North East authorities when they consulted on their proposal for a North East Combined Authority. In total 650 stakeholders (including over 450 residents) participated in their local consultation exercise.

Question 1

We asked…

Please tell us who you are (choose 1)

The response was…

Number PercentageResident 1,638 85.98%

Elected Member 28 1.47%

Business 94 4.93%

Education Provider 27 1.42%

Trade Union 6 0.31%

VCS 39 2.05%

Housing Association 7 0.37%

Other 66 3.46%

TOTAL 1,905 100%

6 skipped this question.

Others include the following:

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Local Healthwatch representative English Heritage NHS Foundation Trust Individuals who work in the Tees Valley Employees from the 5 Local Authorities in the Tees Valley Parish Councils North Yorkshire County Council Member of Parliament Partner Organisation NHS staff Business owner Individuals who identified as being from more than one group e.g. resident and

business owner

Question 2

We asked…

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The five Tees Valley local Councils are committed to working together with business to create more jobs, support businesses to flourish and attract new investment into the Tees Valley. Do you think that this partnership approach is important?

The response was…

Agree74.46% (1,382)

Disagree17.89% (332)

Don’t Know7.65% (142)

Agree Disagree Don’t knowResident 1,153 307 131

Elected Member 22 5 0

Business 84 5 4

Education Provider 25 0 2

Trade Union 5 1 0

VCS 32 2 3

Housing Association 3 2 2

Other 56 7 0

Skipped Q1 2 3 0

TOTAL 1,382 332 142

55 skipped this question.

Question 3

We asked…

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Do you think that we should strengthen the way the five councils work together through a new Combined Authority, cementing our partnership in law, speeding up decision-making, and being ready to accept new powers and resources from Government on these key issues?

The response was…

Agree64.77% (1,184)

Disagree26.91% (492)

Don’t Know8.32% (152)

Agreed Disagreed Don’t knowResident 982 463 130

Elected Member 15 6 2

Business 78 7 5

Education Provider 20 3 3

Trade Union 6 0 0

VCS 26 3 7

Housing Association 3 2 1

Other 52 5 4

Skipped Q1 2 3 0

TOTAL 1,184 492 152

83 skipped this question.

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Question 4

We asked…

Please say whether you agree or disagree with the importance of each of the five areas of economic growth for the Tees Valley area:

220 skipped this question.

Economic Development (i.e. understanding our economy and having the right strategies in place to meet Tees Valley economic needs, to secure new resources to create more jobs)

The response was…

Agree86.39% (1,460)

Disagree8.70% (147)

Don’t Know4.91% (83)

Agreed Disagreed Don’t knowResident 1,239 134 78Elected Member 19 3 0Business 84 0 2Education Provider 24 1 0Trade Union 5 0 0VCS 28 1 3Housing Association 4 2 0Other 55 4 0Skipped Q1 2 2 0

TOTAL 1,460 147 83

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Employment and Skills (i.e. making sure there are local jobs for local people and that local people have the skills they need to do those jobs)

The response was…

Agree90.59% (1,530)

Disagree6.10% (103)

Don’t Know3.32% (56)

Agreed Disagreed Don’t knowResident 1,304 93 53Elected Member 20 2 0Business 84 0 2Education Provider 24 1 0Trade Union 5 0 0VCS 31 0 1Housing Association 4 2 0Other 56 3 0Skipped Q1 2 2 56

TOTAL 1,530 103 56

Business Investment (i.e. attracting new, and keeping and growing existing, local businesses)

The response was…

Agree89.55% (1,499)

Disagree6.27% (105)

Don’t Know4.18% (70)

Agreed Disagreed Don’t knowResident 1,277 95 65Elected Member 20 2 0Business 83 0 2Education Provider 25 0 0Trade Union 5 0 0VCS 29 1 2Housing Association 4 2 0Other 54 3 1Skipped Q1 2 2 0

TOTAL 1,499 105 70

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Transport and Infrastructure across the Tees Valley and beyond(i.e. helping ensure that travel by road, rail, air and sea are fit for current and future purposes in order to keep the economy moving)

The response was…

Agree89.09% (1,494)

Disagree7.51% (126)

Don’t Know3.40% (57)

Agreed Disagreed Don’t knowResident 1,272 115 53Elected Member 20 2 0Business 84 0 2Education Provider 23 1 0Trade Union 5 0 0VCS 30 1 1Housing Association 4 2 0Other 54 3 1Skipped Q1 2 2 0

TOTAL 1,494 126 57

Low Carbon (i.e. maintaining and growing the local economy whilst using less energy, limiting the effects of energy use on the local environment and growing low carbon businesses)

The response was…

Agree68.14% (1,140)

Disagree17.33% (290)

Don’t Know14.52% (243)

Agreed Disagreed Don’t knowResident 963 254 218Elected Member 17 5 0Business 62 10 14Education Provider 18 4 3Trade Union 5 0 0VCS 22 5 4Housing Association 3 2 1Other 49 7 3Skipped Q1 1 3 0

TOTAL 1,140 290 243

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Question 5

We asked…

Please use the box below to make any additional comments.

The response was…

In total 750 chose to provide additional comments whilst 1,161 skipped this question. That means that less than 40% of the total respondents chose to answer this question.

The additional comments provided covered a range of topics and included both positive and negative views. In addition some raised questions about the detail of the Combined Authority.

A number of concerns were anticipated in advance of the consultation and were included within the Frequently Asked Questions. Unfortunately this has not stopped people raising those concerns in their additional comments.

The following section provides a summary of the main themes that came through from the additional comments provided. This reflects just a flavour of the comments received:

Many comments were supportive of the development of a Combined Authority for the Tees Valley as they felt it would put the area into a better position to attract funding and investment.

Some were concerned about the Combined Authority being a recreation of the old Cleveland County and felt that their Local Authority should either remain autonomous or would be better placed with another area e.g. North Yorkshire or County Durham.

However, there were also a number of comments in support of the Local Authorities going even further and becoming a single authority or combining other functions such as education support services or health and social care.

Many felt that working together in partnership would give the area a stronger voice and take it out of the shadow of the other North East local authorities so that the Tees Valley would not lose out to places like Newcastle.

But there were others who felt that the Tees Valley should join the rest of the local councils in the north east as part of the North East Combined Authority.

A number raised concerns about how equally funding and resources would be spread across the 5 local authority areas and also between the urban centres / principal towns and the rest of the area.

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Some comments were made on the proposed scrutiny arrangements. These included the need to include business representatives in the proposed membership and queried whether the Chair should be from the “opposition party” due to the complexity of local politics within the Tees Valley.

There were a number of comments about the potential cost of the Combined Authority and particularly concerns that this may have implications for residents through increasing Council Tax bills. Some felt that there should be an aim to make the new structure cheaper and that there was a need for greater transparency about what the Combined Authority would cost.

Concern was raised about the Combined Authority being an added layer of local bureaucracy or that there would be duplication with existing arrangements. This links to other comments which questioned whether the change would result in redundancies within Local Authorities. Some were against this whilst other felt that jobs should be reduced where there was duplication.

Many welcomed the potential opportunities for the Tees Valley that could come from the devolution of further powers from central government. However, some were wary about such additional powers including concern that if this included setting local tax revenues the area may lose out to the South East.

Some queried how local people, businesses and groups (e.g. Residents Associations, the VCS and Parish Councils) would be involved in the shaping of policy for the Combined Authority. This included queries around future consultation arrangements.

A range of comments were also received on what should be priorities for the Combined Authority. These included:

Transport and access - particularly in reference to rural and peripheral areas within the Tees Valley. One respondent felt that there should be one Tees Valley Transport Plan with Borough chapters to ensure a strategic approach to transport issues.

Durham Tees Valley Airport - Improving and developing the airport was identified by a number of respondents.

Training and skills - Whilst many noted that this should include young people it was also felt that there should be opportunities for all ages, particularly around re-training. Workplace skills for graduates was also highlighted.

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5. Other responses to the consultation

In addition to those completing the online survey a number of letters of support were received from local partners (letters included as appendix C):

Association of North East CouncilsCleveland Police & Crime Commissioner and Cleveland PoliceNorth East Chamber of Commerce (NECC)North East Combined Authority (NECA)PD PortsTees Valley UnlimitedUNISON (Northern Region)

6. Conclusion

The results of the consultation demonstrate that there is broad support for the proposal to develop a Combined Authority for the Tees Valley.

Almost two thirds of those who responded to the consultation (64.77%) agreed that the 5 councils should strengthen the way that they work together through a new Combined Authority, cementing the partnership in law, speeding up decision-making and being ready to accept new powers and resources from Government.

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Appendix A – Consultation Timeline

When? What?

W/C 24th NovExplanation of Combined Authority proposals set up and made public on all council websites & TVU website.

10th DecConsultation opened – council websites (except Middlesbrough) updated with consultation details and link to online survey.

10th Dec – 23rd JanPromotion of consultation through press releases to local media & inclusion in council magazines. Letters sent out to consultees by identified lead organisation.

17th DecConsultation went live in Middlesbrough (following Call-In period), website updated with consultation details and link to survey.

31st Jan Online consultation closed.

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Appendix 3Criterion Enhanced Status Quo Joint Committee Combined Authority CompanyOperational Efficiency & Effectiveness

A. Decision-Making Although the current model does allow for some clarity of responsibility and accountability for decision-making, decisions would need to be taken at individual local authority level. The local authorities have or are moving to different political and constitutional arrangements and each would need to provide certainty regarding an effective method of collective decision-making through the TVU Leadership Board in order to minimise the risk of decisions being challenged or, more importantly, not being

A joint committee could be established to discharge all of the functions which are the subject of the arrangements on behalf of the five Local Authorities.

The joint committee could arrange for the discharge of any of its functions by a sub-committee of the joint committee or an Officer of one of the Authorities with appropriate delegations.

Collective decisions may not be made in one place without ratification by the individual authorities. Local Government legislative requirements

Final binding decisions could be made by simple majority on matters relating to its functions and within its delegated powers. A bigger majority (eg 2/3) could be required for key issues such as setting the annual budget or any transport levy.

Collective decisions will be made in one place, by elected Leaders who are responsible for strategic direction and underwriting any risks.

In line with current national policy, the Combined Authority model would allow for

Decisions would be final and binding within the framework of the Board’s functions. Voting rights and the weight to be given to different Board members’ votes in certain situations would be matters for the local authorities to determine.

Collective decisions will be made in one place by the Board (subject to voting rights).

Government appears less likely to devolve further powers and resources to this option.

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implemented by/on behalf of one or more of the authorities. Whilst TVU has an officer delegation scheme this would need to be reviewed in light of City Deal and TVU’s developing responsibilities in any event. This model would not allow for collective decisions to be made all in one place.

Government appears less likely to devolve further powers and resources to this option.

regarding the call-in and scrutiny of executive decisions would potentially apply, decisions could therefore be overturned

Government appears less likely to devolve further powers and resources to this option.

decisions to be made locally on any new powers and resources devolved from Government.

B. Operational Matters TVU is not a legal entity and agreement amongst the local authorities would therefore be particularly important as regards the body (or bodies) which would hold funds, assets and land, as well as let or enter into contracts, and enter into funding or joint

The joint committee would not be a legal entity in its own right. Agreement would therefore be required as to which Authorities would hold funds/be the accountable body; enter into agreements or let contracts; own land; be a

A Combined Authority would be a vehicle which could be as flexible as TVU/Local Authorities need it to be. It would be a body corporate which could hold funds; own assets; manage projects or arrange for others to do so by agreement; let

As a legal “person” a Company could hold funds; own assets; manage projects or agree with others that they do so; let development contracts; enter into joint venture or funding arrangements, and other contracts (such as with

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venture agreements, together with the arrangements for making investment decisions and sharing profits and risks.

The current arrangement does not include responsibility for strategic transport planning nor funding of major transport schemes.

party to funding or joint venture arrangements. The joint committee, or a sub-committee, could make investment decisions, however these decisions may need to be ratified by each local authority. Projects could be managed for the joint committee by or on behalf of one or more of the Local Authorities. The Authorities would have to agree how profits and losses/risks would be shared.

A Joint Committee can take on responsibility for strategic transport but funding of major schemes would remain with each local authority.

contracts for development; make funding or joint venture agreements; enter into other contracts, such as agreements with transport operators and (if empowered to do so) manage skills contracts on behalf of DWP.

A Combined Authority can take strategic transport responsibilities and funding of major transport schemes

transport operators); and subject to any necessary powers, manage DWP skills contracts.

Existing legislation does not permit companies to take on responsibilities for strategic transport and funding.

C. Efficiency and Cost Enhancing the current joint arrangements should not put the local authorities to any

A joint committee would need to be administered. Existing Officers/resources could

A Combined Authority would be a separate entity. It would need to produce separate

A company would be a separate entity, would need its own financial arrangements,

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additional cost. It involves developing existing resources and operational structures and it should lead to less bureaucracy and the potential for delay, and create efficiencies.

It does not provide the facility to levy for transport responsibilities.

be utilised for this purpose, in the same way that other existing joint committees are serviced. There would be minimal additional administration costs and these would be shared. Decision making arrangements for the joint committee would be more transparent than the existing joint arrangements for TVU and there would be less risk of delays arising from having to refer matters to individual Authorities for agreement/ratification. However, legislative requirements relating to call-in and scrutiny of executive decisions could impact upon the efficiency of the decision-making process.

There would be no facility to levy for transport

accounts, have its own constitution and be separately administered. Statutory roles could however be provided by one of the constituent local authorities via a Service Level Agreement. It is not anticipated that ongoing costs will be significantly higher than the current arrangements.

It would have the power to levy its constituent councils in respect of the expenses and liabilities of the CA which are reasonably attributable to the exercise of its functions relating to transport.

shareholder agreements, etc. Costs of set up would be significant. Staff from constituent local authorities would not be able to provide the required support; ongoing costs are also likely to be higher than current arrangements.

A company could not levy for transport responsibilities.

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facilitiesD. Practical matters TVU currently recovers

VAT on its non-business transactions through Stockton Council. Enhancing the status quo will not affect this. For procurement purposes there would continue to be a (lead) local authority requirement, for and on behalf of all the constituent Councils. Similarly there is a (lead) employing authority for staff. No additional TUPE or LGPS implications are envisaged by enhancing the current arrangements.

A joint committee would not impact upon TVU’s existing VAT position; nor would it affect the present position regarding procurement or the employer/employee arrangements for TVU, and the related terms and conditions of employment.

The Combined Authority would be a local authority for VAT purposes; it would be a single, sub-regional (but legal entity) for procurement purposes and could enter into contracts; it would not be liable for corporation tax; it would have power to employ staff and to determine the terms and conditions on which they were appointed, although TUPE would apply to staff whose functions were transferred to the Combined Authority; the Combined Authority would need to enter into an Admission Agreement for the purposes of the LGPS. The Local Democracy and Economic Development Act 2009 provides the powers to establish a

The Company may not be able to recover VAT on the goods and services it procures and it might be required to account for VAT on the services it provides. The Company would constitute a single, sub-regional body for procurement purposes and it could enter into contracts. In order to avoid the requirement to procure the new company arrangements under EU procurement rules, it would need to be established as a local authority controlled company and the company would have to operate on behalf of the authorities and not autonomously. This would have to be demonstrated in the Company’s governance

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Combined Authority. Assenting resolutions would be required from each constituent authority in order to exercise those powers. The Combined Authority would be a vehicle which could, in the future, take on additional functions (local authority and Secretary of State) provided they can be shown to enable the Combined Authority to fulfil its purposes. The Authority would have to appoint a Head of Paid Service; Section 15, officer and a Monitoring Officer. Officers could, however, be seconded (part-time) from the Councils to fulfil those roles.

and operational arrangements. Such a Company would also then be caught by the statutory provisions regulating companies in which local authorities have an interest eg as regards capital finance. Company profits or surpluses would be liable to corporation tax. It could employ staff. TUPE potentially could apply to staff whose functions were transferred to the Company. The Company would have to enter into an Admission Agreement for Local authority pension purposes.

Enhancing our Economic Development

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E. Ability to Deliver Enhanced arrangements will be more operationally efficient and effective than the current arrangements. However the drawbacks of the existing model remain.

The Joint Committee model moves governance positively from the current arrangements but still does not provide the level of certainty needed to ensure that decisions are made to secure the maximum economic and social benefit.

The Secretary of State has acknowledged that in some cases a Combined Authority model would be an appropriate means of securing improvements in relation to the exercise of statutory functions relating to transport, economic development and regeneration; the effectiveness and efficiency of transport and the economic conditions of an area. A number of proposals have been developed on this basis.

Reflects the functional economic area or ‘real economy’ of the Tees Valley region.

Formalise links between decision making in relation to economic development (including inward investment, skills

A company model may be able to deliver functions effectively.

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and spatial planning) and transport, ensuring decisions are made that secure maximum economic and social benefit.

F. Long-Term Commitment

Currently, the joint agreement enables an authority to withdraw from the arrangements by giving at least 15 months’ notice. Greater long-term commitment may be required in the form of an extended “lock-in” agreement linked for instance, to the life of City Deal and any other relevant initiatives or funding streams. It is not however, as robust as a Combined Authority Model.

A local authority can withdraw from a joint committee at any time, or choose not to appoint members to it. A linked agreement would be required in order to establish “locked in” arrangements and provide some certainty of continuity and security. This would not, however, be as robust as the Combined Authority model, and it would probably be easier to “wind up” the joint committee arrangements than it would be if a Company had been established.

The Combined Authority is a statutory body that has been created by an Order of Parliament. Government is clearly satisfied with the robustness of the Combined Authority model in a number of cases as five (to date) Combined Authorities have been approved. The Combined Authority could only be dissolved if a majority of the constituent Councils agreed and the Secretary of State made the required statutory order.

In time, and by local resolution, partners may

A Company could be wound up in accordance with company law requirements provided there was agreement amongst the local authorities and a Board decision to take steps to do so. The local authorities previously did this in respect of TVR. Conversely the authorities could agree to bind themselves into the arrangements for the longer term if such a commitment was considered to be required.

It is not therefore as robust as a Combined

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choose to transfer additional powers to the TVCA. This could either be through a further Governance Review and the publication of a scheme and statutory order or by virtue of Section 107 of the Local Government Act 1972. In all cases, the transfer of such powers would require a full Council Decision from each of the constituent and non-constituent local authorities.

Authority.

Local Authority Governance and Public Sector Financial Management

G. Influence of Councils The joint arrangements would be strengthened, as would the Councils’ influence over the delivery of their strategic

A joint committee would be composed of local authority members. Any non-elected members would not have voting

The Combined Authority model is comprised of a majority of members from the Constituent Councils. Non-elected members

The composition of the Board and the nature of Board members’ voting rights are matters for the establishing local

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vision and operational plans.

rights. only have voting rights with the elected members’ consent.Decisions will be made in one place, by elected Leaders who are responsible for the strategic direction, and underwriting any risks, of the Combined Authority

authorities to determine. Unless it was proposed to undertake to procure the new company structure in accordance with EC procurement rules, the Company would have to be local authority controlled in any event.

H. Democratic Accountability

TVU; the operation of the joint agreement and the delivery of the joint arrangements could continue to be scrutinised by the local authorities themselves and would continue to be subject to the audit process.

Scrutiny and audit arrangements would apply to a joint committee.

The exercise of the Combined Authority’s functions would be scrutinised by its non-executive members and the Combined Authority itself could be scrutinised by the constituent councils jointly. A politically proportionate panel comprising 3 members from each authority could undertake an effective scrutiny function

Local authority members on the Company Board would have control of the Company’s affairs. The local authorities could scrutinise the Company’s activities and performance.

I. Public Sector Protection There would continue to be lead local authority

The same arrangements as for the current TVU

The Combined Authority could second a section

Unless the Company obtain designated body

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financial administration, responsibility and accountability. Accounting practices, financial procedures and Internal Audit/Audit Committee oversight would also continue through the lead authority as would the relevant Head of Paid Service and Monitoring Officer responsibilities.

joint agreement could apply as regards:-

Financial administration and accountability.Accounting practices.Financial procedures.Internal audit/Audit Committee oversight.Statutory Officer responsibilities.

151 Officer from the constituent councils; it must have arrangements for the proper administration of its financial affairs; it must keep a general fund and must have annual accounts which must be externally audited. It could also have an Audit Committee comprised of a majority of members who are not members of the Combined Authority.

status (by statutory order), it could not obtain administrative, professional and technical services from the Councils. It would therefore have to buy in, or employ staff, to provide company secretarial and legal advice; general legal advice; finance/accountancy; human resources; and audit services. There would accordingly be potentially increased costs associated with this.

J. Public Transparency Currently under the joint agreement meetings of the Leadership Board are not public meetings for the purposes of Access to Information legislation, but can be opened to the public if, and to the extent that the Board determines. This would

The proceedings, meetings and decisions of a joint committee would be accessible publicly, save where exempt or confidential information was involved. They would be as transparent as they would be in a Combined Authority

There would be public access to all non-exempt/non-confidential information relating to the Combined Authority, its meetings and decisions and the meetings and decisions of its Committees.

Public access to non-exempt, non-confidential company information, Board meetings and decisions would be matters for the constituent Councils to establish. Access to information legislative requirements and related rights would

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need to be reviewed, as would arrangements regarding the public availability of agendas, minutes and decisions of meetings, if greater public transparency was to be required/introduced.

model of governance, and more so than the present TVU arrangements and the arrangements under a Company model.

The openness of Local Government Bodies regulations (allowing for the reporting and commentating on public meetings) would apply automatically to the Combined Authority Model, but would not apply to other models.

not automatically apply. However the provisions relating to local authority controlled/regulated companies confer on the public rights of inspection of minutes of general meetings of such companies.

Engaging the Private Sector

K. Private Sector Influence

The Leadership Board has non-elected member representatives. This includes the Chair. All have a vote, save where the business concerns any recommendations the effect of which is that any of the Councils should not exercise their functions in any manner.

A joint committee could co-opt non-elected members, but they would not have the right to vote. Decisions could, however, be agreed to be made by consensus, with the backstop that where a formal vote was required only elected members could vote.

The Combined Authority would consist of representative Members appointed by each of the Authority’s non-elected persons (business representatives could be co-opted).

The LEP would continue and arrangements could be made to ensure the two organisations work seamlessly together.

Private sector representatives could be Board members, with voting rights. This would be written into the Company documentation. It would not require elected member agreement post establishment of the Company.

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Transport Options Appraisal

124 Whilst LDEDC2009 does not make it a precondition that an authority either establishes or takes on the powers of an ITA in its creation, the Tees Valley has assessed the pros and cons of taking on transport powers as in other CAs. The premise is that the area would not want to be disadvantaged and should receive those powers consistent with the devolution agenda. Whilst the Tees Valley should look to achieve devolved powers in line with other city regions, it should also put forward what is right for the Tees Valley.

Two principal options have been considered:

125. Opt i on1 – B us i ness as U sua l , a continuation of what happens at present, albeit with the continued flexibility to add/remove joint working arrangements as necessary. There are a number of strategic functions undertaken jointly at present (principally led by TVU), these are undertaken on the basis of an agreement about TVU’s role and a funding settlement to reflect this that is reviewed on a regular basis. There are a number of other transport functions undertaken jointly by some or all of the authorities, mainly operational, either through Connect Tees Valley, within Stockton, or through other lead authority arrangements, as well as temporary, ‘task and finish’ work to elements such as concessionary fares and specific funding bids such as the Local Sustainable Transport Fund.

Although there is an argument that maintaining what is done at the moment, this option is based upon individuals and relationships rather than a formal robust framework agreement. There is also real risk that this option would undermine the overall case for a Tees Valley CA and impact on the CA’s key drivers.

126. Opt i on 2 – As s u m e F u l l I T A P o w e r s , as set out in LTA2008, within the new CA, to match the other authorities already established. There is no doubt that assuming full powers akin to an ITA would give more robust governance for planning, delivery and management of transport in the area, and possible increased ease of taking decisions.

Considering the test that would be applied to an application for a CA, ie“likely to mprove—

(v) the exercise of statutory functions relating to transport in the area, and

(vi) the effectiveness and efficiency of transport in the area.”

The table overleaf shows how each of the powers would meet these criteria.

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ITA Power Improve Statutory Functions?

Improve Effectiveness and Efficiency?

Concessionary Fares NO – already jointly planned, and locally implemented

NO – already done jointly

LTP YES YES–although LTP may be superseded by SEP

Bus Subsidies NO –already jointly planned, and locally implemented

NO–Darlington and Hartlepool are relatively self-contained networks

Bus Stations/Facilities NO YES –build on TVBNI for joint approach for scheme development

Travel Information YES YES

QCS/QPS YES YES–QPS already in place

Rail YES–although not currently statutory function

YES – through North East Business Unit and Rail North

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