A Framework for City Region Deals -what does this mean?
The National Party flagged its intention to implement city region deals before last year's election. Since then, a number of parties including Kalimena have been thinking about how these might work. The issue, however, is that Ministers - and the Department of Internal Affairs (DIA), as nominated advisor to Ministers on city region deals – have been taking their time to promulgate what is being described as a “policy framework” for city region deals.
In February 2024 Minister for Local Government, Hon Simeon Brown said
“Work to finalise the policy framework of City and Regional deals is underway. I look forward to making announcements soon.”
But then in late March Minister for Infrastructure Hon Chris Bishop said
“Simeon Brown and I have started the work on developing the framework. The basic concept is a simple one: a joint partnership between local and central government, centred on economic growth and productivity, with long-term funding commitments by both parties on projects that will help move the dial locally and nationally.”
In the absence of any real detail on the specifics, we have had a look at some of the commentary to date. The Prime Minister, Rt Hon Christopher Luxon, is on record as a fan of localism and sees city region deals as part of a shift towards localism, for example in The Post[1] (5/10/23) he is quoted as saying
“We believe very strongly in localism and devolution…I don't think there's been very good partnering between central and local government. There's been a parent-child relationship, not an adult one. At the end of the day, the ratepayers and the taxpayers are the same people that we're trying to serve.”
This could perhaps signal an open-ness to consider city region deals with a view to devolution of decision-making and delivery of services to a local level, in the right conditions. In other words, city region deals more like those being progressed across England under the UK Government’s Levelling Up Agenda.
However, what appears clear – from statements and speeches[2] made by both the Prime Minister and other Ministers, and indeed the National Party “Infrastructure for the Future” policy document”[3] – is a higher priority for the Government is progressing policy thinking for investment in infrastructure. City and region deals are typically mentioned in the same breath as the establishment of a National Infrastructure Agency, making better use of innovative funding and financing tools (like PPPs, road tolling, congestion charging, rates, levies and value capture), developing an infrastructure pipeline and/or addressing regulatory barriers to infrastructure.
The National-ACT coalition agreement similarly requires the coalition Government to
“Institute long-term city and regional infrastructure deals, allowing PPPs, tolling and value capture rating to fund infrastructure.”[4]
Within this context city region deals are perhaps only seen as a mechanism for central government to partner with local government to create long-term pipelines of infrastructure projects, making use of innovative funding and financing pools where feasible. This feels like city region deals more akin to Australian city deals, or perhaps Scottish city region deals.
It is natural to ask, therefore, what might we expect from the much anticipated framework? And how might it work alongside other election promises and commitments made within the two Coalition Agreements and elsewhere – most notably in relation to the establishment of a National Infrastructure Agency, resource management reform, the Regional Infrastructure Fund and Local Water Done Well?
It is within this wait-and-see environment, this week Local Government New Zealand (LGNZ) released a document “What communities need from the framework for city region deals”[5], seeking to influence Ministers’ and DIA’s thinking prior to release of the framework. The document lays out LGNZ’s six requirements for “outcomes the framework must deliver”.
The document is intended to reflect conversations LGNZ has been having with its members and it is therefore not surprising that it contains a mix of very specific suggestions, and some higher level principles LGNZ would like to see embedded within the framework. In response to each of these six requirements, here are a few thoughts on what we’d like to see.
Alignment on outcomes and investment between local and central government.
At the heart of a city region deal is the ambition for economic prosperity. The Scottish definition sums it up well: “City Region and Growth Deals are packages of funding agreed between the Scottish Government, the UK Government and local partners. They are designed to bring about long-term improvements to regional economies, attracting additional investment, creating new jobs and accelerating inclusive economic growth.” (https://regionaleconomicdevelopment.scot/our_work/regional-growth-deals/)
Given this, alignment will be best achieved around a place-based economic strategy or plan that is evidence led and not simply an aggregation of projects on wish-lists. Of course, it is entirely feasible that a pipeline of infrastructure projects could be agreed as part of the deal, responding to the economic strategy. In our view this is something councils could be getting on with now – they don’t need a framework to make progress.
LGNZ suggests that it would be helpful to have guidance in the framework on how the deals could integrate with other Government priorities and plans. While a worthy objective, this requirement could prove a barrier to firming up deals in a pragmatic fashion. On the other hand, we entirely agree with the need for the framework to include strong incentives for councils to work together, and to include unambiguous requirements on central government departments and agencies to engage in the deal-making process. Inevitably, deals will require co-operation with more than one government entity and it can’t be left to DIA – or any other co-ordinating entity – to try and corral the various parties unaided. All deals will likely include not only more than one council, but more than one central government agency (for example, the Ministry of Housing and Urban Development), not to mention education institutes, iwi organisations, and the private sector.
Increased trust and partnership between local and central government
Our view is that city region deals, done well, could provide a pathway to build increased trust and partnership between central and local government. Trust is earned, it can’t be mandated so in this sense we don’t agree with the proposition that guidance is required on how city region deals will fit into a wider world view in which central and local government are working together collaboratively.
We do agree, however, that effective governance arrangements will be at the heart of making city region deals work and deliver on the desired outcomes – including key benefits such as jobs growth. Clear rules of engagement will be necessary, including ways in which various parties outside of councils and central government can have a seat at the table without over-burdening decision-making processes.
Long-term commitments, with evolution over time
One of the beauties of doing a deal, is by their very nature they are flexible and can evolve over time. We agree that each deal should be a long-term commitment, possibly 10-15 years. The trick though lies in getting the next deal and the next. The UK Government has effectively provided a platform to facilitate future deals by insisting that a new entity – a Combined Authority – be created to both oversee delivery of each deal, and to plan/negotiate the next deal. For larger deals, it has insisted these be Mayoral Combined Authority (with a single person, the mayor, elected at large at each local election), as a means to enhance accountability. This has not been popular amongst existing mayors, but has worked well for Greater Manchester for example.
Access to new funding and financing mechanisms
This is definitely on the radar for the Government, as discussed above. We expect the National Infrastructure Agency, once in place, will have city region deals firmly on its agenda. The challenge will be to design and implement tools that are both effective (achieve the desired outcomes) and efficient.
So-called “innovative” funding and financing mechanisms are frequently seen as the panacea for our failure as a nation to raise sufficient funds to build the infrastructure we want. Different, longer-term approaches to funding capital for long-life infrastructure is a good idea – but the administrative cost of developing bespoke approaches frequently causes such deals to fail before they start. Investment in designing repeatable approaches to incentivise a pipeline of deals – and commitment from local authorities, perhaps through a city region deal mechanism – could be a helpful way to both raise additional funds and access new, efficient, financing mechanisms.
The opportunity for all cities or regions to propose a city region deal
We can appreciate that all local authorities see value in deepening their relationship with central government, and in doing so, earning greater access to funding and authority to take more responsibility. However, the economic theory behind city region deals draws heavily on agglomeration - the economic value of cities as drivers of innovation and growth. This obviously can’t be true of all locations in New Zealand. It also feels implausible that central government will develop the bandwidth to engage with all local authorities that want a deal at the same time - prioritisation will have to occur.
The UK provides a useful comparator here. A feature of the Scottish City Region and Growth Deal landscape is that ALL councils are part of a deal (there are 12 deals in total – 6 City Region Deals and 6 Regional Growth Deals - each in different stages of delivery). Noting deals in Scotland differ from deals in England in that they do not involve any devolution of service delivery responsibilities. GBP6.5B has been committed jointly between the Scottish Government, the UK Government and local partners including councils, universities and the private sector.
The Scottish Government has invested heavily in building the necessary capability and capacity to progress all 12 deals over a relatively short period. By comparison, while there is a stated desire in England to have city region deals across the country, there appears to be no rush to roll out multiple deals at the same time.
Reflecting on the Scottish deal landscape, and the policy framework under development by DIA, suggests that:
Scottish Regional Growth Deals are designed to ensure not only cities stand to gain from the funding commitments and desired improvements to regional economies.
If similar “regional growth deals” were to be considered for New Zealand, there is potential for overlap with the Regional Infrastructure Fund (RIF) administered by Kānoa-RDU (part of MBIE).
The UK Government also administers a range of other “Funds”, with the GBP4.8B “Levelling Up Fund” bearing the closest resemblance to the RIF. Audit Scotland’s June 2023 report “Scotland’s City Region and Growth Deals: Progress of the 2020 audit report recommendations”[6] is clear that the interplay between the Funds and the deals introduces significant risk and complexity for partners to manage.
Deal governance arrangements in Scotland are complex and – on the face of it – very cumbersome. For example, the Audit Scotland’s report[7] notes “Projects are continually assessed by both governments using HM Treasury’s Green Book guidance. Governments approve outline business cases and endorse full business cases. The relevant deal joint committee then approves the full business case.”
Overall we consider New Zealand needs to be very deliberate before committing to a deal in all locations in short order.
Deals that are efficient to administer and deliver
We agree that it would be unfortunate if the framework recommended an overly cumbersome mechanism for monitoring and reporting on deal progress and outcomes. At the same time, local experience suggests there needs to be sufficient oversight to ensure that progress IS being made, and not being held up by – for example – poor functioning governance.
One of the clear recommendations from the Audit Scotland review was the need for explicit arrangements to share knowledge and learning across deals, to increase transparency (and hence accountability), and to be much more explicit on how funding commitments will be built into financial plans – both at local and central government level. In our view, sharing learnings (not seeing other deals as competitors), transparency and accountability for results (at the governance level) and making funding commitments real from the outset will all help drive genuine efficiency.
In sum, we agree with LGNZ on the need to see a policy framework for city region deals promulgated sooner rather than later. We hope that it will be both ambitious for the potential in city region deals, but also pragmatic to support some pathfinder deals get off the ground. We would be disappointed to see city region deals relegated to the catalogue of good ideas that never gained traction.
[1] https://www.thepost.co.nz/politics/350085092/government-councils-punch-and-judy-show-tensions-luxon-says
[2] https://www.national.org.nz/speech_to_infrastructure_nz_building_nations_conference and https://www.beehive.govt.nz/speech/speech-infrastructure-funding-financing-conference
[3] https://www.national.org.nz/infrastructureforthefuture
[4] https://www.act.org.nz/coalition_agreement_means_lower_cost_of_life_safer_streets_stronger_democracy
[5] https://d1pepq1a2249p5.cloudfront.net/media/documents/Framework_-_City_and_Regional_deals.pdf
[6] https://audit.scot/uploads/docs/report/2023/nr230622_city_deals.pdf
[7] ibid
