The wider benefits and potential of City Deal governance framework
THE recent announcement of the specific projects supported by City Deal that are to be taken forward in Glasgow has demonstrated the value of accessing a new funding approach – allowing the city to continue to raise its game in an environment where capital funding for public infrastructure remains very tight. That is certainly something to be welcomed – but the benefits go deeper than that, grounded in the fundamental principles of the City Deal model itself.
The principles of a City Deal are quite simple. A case is made to the Government to demonstrate the additional economic activity, and thus tax revenues, that will be generated by carrying out particular public infrastructure works – and on the basis of that assessment, the Government provides funding to enable the public infrastructure works to proceed. Essentially, the Government is taking a view that its investment will be more than repaid through the additional tax revenues. The sums are substantial – the infrastructure elements of the Glasgow and Clyde Valley City Deal involve funding from the UK Government and the Scottish Government of £500million each, with a further £130m being contributed by the participating local authorities.
The focus on additional economic activity is important. Priority is given to projects that are most likely to generate investment from the private sector.
It does, however, also raise a major challenge for the local authorities participating in City Deal – they need to raise awareness rapidly among the business community, and particularly among property investors and developers, of what is emerging through the City Deal; and they need to build confidence, to encourage private sector players to take a medium to long-term view on the opportunities that will unfold. An additional £3.3billion of private sector investment will be sought over the 20-year term of the City Deal to complement the public sector contribution.
Our experience in working with the Urban Regeneration Companies (URCs) has shown that creating a climate for major private sector investment can be challenging, particularly within a relatively short timescale. Having said that, the framework developed for the Glasgow and Clyde Valley City Deal takes account of the need for flexibility, allowing the substitution of alternative projects if it becomes evident that implementation of a given project is likely to be delayed.
One of the stand-out features of the Glasgow and Clyde Valley City Deal is the degree of collaboration and joint working among the participating authorities. It would be fair to say progress with the shared services initiative involving Glasgow and Clyde Valley local authorities has been patchy. We were involved in supporting the in-house legal teams in analysing potential options for the governance structure for the City Deal – and it was evident even at that early stage the City Deal initiative had captured the imagination of all the local authorities, with political differences and localised issues being set aside in an effort not to lose out on the prize.
That, along with careful management of the process at political and officer level, has enabled a joint governance framework to be put in place within a short timescale and minimal friction.
There are already suggestions the City Deal governance framework might be used as a platform for other initiatives across a much broader spectrum – and the potential unlocked by that could outshadow the already exciting opportunities opened up by City Deal itself. Stephen Phillips is a partner of Burness Paull