NARRATIVE REPORT

Welcome to the West Midlands Combined Authority’s Statement of Accounts for the financial year ended 31 March 2021. These accounts provide the reader with a view of West Midlands Combined Authority’s financial performance and its effectiveness in its use of resources during the year and are therefore a key element in demonstrating sound financial stewardship of taxpayers’ money as well as ensuring that key stakeholders understand the financial position of the West Midlands Combined Authority (‘the Authority’).

The Statement of Accounts for the year ended 31 March 2021 has been prepared in accordance with the requirements of the Accounts and Audit Regulations 2015. The format reflects the requirements of the Code of Practice on Local Authority Accounting in the United Kingdom 2020/21, supported by International Financial Reporting Standards.

The Authority operates through several undertakings, either exercising full control of an entity (subsidiary undertakings) or in partnership with other organisations (associate undertakings). To provide a complete representation of the activities of the Authority, Group Accounts are also prepared to include the subsidiaries of Midland Metro Limited and WM5G Limited, where the interest and the level of activity is considered material to the group as a whole.

The Narrative Report has been prepared to provide an outline of the activities for the year 2020/21, providing both a guide to the Authority's accounts and to its achievements in delivering inclusive economic growth through transport and economic development as well as setting out the economy, efficiency and effectiveness in its use of resources in doing so.

1. COVID-19 impact

The COVID-19 pandemic has had a significant impact on the Authority’s finances and the way it provides its services in 2020/21. The financial impact in 2019/20 was quite limited as the impact of COVID-19 was reflected only towards the end of the financial year as people began to work from home or were furloughed as a result of the COVID-19 crisis.

Impact on priorities and portfolios

Throughout the pandemic, almost all of the Authority’s workforce have had to adapt their work programmes in response to changing circumstances. Senior leaders have played a central role in both the emergency response and in subsequent ‘recovery’ activities. Programmes of activity on issues such as homelessness, health and well-being, town centre renewal and adult skills provision have had to be adapted in response to guidance.

In terms of the wider economic recovery of the West Midlands region, the Authority has collaborated and engaged with key regional stakeholders to set up new programmes, address gaps in support, lobby Government and allocate funds to support our communities.

The West Midlands Mayor and the Authority convened a COVID-19 economic impact group on 4 March 2020, which meets every week to understand the impact on the regional economy, pinpoint gaps for emergency support and drive economic recovery. The group includes leaders of major firms including NEC Group, Balfour Beatty, Deliveroo, Create Central and major banks, the TUC, universities, business representative organisations, local authority leaders, Local Enterprise Partnership chairs, the Growth Company, government officials, Innovate UK and Bank of England.

We have set up a rapid recruitment team to find suitable candidates for industries in critical need of extra staff, such as supermarkets, care homes, hospitals and other essential services.

Impact on the provision of transport services

In February 2021, the UK Government published the COVID-19 Response – Spring 2021, outlining its plans for lifting coronavirus restrictions in England. The Government is also conducting Roadmap Reviews to consider the introduction of COVID-status certificates and the relaxation of social distancing. Workers continue to be encouraged to work from home if they can, which continues to have an impact on patronage and passenger revenues.

Although it is difficult to predict with certainty what the long-term effects of the COVID-19 pandemic on future public transport demand will be, various research sources have suggested the pandemic will transform the way we live, work and travel in the UK. The Authority is in the initial stages of understanding the long-term impact on the transport system as a whole and the picture is complex; bus and metro systems for instance suffered less serious patronage reductions and experienced a swifter recovery than heavy rail. External factors, from the acceleration in remote working practices nationally, to the pace and extent of the economic recovery, present both risks and opportunities for the future Transport system.

The Government has demonstrated it is committed to supporting the Transport system as evidenced through the direct financial support into the industry in the midst of the pandemic, and the publication of the national bus strategy (Bus Back Better) which will seek to make the system cleaner, safer, healthier, greener, cheaper, more convenient and more inclusive. Additionally, in May 2021, the Government announced its plans for a new vision for the rail industry, which media has reported as presenting the biggest change since privatisation in the early 1990s.

The potential for volatility within the bus industry, as the direct financial support from the Government is slowly withdrawn, was highlighted within the 2021/22 WMCA Budget Report as a key risk in the financial year along with potential ongoing losses in Metro revenues. In March 2021, the Authority Board subsequently agreed to provisionally allocate one-off funding to ensure the Authority can meet cost escalations in the event it is required to maintain an effective network by subsidising additional services.

Beyond 2020/21, the Authority remains committed to the intrinsic value of a good public transport system and therefore has not fundamentally re-assessed the case for investment in existing projects because of COVID-19. The pandemic has introduced some complexities, but these are being managed on a case by case basis to ensure the benefits can be realised as originally intended. At this point therefore, the Authority remains committed to delivering those projects it has already committed to deliver.

The 2021/22 financial year presents a unique opportunity for the Authority to set a firm, forward agenda in the context of a new Mayoral term and the expected announcements of Government settlements that will span across multiple years. The work which will go into selecting and evaluating those projects will take into account all the relevant external factors and forecasts as the case for investment is made.

Impact on the Authority’s workforce

With the impact of COVID-19, we have been able to transition and support the workforce with working from home. This has been a significant change to the way we work, and this has been received by the workforce in a positive way. We have implemented support and new ways to engage with our employees. Health & Well-being has been a top priority during the pandemic. 4% of employees were ill due to COVID-19 and 3% of our workforce were identified as being Clinically Extremely Vulnerable and required to shield, although the majority of employees were able to work from home. We focused on engagement and promoting good mental health over the last year, which has included a programme of health & well-being webinars. Levels of absence have remained low, attributable to the majority of employees working from home. We have embarked on a ‘New ways of working’ programme, which will mean that a hybrid way of working, a combination of office-based, partially remote and fully remote working, will be implemented post COVID-19. This allows us to capitalise on the positives of working flexibly and ensuring the health and well-being of our workforce.

At the early stages of COVID-19, the Authority recorded higher than average sickness levels due to high infection rates, and resulting from when front-line or clinically vulnerable staff were required to self- isolate but were unable to work from home. Sickness levels across the organisation have since declined in the final quarter of the year, due to the successful roll out of the vaccination programme and other measures such as the ‘track and trace’ system, and also attributable in part to the flexibility of working from home. The Authority is recording COVID-19 related sickness absence as part of monitoring the impact of the pandemic, but COVID-19 absence does not count towards the sickness absence triggers for staff. All non COVID-19 related sickness absence is recorded in the normal way in line with the Managing Attendance Policy and is counted on individuals’ records.

Impact on the Authority’s supply chain

In respect of supply chain risk, the Authority is following guidance issued by the Cabinet Office in June 2020: ‘Procurement Policy Note – Recovery and Transition from COVID-19’. This Procurement Policy Note (PPN) sets out information and guidance for public bodies on payment of their suppliers to ensure service continuity during the current coronavirus, COVID-19, outbreak. It updates and builds on the provisions contained in PPN 02/20.

Actions taken include:

a review of the Authority’s contract portfolio, including the provision of any contractual relief due to COVID-19.
the development of transition plans, in partnership with suppliers, to exit from any relief as soon as reasonably possible. This includes agreeing contract variations if operational requirements have changed significantly.
working openly and pragmatically in partnership with our suppliers during this transition, ensuring contracts are still relevant and sustainable and deliver value for money over the medium to long term; and
continuing to pay suppliers as quickly as possible, on receipt of invoices or in accordance with pre-agreed milestone dates, to maintain cash flow and protect jobs.

Impact on reserves, financial performance and financial position

The Authority has a general fund balance of £2.3m at the end of 2020/21, representing 0.84% of net cost of services in the year. In addition, the Authority had balances of £41.0m in general fund earmarked reserves at the end of 2020/21 (see note 27 to the accounts on page 83). This balance includes amounts earmarked for specific risks which will remain present in the Authority’s planning environment independent of the COVID-19 crisis.

Whilst there is a significant gap in funding emerging in future years in the Medium-Term Financial Plan, this is being addressed corporately by reviewing transformation opportunities and potential efficiency savings.

At the end of 2020/21, the Authority had utilised £1.0m of the specific COVID-19 reserve of £1.3m created from savings in the financial year 2019/20. This represents only a small proportion of the financial impact of the crisis on the Authority.

The Authority continued to include consideration for the impact of COVID-19 in its provision for anticipated credit losses and there was no significant change from the previous year. The movement on the credit losses can be found in note 31 on page 96.

The impact of the crisis on the Authority has been most profound in terms of the loss of major income streams for a prolonged period, through reduced patronage for light rail for example, and a significant drop in other transport related income. Capital project delivery timescales have been impacted as programmes were rescheduled with a delayed effect on the realisation of the project benefits for the West Midlands region.

This impact is more significant on the Authority’s subsidiaries, especially Midland Metro Limited, where passenger revenues make up the majority of its income, although it has been confirmed that the DfT will make good these losses in the form of Light Rail Restart Grant until the end of social distancing.

The support given by the Authority to bus operators through subsidised services and the concessionary fares schemes has been directed by the Cabinet Office guidance since the start of the crisis. Whilst these payments continue to be made in much the same way and level as they would have been before the crisis hit, the value of the service being provided has changed. The Authority will continue to have contractual discussions with operators and providers on a transparent ‘open book’ basis, where the Authority receives, uses and verifies information from its operators and providers to make sure it understands what it is paying for, as directed by the Cabinet Office guidance.

Grants and reliefs administered on behalf of Central Government

The Authority has received various grants from the Department for Transport (DfT) and the Department for Education (DfE) during the financial year to recompense the Authority, its bus operators and constituent authorities for the prolonged loss of major income streams due to the pandemic.

On 9 April 2020, the DfT announced extra funding for bus operators and local authorities, to support bus services during the coronavirus (COVID-19) pandemic. The local transport authority element of COVID-19 Bus Services Support Grant (CBSSG) was allocated to support local bus services for lost fares revenue. This included tendered bus services that were experiencing revenue shortfalls. The aim was to ensure that local bus services continued to operate appropriately during the COVID-19 pandemic. Most of the grant claimed by the Authority was passed to the bus operators based on service provision. Some of the grant was retained by the Authority to cover direct costs experienced by the Authority as a result of the pandemic, such as enhanced cleaning and increased information requirements.

Additionally, the sales, fees and charges grant from the DfT has compensated the Authority for lost transactional income from customer receipts generated from parking and public transport.

The grant from the DfE supported additional Bus services to ensure that students were able to travel safely to and from schools and colleges. Some of this funding was spent on additional network services procured directly by the Authority, with the remainder passed to the regions local authorities enabling them to procure additional home to school transport.

Following the ‘A Plan for Jobs’ announcement on Wednesday 8 July, the DfE also made available additional funding to scale up Apprenticeships, Traineeships and to support people looking for a job. This additional Adult Education Board (AEB) funding was part of the DfE’s COVID-19 Skills Recovery Package and wider Government plans to protect, support and create jobs and in turn, to boost the economy.

Further details relating to the above grants can be found in Note 13 on page 70.

Acting as an agent, the Authority has also received Light Rail Grant funding of £7.2m from the DfT, supporting the Metro services during the prolonged period of reduced patronage on the tram system. The aim of this funding was to help protect services, allowing people travelling to hospitals, supermarkets or their place of work to get to their destination safely and quickly, while helping ensure there is enough space for them to observe social distancing guidelines.

On 9 May 2020 the Government announced that a COVID-19 Emergency Active Travel Fund (EATF) would be made available to local authorities across the country to help them introduce measures to re- allocate road space for cyclists and pedestrians and encourage people to walk and use a bike more. Funding of £3.9m was made available to support the delivery of temporary schemes such as pop up cycle lanes, road re-allocations and pavement widening schemes. This addressed the immediate need to provide alternatives to public transport as well as recognising the long-term need to provide alternatives to the car. The EATF was delivered in partnership with our seven constituent authorities and £3m of the total grant received was passed to the local authorities to fund revenue and capital projects.

Debt Management

All of the Authority’s historic borrowing is at fixed rates so there is no significant impact as a result of the pandemic. As a proportion of its capital programmes were rescheduled during 2020 because of lockdown, no further external borrowing was undertaken in year. This resulted in a reduced in year cost of borrowing compared with budget, although the position was partially offset by reduced yields on our cash investments which fell following the Bank of England’s decision to reduce base rate to 0.10% and as a result of needing to invest in short term lower risk instruments.

It’s likely that the current low rates for medium to long term borrowing will continue for a period of time as central banks continue to provide support for the economy. This may result in a favourable outcome in purely financial terms as the cost of this infrastructure borrowing will stay with the Authority for around 30 years.

Cashflow management

The Authority publishes an annual Treasury Management Strategy in line with Chartered Institute of Public Finance and Accountancy (CIPFA) Code of Practice. The policy sets out its objectives which are to ensure the security, liquidity and yield of cash balances. The priorities are listed in order of importance.

Continual cash-flow forecasting is undertaken at a short-, medium- and long-term level to ensure that the Authority can plan ahead and continually monitor the financial environment assisted by sector specialists. This will ensure that there are sufficient lenders in place to borrow from in a timely and affordable manner when the need arises. The availability of funds to meet liabilities (liquidity) is ensured through the continuation of detailed cash planning and the maximisation of liquid products which also offer protection from loss. As a result of the crisis, the Authority has relied upon more secure investments with UK Government (Debt Management Office and other local authorities) for available cash, thereby reducing the exposure to security risk in the current market.

2. Organisational overview and external environment

The Authority came into being on 16 June 2016 by virtue of the West Midlands Combined Authority Order. At the same time, the West Midlands Integrated Transport Authority (WMITA) and the West Midlands Passenger Transport Executive (WMPTE) were dissolved. All of the functions, assets, liabilities and powers of WMITA and WMPTE were transferred to the Authority under the provisions of the 2016 Order.

The Authority is now the Local Transport Authority for the West Midlands and also has powers to exercise economic development and regeneration functions in conjunction with its seven constituent local authorities:

Birmingham City Council
City of Wolverhampton Council
Coventry City Council
Dudley Metropolitan Borough Council
Sandwell Metropolitan Borough Council
Solihull Metropolitan Borough Council
Walsall Metropolitan Borough Council

Leadership of the Authority comes from the Mayor and the leaders of the seven constituent local authorities, which have full voting rights. The leadership also includes the chairs of the Local Enterprise Partnerships (LEPs) which are business-led organisations that help build relationships between businesses and local authorities. Other bodies which include the LEPs and ten local councils from across the wider West Midlands region, have reduced voting rights but play a crucial role at Board level, helping to inform policy and drive forward the Authority agenda. Full details of bodies that are members of the Authority are set out in the Annual Governance Statement.

The 2021 West Midlands Mayoral Election was held on 6 May 2021 to elect the mayor of the West Midlands. Andy Street was re-elected and will continue to serve for the next three years as chair of the Authority and its cabinet of the seven metropolitan West Midlands council leaders.

The policies of the Authority are directed by the Authority Board which is chaired by the Mayor and are implemented by the Senior Leadership Team comprising a Chief Executive and seven Directors, supported by officers. The assurance function is carried out by both the Audit, Risk and Assurance Committee (ARAC) and the Overview and Scrutiny Committee (OSC), both of which comprise members of the constituent authorities and member bodies. Additionally, at least one independent person is appointed to the Audit, Risk and Assurance Committee as Chair.

The Group employed 882 people and the Authority employed 641 people as at 31 March 2021. Further analysis can be found in Table 1.

During the past year, the Authority has continued to work towards delivering its ambitious plans for driving inclusive economic growth in the West Midlands region and building a healthier, happier, better connected and more prosperous population and has also continued to develop strong and sustainable relationships with national government.

The West Midlands’ growth priorities and ambitions are set out in the Strategic Economic Plan. The investments and actions the Authority makes and takes are focussed on delivering this plan, working with the LEPs and other partners.

The Strategic Economic Plan (SEP) sets out the overarching vision for the region which will be delivered through an aspirational and robust programme to drive and accelerate improvements in productivity and enable the West Midlands to become a net contributor to the UK exchequer, whilst improving the quality of life and outcomes for everyone who lives and works in the area.

The key objectives set out in the Strategic Economic Plan are as follows with further details provided within the Operational Performance section:

Economic growth
Employment and skills
Accessibility
Business competitiveness and productivity
Land
Public service reform
Housing
Environment

The region’s Economic Plan is due to be updated during 2021/22.

The Authority’s core values and the underpinning behaviours are as follows:

Be collaborative

We work with others to reach common goals
We are respectful and act with integrity
We communicate clearly, openly and encourage feedback

Be innovative

We encourage creativity, originality and curiosity from everyone
We embrace change and we are open to new possibilities and exploring new ideas
We adopt best practices and keep up to date with new developments to enhance our work

Be driven

We have a positive, proactive and a solution orientated attitude
We set ourselves high standards and strive to exceed these
We take ownership for our performance and outcomes

Be inclusive

We care about and treat each other with dignity and respect
We create a positive working environment
We value diversity and consider other people’s viewpoints ensuring no-one is excluded
We encourage and support each other

3. Governance

The last year has seen an unprecedented challenge in the shape of the COVID-19 pandemic. This has affected every area of life in the UK and clearly these issues have affected the Authority as with others. Through agile working and the implementation of our corporate resilience arrangements, we have continued to manage workloads and delivery. We have worked with public transport providers to ensure that appropriate measures are in place to safeguard the public. We have taken a key role in regional response and recovery arrangements and are leading work to ensure that the economic recovery of the West Midlands is put on a secure footing. Through the use of remote meeting technology, we were able to ensure the continuation of political meetings, and decision-making and controls have remained robust as shown by the audit findings below.

During 2020/21, the audit of Budgetary Control and three other ‘key financial systems’ audits were given ‘substantial’ rating by internal audit and 100% ‘green’ in terms of its recommendations, whilst a ‘satisfactory’ level was achieved for Treasury Management and Accounts Payable. The Authorities’ response to COVID-19 Procurement and Supplier Relief and Employee Management Arrangements were both rated ‘substantial’ with 100% ‘green’ recommendations. One ‘amber’ recommendation was identified for the Environment Management Systems. No audit recommendations were flagged as ‘red’ where imperative action is required. This demonstrates the continued effectiveness of systems and processes supporting audit, risk and governance.

As agreed by the Authority Board in July 2020, the first projects and programmes to transition to the new Single Assurance Framework would be the Investment Programme. This would allow a phased and managed transition of projects and programmes onto the new assurance arrangements. There are broadly five areas within a project lifecycle that are supported by the new assurance Framework - Initiation, Development, Approvals, Delivery and Post Implementation Review. The new Approvals stage went live in September 2020 with the Investment Panel; any proposal and/or Business Case that requires Investment Board and the Authority Board approval will first be considered at the Investment Panel. From November 2020 to March 2021, five Business Cases relating to major projects in the Investment Programme have been appraised in accordance with the new assurance arrangements. In addition, five Change Requests have also been appraised. A commitment has been made by the Senior Leadership Team that the Single Assurance Framework disciplines will be rolled out across all portfolio areas in the near future.

In 2021/22 the annual planning process is being revised with closer links between the strategic objectives and business plans. Regular risk management review meetings are now in place across all of the Authority’s activities, including all directorates, to enable full visibility of key risks having the potential to impact on the organisation. Risk Management and Performance Management is intended to be brought together to provide a strong evidence base to substantiate the risk assumptions.

4. Operational model

The Authority is an enabling body which brings together the political leadership in the West Midlands region; reinforcing and strengthening existing partnership arrangements to help co-ordinate strategic economic planning and drive forward inclusive economic growth.

The major source of funding for operational expenditure is the Transport levy which is paid by local authorities to the Authority to discharge its Transport duties. The Department for Education provides the funding for post-16 education through the Adult Education grant whilst other specific grants from government, investment income generated on balances and fees paid by the Constituent and Non- Constituent Members of the Authority support the work of all other delivery portfolios. Unlike many other local authorities, the Authority does not have significant commercial lines of activity which could provide additional income but also expose the funding to risk and uncertainty. Where commercial undertakings are made, separate vehicles such as Midland Metro Limited (MML), WM5G Limited (WM5G) and other subsidiary undertakings have been created, where appropriate, to mitigate risk and deliver specific services.

The Devolution deal grant and a share of business rates support the Investment Programme, and the Capital Programme is funded predominantly by government grants and borrowing.

Detailed workforce planning, monitoring and management is undertaken by the Human Resources team within Corporate Services via business partner liaison with officers responsible for managing and recruiting, taking into consideration issues of capability and capacity. Staffing skills are maintained through the Authority's continuous staff development and training programme and performance is monitored by the Performance Development Planning process that is now embedded at the Authority.

Table 1 below sets out the headcount (March 2021) and established full time equivalent (FTE) posts.

Table 1: WMCA, MML & WM5G Staffing Analysis — March 2021

No.	Headcount	FTEs
TfWM	342	320.6
Enabling Services	193	189.6
Other services	97	96.5
Mayor's Office	9	9.0
WMCA Total	641	615.7
Midland Metro Limited	222	215.0
WM5G Limited	19	19.0
Group Total	882	849.7

With regard to Equal Pay requirements contained within the Equality Act, the Authority ensures there is no pay discrimination within its pay structures and that all pay differentials can be objectively justified through the use of equality-proofed job evaluation mechanisms which directly relate salaries to the requirements, demands and responsibilities of the role. This policy has been the subject of a review by the Authority’s Audit, Risk and Assurance Committee.

5. Review of the year

This section provides a summary of performance across Portfolios during 2020/21 and looks back at delivery and progress against the actions, activity and outcomes we set out in our 2020/21 plan.

Following the identification of the Authority's aspirations and strategic outcomes in the Strategic Economic Plan, the business planning process for 2020/21 began in the autumn of 2019. This included consultation with Budget Holders across the Authority, leading to the preparation of the Financial Plan for 2020/21 onwards and the informing the budget for 2020/21. There was not a published Annual Business Plan for 2020/21 however, there was the introduction of performance reporting for the High- Level Deliverables approved by the WMCA Board as part of the Financial Plan paper. Performance reporting to the Strategic Leadership Team went live in August 2020 and the Performance team worked closely with Directorates to monitor, report and track progress of delivery.

The High-Level Deliverables were reviewed and refined in September in light of the priorities and challenges facing the Authority around the pandemic. Yet overall, the Authority delivered against the commitments and continued working with partners to generate real improvements to the lives of people in the West Midlands. Key highlights of our year include:

Transport

Created an easy to use system for customers to access the transport system for information and affordable payments. The key achievements are the development of a single app for Ticket Finder, Public Transport Payment, Parking and Car Share; Swift Account Based Ticketing with Best Value Capping and the extension of Swift for rail passengers.
Significant progress made in the delivery of the Sprint rapid bus routes along the A34 and A45 road networks, due to complete by March 2022.
Travel legacy for the Commonwealth Games programme on track to complete by March 2022.
Delivered the Cycling Charter and Making Streets More Walkable, which involved delivery of West Midlands Bike Share Scheme, development and promotion of the West Midlands Walking and Cycle Network and the introduction of the WM Walking and Cycling programme [2019- 2023]
Work undertaken to enhance the infrastructure and customer experience at bus stations and major interchanges, and continued improvements to the quality and capacity of the rail stations and interchange.
One of our priorities is the provision of enhanced local rail connectivity and the capacity of the rail network, with early scheme development completed for a number of new schemes. This also includes input into recommendations of how the released capacity after HS2 could best be utilised.
Expansion of the Metro network via the Westside extension to Hagley Road, Edgbaston and the Wolverhampton extension, as well as furthering progress on both Birmingham Eastside and Wednesbury to Brierley Hill extensions
Increased capability of the Regional Transport Coordination Centre (RTCC) through Operations development and increased partner engagement and collaboration.

Housing & Land

Transport Plan for the Commonwealth Games for visitors (spectators and workforce) to the region. This included the development of a Youth Engagement Programme, the implementation of travel demand management campaigns, communications and engagement, and delivery of the Resilience Communications strategy.
Town Centre Regeneration programme, the Housing Deal, and the Advance Methods in Construction (AMC) programme achieved all planned objectives for the year. Further detail regarding the planned objectives is set out in the annual budget report for 2020/21 which can be accessed on the Authority’s website.

Official new housing delivery statistics are published annually in November by the Ministry of Housing, Communities and Local Government (MHCLG), therefore, we do not have any update for 2020/21. However, market intelligence indicates robust housing delivery during 2020/21. The published figures in November 2020 showed that the West Midlands delivered 16,527 new homes in 2019/20 towards the housing deal target of 215,000 homes by 2031. The figures are an aggregation of the housing delivery for local authority areas (constituent & non-constituent) in the Authority area.
Landmark schemes stalled for years are moving rapidly to delivery on the ground thanks to the Authority’s intervention (e.g. Friar Park, Stoneyard) with additional leverage from WMCA funding in terms of enhanced affordable housing provision and creating a pipeline for advanced methods of construction.
The Authority secured £84m from Brownfield Housing Fund and £24m from National Competitive Fund to deliver even more homes and jobs on brownfield sites throughout the region over the next three years.

Productivity and skills

Through the Adult Education Budget, which is a statutory function of the Authority, enrolling over 3,500 people to Level 3 qualifications and enrolling over 23,000 people to Level 2 qualifications across the region. Through pre-employment programmes, over 2,500 people are receiving training to improve their job prospects. Through new procurements, an additional £3.7m a year will be invested in specialist construction training to ensure the demand for skilled construction workers is met. The Adult Education Budget is also funding more than £20m in basic entitlement skills annually, to ensure people can access English, Maths and English for Speakers of Other Languages (ESOL) courses throughout the region.
A regional network of technical education and training has been established, for example the Digital Retraining fund and Digital bootcamps, enrolling over 1,000 people on the programme of which over 900 subsequently gained employment. With an estimated 1.5 million employees in the UK being at risk from automation in future, the Beat the Bots Digital Retraining fund aims to pay for digital training for up to 1,900 people in the West Midlands over the next three years.
Secured £20m apprenticeship levy funding against a difficult picture nationally to support nearly 2,000 new apprentices in over 600 Small & Medium Enterprises (SMEs). The Authority will continue to work with businesses in order to encourage further use of the levy fund in future months.
The Employment Support Pilot (ESP) tackles unemployment and low pay within nine communities across the region. The aim is for the pilot to be embedded within communities to engage and support unemployed people, including the long-term unemployed, into sustainable employment opportunities. The ESP has supported 1,200 people by guiding them in the development of new skills to achieve and retain good jobs.

Economy and Innovation

Work has been completed via the Innovation Board to increase the demand for business innovation. The work provides integrated intelligence via the Office of Data Analytics (ODA) and Create Central to create a three year action plan.
Established new economic resilience activity to tackle the COVID-19 pandemic and ensure Brexit resilience.
Secured the Authority’s Board agreement to 5 Key Challenges - Deliver Good Jobs / Support Thriving Places & Communities / Embed our green ambition (2041) / Tackling inequality and levelling up / Prevent a lost generation. These will feed into the Corporate Strategy and shape both recovery and reflect the emphasis of the Government's 'Plan for Growth’. The Corporate Strategy will set out what the Authority will deliver towards addressing the key challenges.

Environment and Energy

The Authority approved the region’s first Net Zero Five Year Plan detailing 15 goals for the period 2021-2026 to ensure the region achieves its ambition of being Net Zero by 2041.

Launch of a Net Zero Business Pledge to encourage businesses to pledge their own commitments to the region’s ambitious net zero goals.
Work commissioned to produce a Circular Economy Routemap for the region focusing on green manufacturing, construction and the sharing economy.
Work commissioned with the national Behavioural Insights Team to explore a communications campaign to encourage behaviour change on the part of citizens and businesses in the region.
A new Virtual Forest site has been launched and was covered on BBC Midlands Today. The total number of trees now registered is 11,160 at the end of March 2021.
Net Zero Pathfinder Declaration made by the Mayor to share insights from our highly regarded smart local energy systems projects. These include early insights into the institutional

structures necessary to build the long-term infrastructure to achieve our net zero goals.
Energy Devolution and net zero ‘asks’ agreed, published and submitted to Department for Business, Energy and Industrial Strategy (BEIS).
Full integration of Energy Capital into the Authority and core funding secured through the

#WM2041 Five Year Plan.
Innovation funding secured which provided the business case and partnership foundations for

the Sustainable Market for Affordable Retrofit Technologies (SMART) Hub.
A strong delivery partnership with the Midlands Energy Hub has been established and support

provided to the constituent local authorities to access government grants for retrofit.
Three collaborative projects funded by Innovate UK under the ‘Prospering from the Energy Revolution’ programme were successfully initiated and a new data portal for energy intelligence was created to share the data developed across the West Midlands.
An ‘Ultra Low Emission Vehicles’ strategy evidence base has been commissioned and delivered, which formed the basis of a paper to the Authority’s board, outlining the roles of both the Authority and the constituent local authorities in delivering the necessary infrastructure for the transition to Zero Emission Vehicles (ZEVs).
The UK Central-HS2 Interchange programme is led by Solihull MBC as the accountable body, through their wholly owned subsidiary Urban Growth Company (UGC). The Authority is providing ongoing support to the business plan of UGC through Investment programme funding, which totalled £10.1m during 2020/21. Key milestones achieved thus far include the completion of design works and enabling works for the A452/A446 Roundabout Over-Trace and the development of a full business case for the Birmingham International Station redevelopment project at the Arden Cross HS2 Interchange site.

Public Service Reform & Social Economy

Developed the ‘Commitment to Collaborate’ (C2C) toolkit to continue work across sectors to prevent and relieve homelessness.
In partnership with Birmingham City Council as the accountable body, the additional 6 constituent Local Authorities and the Homelessness Taskforce, 401 unique individuals were supported into Housing First accommodation across all 7 constituent authorities up to 31 March 2021.
Through the WMCA Rough Sleepers Initiative programme, working with partners across the region, 1,211 unique individuals were supported, of which 229 people were rough sleeping at the point of engagement.
Through the national 'everyone in' initiative our local authorities;
accommodated over 800 potential and actual rough sleepers across the region during the initial lockdown
gathered evidence of greater engagement with support offered and, in some cases, an unprecedented willingness on the part of rough sleepers to engage with services
Work continues on the Community Recovery Programme as a result of the Citizens Panel delivered during the year. This programme increased collaboration with key stakeholders such as local authorities by bringing different groups together and delivering work on health, mental health, education and young people as well as linking to existing programmes on towns and cities and jobs and skills. This work also delivered the Community Recovery Innovation Challenge, seeking innovative ideas to address complex problems identified through the programme.
Our inclusive growth work continues at pace, particularly supporting and implementing the publication of East Birmingham Inclusive Growth strategy, and in North Solihull by supporting the Kingshurst development to increase the percentage of affordable, low carbon homes built as part of the project.
Collaborative work with the Office of the Police and Crime Commissioner on the publication of ‘Punishing Abuse’ report in early 2021 has resulted in £1m targeted funding through NHS England to address the recommendations made within the report.

Culture & Digital

Strategic Culture and Digital priorities agreed by the Authority’s Board with new working groups formed to take forward work on cultural strategy, the Black Country culture investment and other opportunities.

Supported the Cultural Leadership Board to maximise the contribution of culture in delivering inclusive growth and to enhance the quality of life for our citizens. This included the launch of the Cultural and Creative Social Enterprise project.

Supported the delivery of the Coventry City of Culture Regeneration project. As part of our Investment programme, the Authority provided funding to Coventry City Council, as the accountable body, of £17.9m during 2020/21, in support of ongoing project delivery which are expected to conclude in 2021/22.
Digital Roadmap launched January 2021 and initial projects rolled out on climate tech, data sharing, and digital inclusion.

Developed the capacity to support digital public services across the West Midlands, which included a review and refresh of the digital strategy for the region.
Secured £100m funding to the emerging 5G network for the region.

Wellbeing

Work to refresh the Thrive action plan and Physical Activity Strategy has been completed with key outcomes as follows:
Recruited 615 people into roles through the Individual Placement and Support Programme against a target of 700. Tender to expand the programme into all seven Local Authority areas and in specialist pathways areas is now open. Funding secured to support programme delivery to July 2022
Approach to establish the Mental Health Commission as a task and finish group presented to the Wellbeing Board March 2021
Work to develop and deliver an innovative new funding mechanism, the Radical Prevention conversations with Department of Health and Social Care (DHSC) taking place to secure funding. Fund continues, with initial Business cases have been established and submitted to progress the work for Radical Prevention.

The Authority has supported the effort for Placed Based Health & Care through key stakeholder engagement and collaboration

A Population Intel Hub has been established identifying the impact of COVID-19 to inform future priorities.

The COVID-19 Task & Finish group have made considerable progress in developing a regional health inequalities programme, and an interim report has already been completed. Final findings are to be included within the Health of the Region report, to be published in November 2021.

Inclusive communities

Enabled our diverse Young combined authority (YCA) to influence and constructively challenge WMCA policy development and worked with members to co-produce a YCA model that will be support greater impact and outreach in the future
Coordinated activity across portfolios and the organisation to further embed equalities, diversity and inclusion into how the WMCA plans, decides and delivers. This includes supporting the Citizens Panel, conducting Equality Impact Assessments and developing new equality initiatives.
The Authority has;
undertaken the ‘RACE Code’ assessment.
continued to support West Midlands Women's Voice.
supported the new Faith Strategic Partnership
assisted the development of the ‘Diversity West Midlands Network’

Enabling Services

Made funding approvals of £59.9m from the Authority’s Investment Programme, bringing the total cumulative funding approvals to £834.9m as at 31 March 2021.
Launched our Business Transformation Programme to build on our strengths, drawing on our evolved experience and creating an organisation that’s more effective, sustainable and fit for the future. Phase 1 of that transformation is now complete which has seen structural changes to enabling services functions to ensure services are fit for the future including driving improvement through our systems and processes.
Continued to embed Social Value into procurement exercises, with over £4.0m social value commitments delivered to date.
Featured in the 2020/21 Times Top 50 Inclusive Employers list and recognised as a Times Top 50 Employer for Women.
Further formal accreditations and awards include:
Leaders in Diversity Accreditation
Disability Confident Leaders status
Thrive at Work Wellbeing Accreditation
Armed Forces Covenant Silver Award
Race Equality Code Quality Mark
Real Living Wage Accreditation

6. Operational Performance

The Authority SEP Performance Management Framework provides a clear framework against which success can be measured. The vision for the region has a number of smart objectives, based on the principles of balance, with clear targets. The Performance Management Framework is composed of a selection of strategic headline indicators, which measure the impact of the various programme areas of the West Midlands SEP. These indicators span a wide range of themes including productivity, employment and skills, infrastructure, competitiveness, sustainability and public service reform, and measure the economic, social, fiscal and environmental impact.

The Performance Management Framework is independently maintained and updated by the Economic Intelligence Unit of Black Country Consortium Ltd who provide in depth cross-thematic spatial analysis on behalf of the Authority.

The Economic Intelligence Unit will annually monitor the Authority's progress in relation to the targets in the Performance Management Framework so that we can be clear on the impact of our delivery plan in achieving our ambitions.

The indicators in the Performance Management Framework will also be the basis upon which we appraise and prioritise our programme of interventions to deliver the Authority SEP. These carefully targeted set of interventions are intended to ensure delivery of the greatest economic benefits to the area and allow us to create opportunities across the Authority.

The headline strategic objectives set out in the SEP are as follows:

Economic growth - to improve gross value added (GVA) for the region in line with the UK average
Employment and skills - to improve the balance between the skills that businesses need and the skills of local people so that they have the skills and qualifications to access jobs
Accessibility - to improve the connectivity of people and businesses to jobs and markets respectively
Business competitiveness and productivity - to improve the productivity (GVA) of businesses, focussing on growth sectors
Land - to improve the quantity of high quality, readily available development sites to high quality locations that meet housing and business needs
Public Service Reform - to secure better for less from public services, improve the life chances and the health and wellbeing of communities
Housing - a greater and broader range of homes
Environment - improved competitiveness through energy and resource efficiency, stimulating new technology and business

Regional Context

In the first part of 2020 we knew that the economic impact of the COVID-19 pandemic was initially severe. In the first quarter UK Gross domestic product (GDP) fell 20% compared with the previous year, manufacturing Purchasing Managers’ Index (PMI) hit an all-time low and 496,000 people across the three LEP areas were on furlough in June 2020: the equivalent of all jobs in Birmingham. Despite the general stasis felt at the time by the economy through furlough and lockdown, the overall claimant count had nearly doubled overall and was most acute for young people. What we now know is that globally there is a twin track economy: some sectors are largely unaffected, and some consumers are still active. By contrast, some sectors are essentially closed and still in stasis - mainly because of the direct impact of lockdown. This is a time like no other, with no recent precedent. We have yet to understand what the easing of lockdown (hopefully for a final time) means in the short-, medium- and longer-term.

Sectors where we had previously seen growth and expansion were hard hit, such as construction which back in June 2020 was hardest hit but has seen some recovery as the lockdowns have eased. We know from the evidence in the Weekly Economic Impact Monitors that the lockdowns in November 2020 and from January 2021 have had an ongoing sustained impact on the same sectors. The expanding higher education sector in the three cities - Birmingham, Coventry and Wolverhampton - has switched to online and distance learning. This has contributed to leaving cities empty for much of the last year. Our largest employment and Gross value added (GVA) sector (professional, businesses and financial services) is still resilient but has sustained job losses, and we predict that workers are unlikely to return to the workplace in the same way as in the pre-COVID-19 era. This will have a significant effect on our three city centres, especially Birmingham. The sectors hardest hit through furlough and lockdown (retail, hospitality and tourism) could bounce back, providing consumer demand returns and certainty in a future where people feel safe and able to return to the leisure activities they once had. But some workers from these sectors may have looked to employment opportunities in other sectors and others may be less willing than formerly to change employers. The Commonwealth Games will rely heavily on these sectors and demand will increase, so it is important that the jobs are protected to ensure the games can be delivered.

The success of the region is vital to the success of the UK, ensuring strong recovery, especially in sectors of national importance such as advanced manufacturing, automotive and the business and professional services sector, and will support the wider growth of the nation. The upcoming Commonwealth Games in 2022 is an opportunity to show the world the resilience and capacity of the people of the West Midlands to bounce back. Investment in the jobs and sectors which have been hardest hit during the pandemic, but are of greatest importance to the Games, is essential to ensure the ongoing strengths in attracting international visitors, importing and exporting which the region has.

We do believe, however, that the region has demonstrated encouraging resilience in the face of the pandemic, through business innovation and redesign and adoption of technology, as seen by some of our most successful support programmes which have enabled businesses to adapt, pivot and prosper. The pandemic has highlighted the role, importance and response of the social economy, through a galvanised voluntary and community sector addressing key issues such as food poverty, mental health and community support.

There is also an emerging trend towards ‘north shoring’. This can be seen in large relocations and expansions such as Goldman Sachs announcing setting up an office in Birmingham and moves of Civil Service jobs to the region. Investments are holding up and the housing market is growing, especially at the top end. But these are not mirrored at the bottom of the market in in the rented sector, and data suggests that the risks of homelessness are growing.

7. Financial performance

The following paragraphs provide a brief overview of the financial position of the Authority in terms of the Authority's management accounting framework rather than the statutory accounting framework, to aid in understanding the statutory accounts.

Revenue Performance

Table 2 set out overleaf shows the overall consolidated revenue position for the Authority compared with the budget that was approved by the Authority Board in February 2020 and is set out in the same way as the regular financial reports that are considered by the Authority Board. This means that the table excludes statutory accounting and funding adjustments required by the Code of Practice on Local Authority Accounting, setting out the outturn position in the same way that the Authority's finances are planned and managed throughout the year.

£000's	Year to date
£000's	Actual	Budget	Variance
Transport Levy	114,720	114,720	-
Commonwealth Games	1,503	2,157	654
Adult education funding	120,440	128,534	8,094
Share of business rates	7,500	7,500	-
Constituent membership	4,644	4,644	-
non constituent members	425	425	-
Investment programme	36,000	36,000	-
Investment income	1,001	1,921	920
Revenue Grants and other income	16,152	13,098	3,064
Use of reserves	4,053	4,053	-
Total funding	306,948	313,552	6,604
Transport for West Midlands	114,264	1188,353	4,089
Commonwealth games	1,503	2,157	654
Economy and Innovation	3,134	2,312	822
Environment, Energy and HS2	1,147	345	802
Housing and Land	1,386	2,521	1,135
Wellbeing	1,179	941	238
PSR and Social Economy	1,258	689	569
Culture and Digital	1,693	210	1,483
Productivity and Skills	129,727	137,715	7,988
Inclusive communities	84	118	38
Business support	2,714	3,229	515
Investment Programme	44,106	44,155	49
Mayoral office	807	807	-
total expenditure	303,002	313,552	10,550
net expenditure	3,946	-	3,946
transfer for 2021/22	3,900	-	3,900
Net total(after reserves)	46	-	46
Transport	4,089	-	4,089
Delivery	143	-	143
Investment programme	-	-	-
mayoral office	-	-	-
total surplus before reserves	3,946	-	3,946
reserve	3,900	-	3,900
total after reserves	46	-	46

£000's	Reconciliation to expenditure and funding analysis(note 5)
£000's	Transport services	Other services	Invest prog.
Transport Levy	-	-	-
Commonwealth Games	1,503	-	-
Adult education funding	-	120,440	-
Share of business rates	-	-	-
Constituent membership	-	-	-
non constituent members	-	-	-
Investment programme	-	-	-
Investment income	-	-	-
Revenue Grants and other income	-	15,355	-
Use of reserves	3,633	420	-
Total funding	5,136	136,215	-
Transport for West Midlands	114,264	-	-
Commonwealth games	1,503	-	-
Economy and Innovation	-	3,134	-
Environment, Energy and HS2	-	1,147	-
Housing and Land	-	1,386	-
Wellbeing	-	1,179	-
PSR and Social Economy	-	1,258	-
Culture and Digital	-	1,693	-
Productivity and Skills	-	129,727	-
Inclusive communities	-	84	-
Business support	-	2,714	-
Investment Programme	-	-	44,106
Mayoral office	-	-	-
total expenditure	115,767	142,322	44,106
net expenditure	110,631	6,107	44,106
transfer for 2021/22	3,900	-	-
Net total(after reserves)	114,531	6,107	44,106
Transport	-	-	-
Delivery	-	-	-
Investment programme	-	-	-
mayoral office	-	-	-
total surplus before reserves	-	-	-
reserve	-	-	-
total after reserves	-	-	-

The table above shows the overall consolidated revenue position for the West Midlands Combined Authority. Total expenditure of £303.0m, compares favourably with the budgeted expenditure of £313.5m and is funded by the Transport Levy, government grants, investment programme, business rates growth, contributions from members, reserves and other income streams.

This provides a net income position at the end of March of £3.9m. To support the 2021/22 budget, and in line with the final forecast out-turn for the year, £3.9m has been transferred to reserves, resulting in net income of £46k for the financial year.

Transport represents a favourable position of £4.1m compared with budget. This is largely due to lower concessionary patronage volumes, no fare increases and Regional Transport Coordination Centre (RTCC) efficiency savings. This is further supplemented by the drawdown of Government grants to support Subsidised Bus, Metro and the wider Transport system. These favourable movements have been partly offset by the impact of COVID-19 on advertising revenue and departure charge income.

Furthermore, the net savings have also been utilised to create a reserve mitigating against potential risk related to the Metro and Rail programmes in future years.

There is an adverse variance of £143k within the Delivery budget, largely as a result of lower investment yields resulting from the 0.1% bank rate. This has been partly offset by debt interest savings as the expected new borrowings have not been required during the financial year.

Revenue Grants & Other Income is showing additional funding of £3.1m compared with budget. This has enable some of the Directorates to undertake further project work and explains why there is increased spend against budget in the expenditure section.

The major movement of note between 2020/21 and 2019/20 relates to the Productivity and Skills Directorate within the Delivery portfolio. This area includes the Adult Education Grant of £131.9m (2020: £79.2m), devolved from the Department for Education. The accounts for 2019/20 saw the first year of this grant covering the period August 2019 to March 2021, in line with the academic year. The grant in 2020/21 includes the remaining £46.9m from the first academic years funding which, along with additional COVID-19 funding of £3.3m, is the main reason for the movement of £52.7m.

Capital Programme Performance

The Authority approves the capital programme for the financial year as part of the budget setting process and the amount that can be spent is limited by the amount of capital resources available.

Many of the schemes within the capital programme take some time to develop and implement over a period of some years and therefore considerable variations can arise.

The Authority spent £238.1m on capital projects in 2020/21 which was £267.2m less than the budget of £505.3m and primarily reflects the re-phasing of activities in relation to the various Metro extension schemes, grants allocated to Local Authorities through the Investment Programme and Housing schemes, which are taking place later than originally planned. The variances at the end of March 2021 were spread across all programmes, but primarily within the Local Authority led Investment Programme (£103.5m), the WMCA Investment Programme (£54.5m) and the Commonwealth Games (£49.0m). The impact of the COVID-19 pandemic has had a prolonged and significant impact on progression of schemes across the year. In the main, delivery schedules are not anticipated to be impacted by the rephasing of expenditure plans into 2021/22.

Major items of capital spend in the year were:

Metro Wednesbury to Brierley Hill Extension £35.4m
Metro Centenary Square / Edgbaston Extension £25.9m Coventry Station Masterplan £20.0m
Coventry City of Culture £17.9m
Metro Birmingham Eastside Extension £15.6m
SPRINT A45 Birmingham-Airport-Solihull £12.0m Solihull-HS2 Interchange £10.1m
University Station £9.4m
Brownfield Land Property Development Fund (BLPDF) £9.0m

The capital programme spending of £238.1m was financed in the following way:

Table 3: Financing of Capital Expenditure 2020/21

Row	Million (£)
Government Grants	107.17
Borrowing	106.27
District/Local Enterprise Partnership (LEP) grants and contributions	9.00
Third party contributions	0.09
Gainshare contribution	15.61
Total	238.14

8. Strategy and Resource allocation

The Authority currently plans its finances over a medium term 5-year rolling period which includes all known financial pressures that it faces over the medium term in its Financial Plan.

The Medium-Term Financial Plan (MTFP) incorporates a broad estimate of the financial impact for the following risks and sensitivities:

Demographic growth and demand pressures, specifically where transport payments and services are directly affected by patronage demands;
Ongoing impact of COVID-19 and associated recovery of the region;
Inflation;
Brexit, to the extent that there may be potential for increased costs of supply of labour, goods and services
Business Rates Retention Scheme and the achievement of growth targets.

The current Medium-Term Financial Plan assumes a cash flat funding requirement from Constituent Authorities both in terms of the Transport for West Midlands levy and their contributions to the Authority’s Delivery Budget up to and including 2025/26. Whilst this currently represents the planning assumption, it is acknowledged that this creates a potential financial risk, specifically regarding inflationary increases, pay and legislative changes and demand in terms of patronage. The impact of these risks will be kept under review.

Assumptions have been made around pay and price rises and the Consumer Prices Index, along with changes in patronage and fares. Any variation on this for 2021/22 will need to be managed within the available resources. These clearly may change significantly over the medium term, meaning a cash flat position may not be achievable without changes to policy. Medium term planning assumptions will also be kept under constant review to reflect the latest available information in relation to the COVID- 19 pandemic.

The Medium-Term Financial Plan reflects the Authority's obligations as a Best Value authority to make arrangements to secure continuous improvement in the way in which our functions are exercised, having regard to a combination of economy, efficiency and effectiveness, including consultation with taxpayers and users as appropriate.

	2021/ 2022 (£m)	2022/ 2023 (£m)	2023/ 2024 (£m)	2024/ 2025 (£m)	2025/ 2026 (£m)
Transport Levy	114.7	114.7	114.7	114.7	114.7
Revenue Grants & Other Income	188.6	166.9	165.5	165.8	166.5
Business Rates Share	9.0	10.5	12.0	13.5	15.0
Constituent Membership	4.6	4.6	4.6	4.6	4.6
Non-Constituent Members	0.4	0.4	0.4	0.4	0.4
Investment Income	0.9	0.9	0.9	0.9	0.9
Mayoral Precept	0.0	7.3	7.4	7.5	7.6
Commonwealth Games	5.4	20.7	0.0	0.0	0.0
Use of Reserves	5.1	0.0	0.0	0.0	0.0
Unsecured Mayoral Election Funding	3.6	0.0	0.0	0.0	0.0
Transport Funding	332.3	326.0	305.5	307.4	309.7
Transport for West Midlands	118.6	127.6	127.5	131.1	135.4
Commonwealth Games	5.4	20.7	0.0	0.0	0.0
The Authority Delivery Budget	158.3	141.4	143.2	145.2	146.3
Investment Programme	45.6	53.6	55.2	56.8	58.3
Mayoral Office	0.8	0.9	0.9	0.9	0.9
Mayoral Election	3.6	1.0	1.0	1.0	1.0
Total Expenditure	332.3	345.2	327.8	335.0	341.9
Net Expenditure	0.0	(19.2)	(22.3)	(27.6)	(32.2)

The medium-term planning position set out in the table above was noted by the Authority Board in February 2021. A balanced budget position for 2021/22 was approved. However, there currently remains a gap in available funding to support expenditure plans ranging from £19.2m in 2022/23 rising to £32.2m in 2025/26.

It is increasingly acknowledged that combined authorities do not have an adequate sustainable funding base and therefore need to bid for much of the resources they do have. This makes longer term financial planning more difficult, whilst the delay to the Comprehensive Spending Review (CSR) has added to the uncertainty and means it is harder for us to respond to changing priorities. The councils that make up mayoral combined authorities also have a financial system that is subject to ongoing review. It is therefore clear that more stable and long-term funding is needed to enable combined authorities to deliver their priorities.

The Authority will continue to review existing established expenditure budgets to drive efficiency savings in the medium term and is continuing to lobby government alongside other Mayoral combined authorities for sustainable funding for Mayoral combined authorities to be included in the Government’s spending plans, including funding future Mayoral Elections.

The Medium-Term Financial Plan position set out above was developed in Summer 2020, amid the COVID-19 crisis and the postponed Mayoral election. The Authority has therefore begun a refresh of its Medium-Term Financial Plan position, to enable strategic priorities and to include the latest position on additional spending requirements and reductions in income.

Significant matters that may affect future cash flows are as follows:

COVID-19 – the impact of the COVID-19 crisis on the Authority’s financial position is being assessed, both in terms of the negative impact on revenue income and the increased risk of cost escalation in delivering its approved Capital Programme and Investment Programme.
Capital Financing Costs – The Authority opted to change the way it calculates Minimum Revenue Provision (MRP) in the 2017/18 financial year. The change was approved by the Authority Board in November 2017. The reduction in the MRP charge is for a six-year period (2018/19 to 2023/24 inclusive) whereupon the MRP charge will revert to its previous level. The resulting favourable variance achieved in 2017/18 was used to support the Transport Delivery Budget during the period 2018/19 to 2020/21.
Pensions costs – The Authority has received its triennial actuarial valuation which sets the contributions for the three years beginning 2019/20. It has agreed to prepay these in order to benefit from a discount.
Interest Rates – the ongoing period of low interest rates has impacted on investment returns.
Commonwealth Games – the 2022 Commonwealth Games in Birmingham will be the biggest sporting event to be awarded in England since the London Olympics in 2012. Between 500,000 and one million people are expected to descend on Birmingham over the 11-day sporting event in the summer of 2022 and the Games are anticipated to generate a boost of more than half a billion pounds to the West Midlands region. At the time of writing, the Games are anticipated to go ahead as planned in 2022.
Mayor's budget and precept – All Metropolitan Mayors have powers to raise a Mayoral Precept; effectively an incremental charge on top of existing Council Tax bills. Prior to his re- election in May 2021, the Mayor made a commitment in his manifesto not to set a Mayoral council tax precept for the whole of his 2021-24 term as Mayor.
The Authority’s Investment Programme – The Investment Programme aims to deliver an ambitious programme of infrastructure and other measures that are aimed at driving inclusive economic growth in the West Midlands Region. Funding for the programme to date is predominantly though Gainshare Grant and Share of Business Rates with other options for raising the required funding under continual review. Until such time that those additional revenues are realised, the programme will remain within the affordable limit as agreed by the Authority Board.
Borrowing Powers – the amendment to statutory regulations that extended the Authority to borrow for non-transport capital schemes was confirmed in May 2018 subject to the Authority agreeing to operate within an agreed borrowing cap set by HM Treasury. The final year of the three-year cap was 2020/21 (£1,042.0m), however this has been rolled forward for 2021/22. The Authority expects to commence a dialogue with HM Treasury during 2021/22 about the value of the borrowing cap which will be effective from 2022/23 onwards.
Business Rates Supplement – The Authority has the same legal powers as Local Authorities to raise a business rate supplement subject to it gaining consent from businesses affected by the charge. Recognising the regional impacts such a charge may have on local businesses, the prospect to implement a Business Rates Supplement was placed on hold by the Authority Board in July 2019.
Midland Metro Limited – 2017 saw the establishment of the Authority's wholly-owned subsidiary, `Midland Metro Limited' that has been created to take over the day-to-day running of Midland Metro trams in the West Midlands region and is expected to generate profits in the longer term, which will be channelled back into the network for the benefit of passengers and the local economy. Patronage falls during the COVID-19 outbreak have significantly increased the risk to the funding of this investment. This risk is to be reviewed as part of the refreshed Medium-Term Financial Plan.
Commercial & Residential Investment Funds – The Authority employs West Midlands Development Capital Limited (a subsidiary of the Authority incorporated in 2017) as the fund manager for these commercial loans. The Authority Investment Funds support the acceleration of commercial / residential property developments within the West Midlands area where traditional lending is not readily available.
These are revolving loan funds that aim to underpin the region’s long-term growth and stability and are open to developers seeking finance of £1m to £10m. The fund commits repayable loan capital to eligible commercial, light industrial and residential regeneration opportunities at commercial rates of interest. The maximum value of commitments the Authority will allow against the total fund has been increased from £70m to £210m.
The Authority is obliged under the Accounting Standards to make a suitable financial provision for credit losses which, in the event of a default, would be used to negate the in-year impact of the event.

General Fund balances – although clearly the appropriate level of general fund reserves is a matter for judgement by the Finance Director (Section 151 Officer), the generally accepted practice is for general fund reserves to be between 3% and 5% of expenditure. The proposed balance is below this recommended level and consideration should be given over the medium term to increase the level of General Balances to ensure risk can be managed within the Authority without creating volatility on Constituent Authority contributions. It is however noted that the Authority does hold Earmarked Reserves, which gives the Finance Director (Section 151 Officer) comfort that the General Fund balance is sufficient in the short term.

9. Risks and opportunities

Risks

The Authority has put in place a system of internal controls designed to manage risks to a reasonable level and aims to identify and prioritise the risks to the achievement of policies, aims and objectives; and evaluate the likelihood of those risks being realised, the impact should they be realised and to manage them efficiently, effectively and economically.

The Authority has developed a Risk Management Strategy and Strategic Risk Register, which is reported to regular meetings of the Authority's Audit, Risk and Assurance Committee and the Senior Leadership Team. It provides visibility of risk at operational, programme and strategic levels.

Operational Risk Registers are in place within directorates which feed into the Authority Strategic Risk Register. There are regular meetings in place with both the management team of each business area and the Strategy Director to monitor the status of risks and to ascertain the level of risk exposure in each of these areas to determine the assurance conclusions. Additionally, the Strategic Risk Register is reviewed by Senior Leadership Team on a quarterly basis.

Progress of the 2020/21 Annual Business Plan was monitored on a monthly basis by internal management teams with key risks impacting on its delivery, being escalated to the directorate operational risk registers. In addition, delivery against performance of the High-Level Deliverables within the Annual Plan was reported monthly to Senior Leadership Team and quarterly to the Authority Board.

The Authority has also put in place and continues to develop a robust monitoring framework that measures the performance of the Authority and gauges how the Authority is progressing against the SEP and the Mayor's Renewal Plan.

The principal risks and uncertainties faced by the Authority in relation to future service provision, including those in connection with the continued availability, quality and affordability of key resources that the Authority depends on to deliver its service, are as follows:

the Authority is negatively impacted by either the Comprehensive Spending Review and/or the approach to business rates localisation, leading to a risk that baseline funding is not secure and depends on one-off grants from government for core spending commitments.
external challenges or changes in policy from global or government / political or financial change are not factored into the Authority plans, which could make delivery ambitions more difficult to achieve.
as a result of political and economic uncertainty, there is a risk that the overall objectives underpinning the establishment of the Authority to deliver Devolution are compromised. This is both a delivery risk and also a reputational and functional risk.
if the Authority is not able to realise the supplementary (or alternative, equivalent) income streams envisaged in the 2016 Devolution deal the Investment programme may not be delivered as originally intended.
as the Authority continues to expand and absorb new remits and accountabilities that the Authority's stakeholders become more pressured in terms of their funding contributions.
the Authority cannot respond in an effective and timely manner to events that disrupt operations and activities, which could lead to financial loss (or failure to realise expected benefits or funding) reputational damage, legal or regulatory breach.
new project and programme proposals are not effectively appraised or assured and there are insufficient ‘lessons learnt’ from post implementation reviews. This could lead to poor investment decisions and failure to realise anticipated benefits or value for money; hence it will have an adverse financial and reputational impact.
having chosen to use commercial company delivery models in some areas, challenging economic conditions and/or material loss of revenue from investments may result in:
a) commercial models not being able to deliver expected benefits and commercial revenue targets and/or
b) the structure exposing the Authority to greater financial risk if the delivery model is unsuccessful.
a lack of, or non-adherence to, formal governance arrangements will result in a risk of ineffective or unsuccessful delivery of the Authority’s objectives and possible legal challenge, impacting on the Authority's ability to meet its obligations and future aspirations. As the Authority is going through a period of growth with the absorption of new and emerging priorities, there is a risk that existing governance arrangements do not support the delivery of the organisation's objectives. With new devolved budgets, different government departments have specified different assurance requirements which are adding to pressures to develop bespoke governance arrangements.
that Health & Safety procedures to ensure safe working conditions for staff, visitors and users of all of the Authority’s facilities are absent or inadequate. Failure to provide a safe environment for all users will result in potential legal challenges and reputational damage due to unsafe, or unreliable infrastructure, particularly on the transport network. The Authority is now accountable for the delivery of Metro operations and a number of project construction sites, with a growing number of infrastructure projects in delivery.
the effective management and control of risk are prime objectives of the Authority’s treasury management activities. The Treasury Management Strategy therefore sets out various indicators and limits to constrain the risk of unexpected losses and details the extent to which financial derivatives may be used to manage treasury risks. This includes the 'interest rate risk' and the degree to which any upwards movement in the rate the Authority borrows at erodes the purchasing power of the grants / funding it has secured to date.
data protection requirements and/or appropriate protective security of the Authority’s assets (information/systems, premises and people) is not maintained causing damage, loss or misuse of corporate assets, and opportunities for fraudulent criminal and terrorist related activity. This may result in harm to personnel (staff, visitors and partners), data subjects (citizens of the West Midlands), reputational damage, legal challenges and an inability to maintain operations.
Cyber Crime, predominantly attempted via social engineering (phishing, vishing and smishing), direct ‘hacking’ and/or denial of service of ICT systems and services, is an increasing threat and public sector bodies are regular targets. National Technical Authority (NTA) advice sets the risk at substantial. Failure to maintain adequate protection and response to incidents has the potential for severe reputational, operational and regulatory impact on the Authority. Financial penalties for breach of Data Protection obligations are now significantly increased.
the Authority is governed by stakeholders who are also responsible for the delivery of some of its corporate objectives leading to a governance risk mitigated through effective monitoring, evaluation and reporting.
the capacity and capability of the Leadership team is not sufficient to enable business decisions to be made in a timely manner, for instance due to difficulties in recruitment or excessive workloads.
capacity and skills amongst managers and officers is not fully aligned to meet the continuing focus for delivery of new and challenging initiatives within the Authority. This results in difficulties in its ability to achieve delivery of the organisational priorities, including a comprehensive organisation wide transformation programme, within the constraints of the funding pressures set for the organisation.
there is significant pressure on resources, particularly in matching staff resources to the tasks in hand. This is being carefully monitored by the Authority with a plan in place to mitigate these pressures.
the reputation of the Authority will be compromised if the organisation does not present itself as an effective and efficient organisation, resulting in negative media coverage and an inability to deliver expectations. Where the Authority has significant monetary investment and proposals run by partners, for example the Commonwealth Games, the operation of Arm’s Length Companies or high profile sporting or cultural events in the region; the Authority needs to manage the additional indirect reputational risks that are posed by association with these projects/proposals. There is reputational risk involved in that there is a wider perception that the Authority is accountable for more than it is, i.e. delivery of the Commonwealth Games.
that the cost of resources to strengthen the local and regional transport network, under the extraordinary one-off demands of the Commonwealth Games cannot be met entirely by the agreed Organising Committee (OC) operations budget.
Additionally, the current impact on the Business as Usual public transport network and its recovery period as a result of COVID-19 (medium/long term) may not be sufficient to support the proposed public transport strengthening plans.
where Projects/Programmes are wholly or partially funded by the Authority’s Investment Programme but delivered by Delivery Partners/Delivery Bodies, that the Delivery Partners/ Delivery Bodies may fail to deliver the agreed scope of the Project/Programme due to circumstances beyond their control. Potentially this would lead towards the risk of both reputational damage to the Authority and damage to political relations.
inherent risks remain in respect of the ongoing impact of the pandemic on our Transport services, in particular that Metro patronage will recover to pre COVID-19 levels, or that the Department for Transport (DfT) will continue to reimburse any losses. Further risks remain within the Commercial Bus network, which is facing unprecedented shock as a result of the pandemic. As a result, companies previously providing critical services could and are failing. Additionally, there is a risk of escalating costs when current subsidised service contracts expire, further reducing the commercial viability of some services where patronage does not recover to pre COVID-19 levels.

Devolution of Adult Education Board (AEB) represents a significant opportunity to demonstrate the impact of local control of skills funding on communities, through the ability to align c.£130m per annum of skills funding to better meet the needs of residents and businesses in line with the priorities as set out within the Regional Skills Plan. There is a risk that this opportunity will not be taken if not managed appropriately.
Housing & Regeneration priorities and objectives are contingent on the deployment of funding secured through Devolution and subsequent agreements with the Government, including acquisitions by the Authority directly and joint ventures and investments. The impact of the COVID-19 pandemic on the property market may have consequences for programme delivery, progress towards Government targets and the financial risk profile of the Authority’s investments and acquisitions.
With the impact of COVID-19 on local authority priorities and resourcing, there is a risk that progress with local plans could be hampered. This is a risk that the Authority does not control, with a consequence for securing continuing funding, support and confidence from Whitehall to achieve the Authority’s outcomes.
the Authority’s members and partners will not meet the region's carbon budget reduction net- zero CO2 by 2041 (and attendant interim targets) due to a variety of structural and operational factors, including the pace of transition within key industries and sectors and the scale of government investment and legislation.
5G is a complex, multi-stakeholder project which is part of the national Test Beds and Trials programme within the Department for Digital, Culture, Media & Sport (DCMS). There is managed risk inbuilt within the programme regarding the market response, the technical requirements of a hitherto largely untested (at scale) technology, and the extent to which we as a region can build the mix of supply and demand that will be needed to realise maximum economic and social value for the region. WM5G is a short term undertaking which will close when the test bed programme comes to an end.

Opportunities

The Authority will be taking the opportunity to make a submission to the forthcoming Comprehensive Spending Review, which was deferred from 2020 due to Brexit and the COVID-19 outbreak. This submission would seek to place the Authority on a stronger and more resilient basis for funding of its core operations and build on its potential to draw additional funding into the West Midlands region.

The Authority has set itself a demanding programme of work and is ambitious for itself and the benefits that it hopes to bring to the region. It has been successful in negotiations for a second Devolution Deal and has recruited an able team of experienced professionals to form the leadership team.

Opportunities to generate additional revenue streams are actively explored. Some examples include the generation of additional advertising revenue from the Authority's bus shelters in conjunction with a private sector partner, as well as taking on the operation of CCTV for a number of partners in our new Regional Transport Coordination Centre hub.

Opportunities to ensure optimum financial stability and security include Treasury Management activity, maximising the current market opportunities, reviewing the borrowing strategy and making best use of capital financing, including optimum use of access to the Public Works Loans Board.

The Authority commenced a Business Transformation Programme during 2020/21 focused on its enabling services, to ensure they are fit for the future, with an efficient and effective structure. The Business Transformation work is ongoing into 2021/22 with the planned restructure of some teams. At the same time, the Authority also launched a Productivity and Efficiencies Board chaired by the Finance Director, which will continue to meet throughout 2021/22 to identify further productivity and efficiency opportunities. The Productivity and Efficiencies Board and Business Transformation Programme have a combined target to achieve annualised savings of £1.0m during 2021/22.

The new Single Assurance Framework (SAF) was approved by WMCA Board in July 2020. It provides the Authority with a consistent approach for appraisal, assurance, risk management and performance throughout the life cycle of projects and programmes and is applied proportionally and consistently. The new assurance framework sets out key processes for ensuring accountability, probity, transparency and legal compliance and for ensuring value for money is achieved across its investments.

The Authority has also actively sought new commercial trading opportunities and in doing so has established two subsidiaries since its inception.

The largest subsidiary is ‘Midland Metro Limited’ which operates light rail in the region. The commercial model is expected to generate surpluses which will be channelled back into the light rail network for the benefit of passengers and the local economy.

The second largest subsidiary, WM5G Limited, came into operation in 2019/20 in order to channel the investment from central government through the Department for Digital, Culture, Media & Sport (DCMS) into the development of new 5G technology at its testbed in the West Midlands.

10. Midland Metro Limited

Midland Metro Limited (MML) is a private limited company wholly owned by the Authority and was incorporated in 2017. The main business of MML is to provide passenger light rail transportation operation and maintenance of the Midland Metro in accordance with the terms of the public service contract with The Authority.

MML started trading on 24 June 2018 on commencement of the franchise and as a 100% subsidiary of the Authority, has now been consolidated into the Authority’s group accounts.

Income mainly consists of passenger revenue from on tram sales and income received from the Authority in respect of travel card sales and concessionary travel reimbursement.

Under the terms of the public service contract, MML receives a subsidy in loss making years to enable it to break even. A franchise fee will be paid to the Authority in profit making years.

11. WM5G Limited

West Midlands 5G Limited (WM5G) is a private limited company wholly owned by the Authority and was incorporated in February 2019. The main business of WM5G is to be the UK’s first region-wide 5G test bed and thus accelerate 5G deployment across the region to achieve citizen, public and private sector benefits from 5G.

WM5G started trading on 1 April 2019 as a 100% subsidiary of the Authority and has now been consolidated into the Authority’s group accounts.

Income mainly consists of grants from the DCMS and the Authority in respect of funding of initiatives and competitions to acceleration 5G Infrastructure and Applications.

12. Basis of preparation

The Authority’s Statement of Accounts have been prepared under the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2020/21 (the Code) and are for the full year from 1 April 2020 to 31 March 2021.

The Group Accounts comprise of:

The Authority.
Midland Metro Limited
WM5G Limited

The Statement of Accounts covering the Authority and the Group includes:

Comprehensive Income and Expenditure Statement

This statement shows the accounting cost of providing services in the year, according to the Code. An adjustment is required to be made between the accounting basis and the funding basis due to the different accounting treatments for capital grants and pension costs, further details of which are shown in the Movement in Reserves Statement.

Movement in Reserves Statement

This statement shows the movement of the different reserves in the year. These are analysed between ‘usable reserves’ (those that can be applied to fund expenditure) and ‘unusable reserves’ (those allocated for specific purposes).

Balance Sheet

The Balance Sheet shows the value of the assets and liabilities as at the Balance Sheet date. The net assets (assets less liabilities) are matched by the reserves held.

Cashflow Statement

The Cashflow Statement shows the changes in cash and cash equivalents during the year. The statement shows how the Authority and the Group generate and use cash and cash equivalents by classifying the cash flows as operating, investing and financing activities.

13. Directors and Senior Officers

The following WMCA directors and senior officers held office during the year:

Directors/Senior Officers	Title	Appointment/ Resignation
Deborah Cadman	Chief Executive	Resigned – 13 June 2021
Ed Cox	Director of Inclusive Growth & Public Service Reform	Appointed – 20 April 2020
Gareth Bradford	Director of Housing and Regeneration	-
Ian Martin	Director of Investment and Commercial Activities	-
Julia Goldsworthy	Director of Strategy	-
Julie Nugent	Director of Productivity and Skills	-
Laura Shoaf	Managing Director, Transport for West Midlands	-
Linda Horne	Finance Director	-
Simon Wren	Director of Strategic Communications and Public Affairs	Resigned – 12 October 2020
Tim Martin	Director of Law and Governance, Clerk and Monitoring Officer	Resigned – 31 May 2021

Laura Shoaf was appointed as the interim Chief Executive in June 2021 following the departure of Deborah Cadman. An interim Managing Director for Transport for West Midlands was appointed in July 2021.

The title of Head of Governance, Clerk to the WMCA and Monitoring Officer was re-named to Director of Law and Governance, Clerk and Monitoring Officer in February 2021. An interim Director of Law and Governance was appointed in April 2021.

The title Director of Strategic Communications and Public Affairs was re-named to Head of Communications and appointed in April 2021.

14. Auditors

Grant Thornton (UK) LLP are the auditors of the Authority for 2020/21. Their appointment was made under Section 3 of the Audit Commission Act 1998, saved under provisions of the Local Audit and Accountability Act 2014.

On behalf of the West Midlands Combined Authority Board

Laura Shoaf
Interim Chief Executive Date: 4 November 2021

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ACCOUNTS AND AUDIT REGULATIONS 2015 NOTICE PUBLICATION OF 2020/21 ACCOUNTS (1)