NARRATIVE REPORT OF THE CHIEF EXECUTIVE AND MEMBERS

Welcome to the West Midlands Combined Authority’s Statement of Accounts for the financial year ended 31 March 2022. 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 2022 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 2021/22, 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 and joint venture 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 outline the activities for the year 2021/22, 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 has provided its services over the last two financial years. However, following the Government’s easing of restrictions on the 21 February 2022, under their COVID-19 Response: Living with COVID-19 guidelines, we are now in the recovery phase of the pandemic. Some of the main areas affected by COVID-19 during 2021/2022 are detailed below.

Impact on priorities and portfolios

We came together as a region, continuing to deliver vital frontline services despite extraordinary pressures, setting up new programmes in response to the unfolding situation, addressing gaps in support, lobbying government and allocating funds to support our communities.

In terms of the wider economic recovery of the West Midlands region, WMCA’s response to the pandemic has evolved over the past year as we’ve understood more clearly its impact on every aspect of our lives. Almost all the Authority’s workforce have had to adapt their work programmes in response to changing circumstances, and senior leaders have played a central role in both the emergency response and in subsequent ‘recovery’ activities. The Authority has collaborated and engaged with key regional stakeholders, and the following overview details our response to date, progress achieved, and identifies the issues we need to focus on in the next phases of our journey towards recovery.

Existing plans were adapted (LEP Sector Action Plans, Local Council Plans) and new recovery plans and priorities created (LEP and Local Authority Recovery Plans, 10 Leaders Recovery Priorities, Community Recovery Prospectus, WM Young Combined Authority Priorities)
New, collaborative governance structures were set up to guide our response (Recovery Forum, Economic Impact Group, Regional Economic Implementation Group, SteerCo, LEP and Local Authority Covid Recovery Taskforces, Jobs and Skills Delivery Board)
Programme delivery was tailored (Pivot and Prosper, Thrive at Work, Local Authority, LEP and University led Business Recovery Webinars, Digital Skills support and Employment support)
We researched and understood our citizens’ experiences, engaging with people across the region (Community Recovery Prospectus, WM Faith Forum Roundtable, Business Surveys, Community Outreach

Evidence was developed and guided our decision making (WM Regional Economic Development Institute (WMREDI) Economic Monitor, Health of the Region Report, Citizens Panel, Growth Hubs and Chambers of Commerce Business Surveys)
We articulated our asks and our regional opportunities to government, coming together as a collective regional voice (31 Recharge priorities, 3 Calls to Action, campaigns including #BackOurBusinesses led by Chambers of Commerce)
Looking ahead, one of WMCA’s corporate Aims & Objectives in 2022/2023 is to ensure everyone has the opportunity to benefit as the region recovers from COVID-19, improves resilience and tackles long- standing challenges. To achieve this, we will work with local authorities, Jobcentres, colleges and training providers to ensure our communities are given training and employment support to access and succeed in new opportunities. We will work with partners to identify and address the different barriers faced by our diverse communities. We will support social innovation to tackle complex and longstanding challenges facing our communities, where mutually agreed with partners.

Impact on the Authority’s workforce

WMCA has complied with and implemented regulations and requirements throughout the COVID-19 pandemic in response to UK Government legislation.

In preparation for the Governments easing of restrictions in England in July 2021, WMCA surveyed its workforce, with results showing that 9 out of 10 staff would like to continue to work from home for at least some of the working week. With these results in mind, WMCA developed a flexible approach to the workplace, led by our business needs as an organisation, whilst retaining some of the benefits of working from home. During the summer, we re-imagined the space at our Summer Lane head office to accommodate hybrid working and COVID-19 safety measures, with staff returning to the office in the first of the team zones in September 2021, though subsequently adhering to temporary lockdown measures in December 2021 in respect of the Omicron variant. Following the easing of these restrictions, attendance in the office continues to increase with the majority of the workforce now actively participating in the hybrid working arrangements.

During the period of enforced remote working, the Authority kept records of COVID-19 related sickness absence as part of monitoring the impact of the pandemic, though COVID-19 absence did not count towards the sickness absence triggers for staff. It was found that due to the implementation of hybrid working and people being able to work fully from home, levels of sickness did not spike. It was shown that staff were able to carry on working if they had tested positive for COVID-19 but did not have symptoms that prevented them from doing so.

It is also important to highlight that during the period of enforced remote working, business as usual across all directorates was successfully achieved by staff adapting to home working, and our critical staff kept the regions transport system operational throughout the pandemic.

Going forwards, WMCA supports the UK Government’s Living with COVID-19 strategy (published in February 2022 with further updates in March, April and May) and recognises the importance of having a cohesive, organisation-wide plan and continuing to promote conversations between managers and employees as part of protecting the physical and mental health of our workforce.

The plan, operational in June 2022, will take an approach that is led by the principles of what is fair and reasonable to ask, respecting that many people (especially the 3% of our workforce who have been identified as Clinically Extremely Vulnerable) may still be concerned about coming into places of work. Our priority is to continue to review and maintain existing practices which keep all of our workplaces as safe as is reasonably practicable and which support WMCA in meeting our fundamental duty of care to protect the physical and mental health of employees.

WMCA will communicate our approach and operational procedures to partners, stakeholders and industry bodies - sharing our experiences to assist them with their own adoption of the latest COVID- 19 strategy.

Impact on the Authority’s supply chain

In respect of supply chain risk, the Authority continues to follow 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 £1.6m at the end of 2021/22 (2020/21: £2.3m), representing 0.43% of net cost of services in the year. In addition, the Authority had balances of £56.6m in general fund earmarked reserves at the end of 2021/22 (see note 29 to the accounts on page 92) (2020/21: £41.0m). 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 for future years in the Medium-Term Financial Plan, this is being addressed corporately through consultation with Mayor and Local Authority Member Leaders to determine a long-term funding solution for WMCA.

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 in relation to COVID-19. The movement on the credit losses can be found in note 34 on page 106.

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, a loss of approximately £4.5m in the year which was supported by the Department of Transport in the form of Light Rail Restart Grant and a drop in other transport related income of around £0.9m which was also partially offset by Government grant. 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 the DfT made good those losses in the form of Light Rail Revenue Restart Grant throughout the financial year 2021/22.

In 2020/21, the support given by the Authority to Bus operators through subsidised services and the concessionary fares schemes was directed by the Cabinet Office guidance. In 2021/22, the Government strongly recommended that Authorities’ support to Bus operators remained the same, given the continued impact of COVID-19 and the fact that patronage remained at relatively low levels. The change which had been made to the Concessions legislation in 2020 from “No better, no worse off” to just “no worse off” was extended to March 2022. This has allowed Authorities to continue to pay operators on pre-COVID levels. Subsidised services provision returned to pre-COVID levels part-way through 2020/21 so operators have been reimbursed as normal for these and no further provision has had to be made.

Grants and reliefs administered on behalf of Central Government

Since the start of the pandemic, the Authority has received various grants from the Department for Transport (DfT) and the Department for Education (DfE) 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 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.
CBSSG was replaced by the Bus Recovery Grant (BRG) from 1 September 2021. BRG is paid to local transport authorities (LTAs) and operators to provide support for lost fares revenue on both commercial and tendered services. BRG for commercial services was paid directly to operators, whilst for tendered services it was paid to LTAs to distribute to operators. Unlike CBSSG, BRG was not designed to “plug the gap” between revenue and costs. It was a contribution towards the impact of lower sales revenue and, unlike CBSSG, operators were allowed to make a profit whilst claiming it.
In August 2021 the DfT also provided support to LTAs to help them develop their own travel demand management (TDM) programme to manage the effects of the COVID-19 pandemic on the transport system.
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 up to 30 June 2021.
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 region’s local authorities, enabling them to procure additional home to school transport. This grant covered services provided up to the end of the 2020/21 Academic Year.
Following the ‘A Plan for Jobs’ announcement on 8 July 2021, 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 15 on page 78.
Acting as an agent, the Authority has also received Light Rail Grant funding of £4.5m 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.

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. In 2021/22 capital programme works that had been delayed during the initial phase of the pandemic, restarted. To unwind a proportion of its historic under-borrowed capital financing position and to mitigate against interest rate rises, the Authority accessed £200m of Public Works Loan Board (PWLB) borrowing that it had previously successfully bid for at the Government’s Local Infrastructure Rate (Gilts + 60 basis points) and a further £10m of borrowing from the UK Infrastructure Bank at an equivalent rate. £125m of PWLB borrowing at the Certainty Rate (Gilts + 80 basis points) was also secured.

At 31 March 2022, the Authority had debt outstanding of £457m, well within the authorised limit for external debt of £697m. Debt outstanding is made up of the following figure:

		In year
	As at 1 April 2021	Repaid	Raised	As at 31 March 2022	Notes
	£m	£m	£m	£m
PWLB	108.44	(1.44)	325.00	432.00	PWLB Local Infrastructure Rate Loans / UK Infrastructure Bank Loan
Barclays	10.00	0.00	0.00	10.00	No change
WM County Council (Transferred Debt)	5.59	(0.92)	0.00	4.67	Annual repayment of principal
UKIB	-		10.00	10.00
Total Long-Term Borrowing	124.03	(2.36)	335.00	456.67

Rates for medium to long term borrowing have risen during the year as central banks contend with the impact of rising inflation. The Authority will maintain a low risk treasury management approach seeking to maximise low interest loans when the opportunity arises.

Short Term Investments for Treasury Management Purposes

As a consequence of advanced receipt of grants and the unwinding of its historically under-borrowed position, short term deposits (investments of 365 days or less) increased during the year from £248m (2020/21) to £616m (2021/22). This is made up of the following figures:

2020/21 (£m)		2019/20 (£m)
112.60	Bank Deposits	189.16
135.70	Local Authorities / Housing Associations / UK Government Backed Deposits	427.00
248.30	Total	616.16

Cash flow management

The Authority publishes an annual Treasury Management Strategy in line with the 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 pandemic, the Authority 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 17 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 WMCA is a partnership between 18 local authorities and other bodies including Local Enterprise Partnerships, the West Midlands Police and Crime Commissioner and West Midlands Fire and Rescue Authority. We have seven constituent local authority members who make up the WMCA Board.

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

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

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 on pages 34 to 44.

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 Board.

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 five 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 974 people and the Authority employed 699 people as at 31 March 2022. Further analysis can be found in Table 1 on page 12.

WMCA’s vision is to achieve ‘A more prosperous and better connected West Midlands which is fairer, greener and healthier’.

WMCA’s report titled ‘Unlocking the potential of the West Midlands’ sets out our aims and objectives for achieving our vision. This document helps us to:

Set out how we will deliver on the region’s priorities
Guide our use of powers and money secured from central government
Measure our progress against our priorities

The WMCA takes on a range of different roles to deliver on our shared regional ambitions. We always ensure that our activity builds on work at a local level, led by local authorities and other partners. In some areas we are responsible for delivering and commissioning services, such as the regional public transport system and the provision of adult skills. In other areas we convene and guide the work of partners, including developing economic strategy to support regional businesses and unlocking sites for housing and regeneration schemes. We also play an advocacy role, amplifying the voice of partners in the region to solve shared challenges and secure new resources or powers

We developed six aims following the Mayoral election in 2021. The WMCA also engaged extensively with our local authority partners, the Young Combined Authority, and other partners to understand our shared areas of focus. These six aims are based on evidence and data about the key challenges in the region, taken from reports such as the State of the Region. Overall, these six aims set out how the WMCA can help realise our vision.

Promote inclusive economic growth in every corner of the region
Ensure everyone has the opportunity to benefit
Connect our communities by delivering transport and unlocking housing and regeneration schemes
Reduce carbon emissions to net zero and enhance the environment
Secure new powers and resources from central government
Develop our organisation and our role as a good regional partner

Each aim is supported by a number of objectives, and key activities then set out how we will achieve those objectives. Our aims and objectives will be regularly reviewed, including a formal review every six months, to monitor progress. They are agreed and owned by the WMCA Board, chaired by the Mayor.

WMCA will achieve its vision through living our values which are central to how we work and interact with our wider partners and stakeholders.

Our core values and the underpinning behaviours are listed on page 37.

Regional Economic Context

The end of the financial year 2021/22 marked two years since the beginning of the global pandemic and five years since the process to leave the EU formally began. The combined effect of Brexit and COVID-19 has seen output fall in the West Midlands compared with pre-pandemic levels which has led to a fall in employment in important sectors in the region. For example, the West Midlands automotive sector has seen 61,211 jobs lost in the Midlands and the region is particularly exposed to the on-going impacts of Brexit due to its heavy dependence on exports to the EU - 55% of the West Midlands’ £934m exports in manufacturing services and 62% of its £177m exports in Wholesale and Motor Trades’ services head for the EU.

These so-called ‘2020 Shocks’ have now been further compounded by a further global shock. Russia’s invasion of Ukraine and the economic sanctions that have been placed on Russia have put global energy supplies at risk. Russia currently accounts for around 10% of the world’s energy supply, including 17% of natural gas supplies and 12% of oil supply. The primary impact of the war in Ukraine has been soaring energy prices having an impact on both businesses and consumers in the West Midlands. A further rise in the price cap on energy is expected in October 2022. Both the war and lockdowns in China are making it hard to import things which is likely to push up prices. As a result of these factors, the Bank of England expects inflation to rise to almost 11% later this year. The Bank also predicts that whilst the UK economy has been recovering from the effects of Covid, the increased cost of living is expected to lead to slower economic growth overall.

In the West Midlands, the number of people on Universal Credit (UC) has soared from pre-pandemic levels, with some areas of Birmingham seeing claims more than double. The West Midlands also has one of the highest rates of fuel poverty in England. The rising cost of electricity and gas will further push families into poverty. In September 2021 around 18% of homes could not affordably heat their homes compared with the England average of 13%.

Despite these shocks, business confidence in the region has remained high. The West Midlands Business Confidence Index produced by the Institute of Chartered Accountants in England and Wales (ICAEW) has improved, making it the joint most confident region in the UK, alongside London. Domestic sales growth was faster than in any other UK nation or region in the 12 months to Q1 2022, with even stronger growth expected for the year ahead.

Labour market statistics also show more positive indicators. For the three months ending January 2022, the West Midlands Region employment rate (aged 16 – 64 years) was 75.7% - a record high. Since the three months ending October 2021, the employment rate saw an increase of 1.1 percentage points (pp); while there is an increase of 2.7pp when compared to the same period in the previous year – with the latter the largest increase across all regions. Furthermore, for the three months ending in January 2022, the West Midlands Region economic inactivity rate (aged 16 – 64 years) was a record low of 20.3% - a decrease of 1.3pp from previous quarter and a decrease of 1.6pp when compared to the previous year - both time comparisons were the largest decreases across all regions.

3. Governance

Governance arrangements during the year are set out in the Annual Governance Statement that can be found on pages 34 to 44.

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 Enabling 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 in line with the Individual Performance Management framework that is now embedded at the Authority.

Table 1 below sets out the headcount (March 2022) and established full time equivalent (FTE) posts.

Table 1: WMCA, MML & WM5G Staffing Analysis — March 2022

No.	Headcount	FTEs
TfWM	357	329.7
Enabling Services	193	189.6
Other Services	139	136.9
Mayor’s Office	10	9.6
WMCA Total	699	665.8
Midland Metro Limited	255	242.5
WM5G Limited	20	19.2
Group total	974	927.5

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. Operational performance

Performance summary of the 2021/22 High Level Deliverables

The WMCA is committed to delivering positive change across the West Midlands region and this is evidenced through our High Level Deliverables (HLDs), which demonstrate to our stakeholders how we are progressing and what is being delivered.

In February 2021 the WMCA Board approved the HLDs for the 2021/22 financial year. HLDs are the output measures of the work that is being undertaken over the year and this section shows how we have performed and our key achievements.

There were 105 HLDs in total and 50 HLDs have been successfully completed in the 2021/22 financial year. A further 55 HLDs have completion dates post-March 2022. These have been absorbed into 2022/23 HLDs and will then be monitored over the following year.

Out of 105 HLDs, 95% have remained within acceptable tolerance levels (completed and on track).

2021/22 key achievements:

The WMCA has continued to work collaboratively with its partners to deliver positive outcomes for its residents even during challenging times bought on by the pandemic. Key achievements for the year are shown below for each portfolio area.

Strategy, Culture & Digital

Led the organisation in the development and approval of the WMCA Aims and Objectives at WMCA Board in November 2021. Engaged in the delivery of the £5.3m Community Renewal Fund (CRF) programme, an integral part of the Government’s plans to level up communities and support people most in need within our region. The CRF programme seeks to tackle local challenges – whether through building skills, supporting local businesses, supporting communities and places and providing employment support throughout the West Midlands.
Eight locally led projects have been designed to offer people new skills and opportunities. These include skills training for those impacted by the economic fallout from the COVID-19 pandemic and projects to close gaps in support for key groups such as the over 50s and those with a history of offending.
The projects awarded funding are:
£757k to Sandwell Council for the Black Country 50 plus partnership to plug gaps in support for residents aged 50 and over
£448k to the Greater Birmingham and Solihull Local Enterprise Partnership to set up the ‘No Code’ digital skills project aimed at 16-19-year-olds to create the tech entrepreneurs of the future
£903k to the ‘Good Things Foundation for the Digital Future’ project to get marginalised communities online, helping them to access jobs and opportunities
£509k to Walsall Council for the ‘Works+’ project to help get back into work those whose jobs were lost or put at risk through the pandemic
£586k to the Chance Heritage Trust to explore opportunities to regenerate the Chance Brothers
Glassworks and Soho Foundry and Mint as economic and community hubs
£496k to the Wolverhampton Voluntary Sector Council for its Black Country Talent Match to provide mentoring, advice, skills training and support for local young people with a background of offending
£694k for Coventry City Council’s Creative Growth and Cultural Tourism Recovery Programme o £706k for the Wolverhampton Voluntary Sector Council’s project with 16 local organisations to
provide support to people who face barriers to achieving full citizenship.
Initiated the WM Cultural Sector Research which has provided a robust evidence base, a first for the local arts and cultural sector. Launched the Cultural Infrastructure Map which will strengthen the sectors potential in securing more investment and to reach more communities throughout our region. Led the Cultural & Creative Social Enterprise Pilot programme which has now come to an end: the programme was created to address challenges raised by the COVID-19 pandemic, particularly for smaller, diverse organisations operating within their home communities. The two selected participants received funding to develop their business ideas and operations, as well as training and mentoring support throughout their journey
Read more information

Economy & Innovation

The ‘Made Smarter West Midlands’ programme was commissioned, supporting over 100 firms to digitise their processes and services, with a consequent increase in firm-level productivity.
Collaborated with Create Central to support the growth of the Creative Services industries within the West Midlands. This resulted in securing a new partnership with the BBC and the relocation of the MasterChef production from London to Birmingham from 2024. It will be the first time one of the BBC’s prominent shows will be produced outside of London in over 20 years. This partnership also resulted in the production of a new serial drama filmed within Birmingham.
Led the development of the West Midlands Plan for Growth which pinpoints the potential for the region’s economy to secure above average growth in clusters which will deliver more good jobs for local people.

Environment

WMCA was recognised by the government backed, Climate Emergency UK as having the top scoring climate change plans in the country amongst combined authorities and the second best overall out of all local and combined authorities. The Climate Emergency UK exists to support all local and combined authorities by providing accessible information about best practice, and providing a network where local authorities, activists, non-government organisations (NGOs), business and local communities can work together.

The Environment Team launched the Community Green Grants in January 2022, offering community groups a share of £725k to improve people’s access to quality green space across the West Midlands.
Through our work on supporting and encouraging the region's tree planting efforts, there have now been over 88,000 new trees registered on the West Midlands Virtual Forest since January 2020.

Energy Capital

Establishment of the SMART (Sustainable Market for Affordable Retrofit Technologies) Hub to channel retrofit funding and activity. The team have already led the region to attract funding in excess of £10m and supported partners in additional bids of more than £14m. This investment will be spent on the homes of vulnerable people; directly saving carbon and improving the living conditions of people in the region.
Energy Capital have delivered several innovation projects spanning heat networks, retrofit and local energy system planning and operation. These have enabled the WMCA to identify the genuine opportunities and barriers to net zero in the region and places us in a strong position to overcome these with the support of Government and investors.
The Energy Capital team are working on a Trailblazer Devolution Deal following the publication of the Levelling Up White Paper. On net zero, we are prioritising Local Area Energy Planning and Zoning and the establishment of a Retrofit Commissioning Framework to consolidate the funding streams that come from government.

Housing & Land

In 2021, the Directorate oversaw the deployment of £100m+ to invest in housing, commercial and regeneration schemes in the region, heavily prioritising brownfield sites.
Built new and strengthened existing relationships as the West Midlands’ first Public Land Taskforce was launched. The Directorate progressed a programme of industry-led taskforces on town centres, zero carbon, modular construction and commercial development, signed a strategic partnership with a major developer and progressed innovative partnership working with regional housing associations
Led the transformation of 16 Summer Lane to support hybrid working and our wider WMCA property and estate management goals.

Inclusive communities

Commenced delivery of the new West Midlands Race Equalities Taskforce, that will take action to improve equality of opportunity for all our communities, including appointing the Taskforce’s membership and developing an evidence base and forward plan for 2022/23 activity.
Developed and published the WMCA Equality Scheme 2022-24 which sets out our vision, ambitions and proposed objectives for promoting equality, diversity and inclusion across the organisation and our work over the next three years.
Delivered a varied portfolio of activity to embed equality, diversity and inclusion and citizen voice throughout the WMCA. This included establishing staff networks, delivering internal positive action initiatives, consulting with a wide range of community groups and supporting our Young Combined Authority.

Productivity and Skills

This year saw an investment of over £150m of adult skills funding which resulted in training opportunities for 41,000 local people.

The team responded quickly in combating the changing economic context, investing in new training to support key regional sectors, including construction, manufacturing, digital and business and professional services – with a 20% increase in job outcomes across our offer. We were pivotal in developing and delivering HGV driver training in response to emerging sector pressures – providing a blueprint for subsequent national programmes.
We have delivered ground-breaking digital bootcamps to 2,000 local people, double what was achieved in the previous year, with 50% female and 50% from black and ethnic minority communities – helping over two-thirds of participants into employment.

PSR & Social Economy

The WMCA Housing First pilot was the first in the country to meet its target, supporting over 500 people into accommodation with intensive wrap-around support.
WMCA launched ‘Growing the social economy in the WMCA area’, the region’s plan for doubling the size of the social economy in 10 years, as promised to the Social Economy Taskforce in 2020. We are now working to deliver this plan as part of a cross-sector virtual team.
Agreed, published and began delivery against a 13-point joint action plan with the Police and Crime Commissioner to collaboratively take action to make the West Midlands a safer place to live, work, learn and visit.

Transport for West Midlands

There were successful bids for delivery programmes including £1.05bn City Region Sustainable Transport Settlement (CRSTS), £86.9m Bus Service Improvement Plan (BSIP), £30m for Zero Emission Bus Regional Area (ZEBRA) hydrogen bus and £17.5m for active travel to continue the authorities’ aspirations for a better connected and greener transport network which supports the aims and objectives of the WMCA.
Delivery of existing projects including; phase 1 of the Sprint Network from Walsall to Solihull via Birmingham City Centre; the roll out of the Cycle Hire scheme and delivery of the new cycle infrastructure with Local Authorities; continued delivery of the Birmingham University and Perry Barr rail stations to improve connectivity to meet passenger demand and support wider regeneration; upgrade of Pool Meadow Bus Station to support the City of Culture in Coventry; continued delivery of the Metro extensions in Birmingham and Wolverhampton and many other smaller projects. Also, successful completion of the Commonwealth Games Statutory Transport Plan and agreement for the Local Transport Plan core strategy with a good response achieved from the consultation.
Continued to support passengers across the public transport network through the fluctuations of COVID-19 restrictions by; managing our bus stations and maintaining services; trialling new customer services for pilot schemes such as e-scooters and Cycle Hire; implementing the Demand Responsive Travel trial in Coventry; extending the Future Transport Zone test bed and testing of innovative technologies; and opening a local road Highways ‘desk’ at National Highways Regional Operation Centre, thereby extending the reach and collaboration of the Road Traffic Control Centre (RTCC).

Wellness

The ‘Thrive into Work’ programme has been recognised within the sector for achievements made in the Individual Placement Support (IPS) practice and has received funding to extend the programme to March 2023. A Coalition Panel of regional health and employment leads has been established to guide the programme and services, which continues to deliver excellent results. This year we have achieved:

1,332 programme starts
345 people achieved employment outcomes
Generated a further £2.84m of funding into the region to continue to deliver IPS service

Thrive at Work’ continues to drive forward the agenda for improved health and wellbeing options for employees at their place of work. This year we had:

150 new organisations registered to ‘Thrive at Work’
38 organisations used our Health Needs Assessment tool
35 organisation achieved Foundation level accreditation
15 organisations achieved Bronze accreditation
Celebrated the first organisation to achieve Silver accreditation
Establishment of a Mental Health Commission, from the findings of the 2021/22 Health of the Region report, focusing on health inequalities in the wake of the pandemic. Expanded the WMCA’s influence in health inequalities and prevention space by working with the region’s Integrated Care System and local public health teams. This work has led to the coordination of remote diagnostic centres in the region, improved digital inclusion and, benefitting from their expertise, enabled us to take a ‘health in all policies’ approach to our devolved responsibilities. This has also paved the way for our trailblazing devolution asks around health to be negotiated with the Government.

Enabling Services

Our specialist and professional Enabling Services play a critical role in supporting the delivery of the WMCA Aims & Objectives, and work in a collaborative and integrated way across the business.

During 2021/22 the Business Transformation programme led to structural changes within Enabling Services to ensure the most effective and efficient ways of working were being implemented, thereby forming the Finance and Business Hub. A key outcome of this work was to build a business partner model, ensuring there was a strategic and specialist resource in all teams and that outcomes and requirements are agreed and updated on a regular basis. This inward look will continue throughout 2022/23.

The Enabling Services team comprises of 189.6 FTE across the following areas:

Communication – Communications supports all of the directorates to engage with their audiences to help them achieve their objectives and celebrate success. We are proud to work on projects that have helped the people of the West Midlands feel more connected through our transport network; see their region come alive with vibrant new housing and regeneration projects; learn valuable skills that help them succeed; plant trees that add to the region’s virtual forest and put urban communities back in touch with nature; and support a healthier and happier workforce by sharing best practice on mental health. Throughout the year we have delivered projects with local, regional and national impact - hosting the region’s first international climate change conference alongside UK100; launching a strategy for tackling violence against women and girls on our transport network which was covered in national and broadcast media; and running two jobs fairs that saw nearly 2,500 people attend.
Digital & Data – Processes have been re-analysed to enhance and create a closer working relationship with directorates and services across the business. The Technical Governance Panel was introduced to consider technical specification. This has enabled better planning and design work that has underpinned deliveries which include new back office systems such as Finance and HR, as well as modernisation of legacy systems and infrastructure.
Equalities and Inclusion - Developed and published the WMCA Equality and Inclusion Scheme 2022-24, which sets out the WMCA’s vision, ambitions and proposed objectives for promoting equality, diversity and inclusion across the organisation and our work over the next three years. The team have also delivered a varied portfolio of activities to embed equality, diversity and wellbeing internally including establishing staff networks, delivering internal positive action development initiatives, embedding wellbeing and inclusion in key internal processes and introducing equality objectives in performance reviews. As a result, we have seen a positive shift in our workforce statistics.

Finance and Business Hub

Assurance and Appraisal - The Programme Assurance & Appraisal team have led the implementation of the Single Assurance Framework (SAF) across WMCA Project Portfolios/Directorates which will enable WMCA to increase its project/programme management capability. The team leads key processes for ensuring accountability, probity, transparency and legal compliance, and for ensuring value for money is achieved across its investments.
Business Planning – Developed an Annual Business Plan for 2022/23, directly aligned with the corporate aims and objectives, creating a clear ‘golden thread’ from strategic vision to Individual Performance Management (IPM) goals and identification of both financial and workforce resources. A collaborative approach was taken with directorates to develop SMART High-Level Deliverables (HLDs) for the next financial year (2022/23).
Commercial and Investment – As well as overseeing £121m of Investment programme spend and £24m of commitments, the team supported Directorates delivering innovative new projects e.g., the Help 2 Own affordable housing initiative delivering its’ first homes under a LLP Joint Venture structure. Two further Joint Venture structures were researched, structured and presented for approval in the year; Electric Vehicle Charging Area Transit station (EV CATS) and the West Midlands Co- Invest.
Finance - Helped lead and influence funding bids into Government resulting in over £1bn of new funding being secured for WMCA to deliver against its Aims and Objectives.
HR – There has been a full review of the HR team structure which gained approval from the Strategic Leadership Team (SLT), resulting in an approved strategy to re-design the service provided by the HR team to the organisation. This included the creation and implementation of a HR Service Centre, aimed at first line employee support and response to queries, and a dedicated team of strategic HR Business Partners working closely with Directorates to fully embed themselves within the teams they support.
Performance – To improve our reporting capability, the team worked with colleagues from Digital & Data to develop a new ‘single source of truth’ reporting platform to support data driven decision-making and the journey to a performance management culture.
Procurement – Achieved SLT approval in January 2022 to strengthen the team, including newly created positions of Procurement Business Partners. The roles will provide increased in-house capacity and capability to meet the Authority’s growing demands, and further develop our service offer to the organisation.
Risk – During 2021/22 a Strategic Risk Management Framework was developed and approved by Audit, Risk and Assurance Committee (ARAC), together with all associated tools and templates. A series of training sessions then provided support for teams and risk owners to use the framework and to identify, monitor, manage and review risks.

Learning and Organisational development – Led the organisation in the introduction of the Clearview platform, helping staff to understand how their work links with and supports the delivery of the strategic aims and objectives of the organisation through Individual Performance Management goals.

Legal and Governance – During 2021/22, the team strengthened its in-house capability and capacity to enable substantially more legal work to be carried out internally, achieving better value for money.

Strategic Facilities Management and Assets – Led the business continuity during the pandemic through the delivery of a working environment that is COVID-19 compliant and supports the re-imagined hybrid ways of working at our Summer Lane Headquarters.

6. 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 below shows the overall consolidated revenue position for the Authority compared with the budget approved by the Authority Board in February 2021, 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.

Table 2: West Midlands Combined Authority Revenue Outturn 2021/22

	Year to date
£000	Actual	Budget	Variance
Transport Levy	114,720	114,720	0
Commonwealth Games	5,279	5,423	(144)
Revenue Grants & Other Income	20,197	9,348	10,849
Adult Education Funding	125,169	142,698	(17,529)
Share of Business Rates	9,000	9,000	0
Constituent Membership	4,644	4,644	0
Non Constituent Members	425	425	0
Investment Programme	36,500	36,500	0
Investment Income	976	898	78
Use of Reserves	9,947	9,495	452
Total Funding	326,857	333,151	15,503
Transport for West Midlands	110,400	119,415	9,015
Commonwealth Games	5,279	5,423	144
Economy & Innovation	7,082	3,381	(3,701)
Environment, Energy & HS2	1,116	598	(518)
Housing and Land	1,242	1,400	158
Wellbeing	1,357	1,502	145
PSR & Social Economy	1,566	1,563	(3)
Culture and Digital	5,803	174	5,629
Productivity & Skills	131,446	147,598	16,152
Inclusive Communities	67	68	1
Business Support	2,729	2,064	665
Investment programme	45,683	45,605	78
Mayoral Office	760	760	0
Mayoral Election	3,118	3,600	482
Total Expenditure	317,648	333,151	15,503
Net Income (before reserves)	9,209	0	9,209
Earmarked reserve (Support for Bus Network)	6,350	0	6,350
Earmarked reserve (2022/23 Transport Budget Support)	3,600	0	3,600
Net Expenditure (after reserves)	741	0	741
Transport	0	0	0
Wider Services	741	0	741
Mayoral Office	0	0	0
Total Surplus / (Deficit)	741	0	741

	Reconciliation to Expenditure and Funding Analysis (note 6)
£000	Transport Services	Other Services	Invest. Prog.	Mayor's Office
Transport Levy	-	-	-	-
Commonwealth Games	5,279	-	-	-
Revenue Grants & Other Income	-	19,437	-	760
Adult Education Funding	-	125,169	-	-
Share of Business Rates	-	-	-	-
Constituent Membership	-	-	-	-
Non Constituent Members	-	-	-	-
Investment Programme	-	-	-	-
Investment Income	-	-	-	-
Use of Reserves	5,630	1,199	-	-
Total Funding	10,909	145,805	0	760
Transport for West Midlands	110,400	-	-	-
Commonwealth Games	5,279	-	-	-
Economy & Innovation	-	7,082	-	-
Environment, Energy & HS2	-	1,116	-	-
Housing and Land	-	1,242	-	-
Wellbeing	-	1,357	-	-
PSR & Social Economy	-	1,566	-	-
Culture and Digital	-	5,803	-	-
Productivity & Skills	-	131,446	-	-
Inclusive Communities	-	67	-	-
Business Support	-	2,729	-	-
Investment programme	-	-	45,683	-
Mayoral Office	-	-	-	760
Mayoral Election	-	-	-	-
Total Expenditure	115,679	152,408	45,683	760
Net Income (before reserves)	104,770	6,603	45,683
Earmarked reserve (Support for Bus Network)	6,350
Earmarked reserve (2022/23 Transport Budget Support)	3,600
Net Expenditure (after reserves)	114,720	6,603	45,683	0

	Reconciliation to Expenditure and Funding Analysis (note 6)
£000	Mayoral's Office	Mayoral Elections	Financing	Grant Income	Total
Transport Levy	-	-	-	114,720	114,720
Commonwealth Games	-	-	-		5,279
Revenue Grants & Other Income	760	-	-		20,197
Adult Education Funding	-	-	-		125,169
Share of Business Rates	-	-	-	9,000	9,000
Constituent Membership	-	-	-	4,644	4,644
Non Constituent Members	-	-	-	425	425
Investment Programme	-	-	-	36,500	36,500
Investment Income	-	-	976	-	976
Use of Reserves	-	3,118	-	-	9,947
Total Funding	760	3,118	976	165,289	326,857
Transport for West Midlands	-	-	-	-	110,400
Commonwealth Games	-	-	-	-	5,279
Economy & Innovation	-	-	-	-	7,082
Environment, Energy & HS2	-	-	-	-	1,116
Housing and Land	-	-	-	-	1,242
Wellbeing	-	-	-	-	1,357
PSR & Social Economy	-	-	-	-	1,566
Culture and Digital	-	-	-	-	5,803
Productivity & Skills	-	-	-	-	131,446
Inclusive Communities	-	-	-	-	67
Business Support	-	-	-	-	2,729
Investment programme	-	-	-	-	45,683
Mayoral Office	760	-	-	-	760
Mayoral Election	-	3,118	-	-	3,118
Total Expenditure	760	3.118	-	-	317,648
Net Income (before reserves)	-	-	-	-	9,209
Earmarked reserve (Support for Bus Network)	-	-	-	-	6,350
Earmarked reserve (2022/23 Transport Budget Support)	-	-	-	-	3,600
Net Expenditure (after reserves)	-	-	-	-	(741)

The table 2 on page 18 shows the overall consolidated revenue position for the WMCA. Total expenditure of £317.6m, compares favourably with the budgeted expenditure of £333.1m 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 £9.2m. To support the 2022/23 budget, £9.9m has been transferred to reserves, an increase of £6.3m from the final forecast out-turn for the year. The resulting net expenditure of £741k for the financial year is within the Wider Services budget.

Transport represents a favourable position of £9.95m before transfer to earmarked reserves, compared with budget. This is largely due to Concession savings during the pandemic as a result of reduced service provision by operators, lower patronage and no fare increases. Further savings have been achieved due to the revision of the Accessible Transport contract, which included bringing the Customer Service team in-house. Additionally, increased Digital Advertising revenue, current savings within the Subsidised Bus budget and ongoing staffing variations across various areas have also contributed towards the overall favourable variance.

The net savings have been utilised to create two reserves, one supporting the Bus Network and the second mitigating against potential risks relating to the Metro and Rail programmes in future years.

Within the Wider Services budget, the adverse variance of £0.741m is due to timing of the planned use of reserves, partly offset by additional grant income within the Wellbeing and Productivity & Skills Portfolios, savings relating to staffing variations and the re-profiling of activity across several Portfolios.

The adverse variance of £17.5m on Adult Education Budget reflects lower learner numbers compared with the original budget, owing to the knock on effect of the pandemic and lower take up on Level 3 skills than anticipated in the budget. The adverse variance on Culture and Digital of £5.6m reflects expenditure on the Business and Tourism Programme for the Commonwealth Games which was funded from Government grant. The budget and funding for the programme was agreed after the original budget was set in February 2021.

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 years and therefore considerable variations can arise.

The Authority spent £387.6m on capital projects in 2021/22 (see note 31) which was £206.9m less than the budget of £594.5m and primarily reflects the re-phasing of activities in relation to the various Metro extension schemes. Furthermore, grants allocated to Local Authorities through the Investment Programme and Commonwealth Games schemes are taking place later than originally planned. The variances at the end of March 2022 were spread across all programmes, but primarily within the WMCA Investment Programme (£88.6m), the Investment Programme Grants to Local Authorities (£35m) and the Commonwealth Games (£32.7m). The impact of the COVID-19 pandemic has had a prolonged and significant impact on progression of schemes across the year due to resource shortage in construction and within the Local Authorities. In the main, delivery schedules are not anticipated to be impacted by the rephasing of expenditure plans into 2022/23.

Major items of capital spend in the year were:

Metro Wednesbury to Brierley Hill Extension £58.0m
Metro Birmingham Eastside Extension £46.6m
University Station £30.1m
SPRINT A45 Birmingham-Airport-Solihull £29.6m
Alexander Stadium Redevelopment £25.0m
Coventry Station Masterplan £16.7m
SPRINT A34 Walsall to Birmingham £16.1m
Perry Barr Rail Station £15.6m
Coventry Friargate Business District Regeneration £14.5m
Metro Edgbaston Extension £12.9m
Coventry Electric Bus City £11.4m

The capital programme spending of £387.6m was financed in the following way:

Table 3: Financing of Capital Expenditure 2021/22

	£ million
Government grants	231.3
Borrowing	111.2
District/Local Enterprise Partnership (LEP) grants and contributions	9.4
Third party contributions	25.8
Gainshare contribution	9.9
Total	387.6

7. Strategy and resource allocation

Revenue Budget 2022/2023

The tables on page 21 show how the £341m revenue income is sourced and where it gets allocated for expenditure. 2022/23 Transport expenditure is to be funded by £117.0m of Transport Levy, which WMCA receives from its constituent members, £4.5m of Business Rates and £3.6m of WMCA’s existing Reserves. The Transport Levy has been increased by 2% (£2.3m) from 2021/22, having previously remained flat for five years. Also, within Transport, WMCA will receive a grant of £18.7m from the 2022 Commonwealth Games Organising Committee to support the delivery of the Games.

2022/23 Non-Transport expenditure includes WMCA’s devolved funding in order to deliver Adult Education throughout the region, as part of our Productivity & Skills portfolio. The remaining expenditure in the area includes WMCA’s Economy & Innovation, Culture & Digital, Wellbeing, PSR & Social Economy, Environment and Inclusive Communities portfolios, as well as revenue costs of delivering our Housing & Land Capital Programme.

The Investment Programme and Mayor’s Office Budgets are in line with prior years and include the receipt of Devolution Deal grants. A gainshare grant of £36.5m will be used to deliver the Capital projects within the Investment Programme, whilst a £0.8m Mayoral Capacity Funding grant supports the operation of the Mayoral Office.

WMCA has committed to working with Constituent Authorities throughout 2022 to develop a longer- term, sustainable budget and plan, building on the work to develop the 2022/23 Aims and Objectives.

11. 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 2021/22 (the Code) and are for the full year from 1 April 2021 to 31 March 2022.

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.

Cash Flow Statement

The Cash Flow 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.

12. 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
Laura Shoaf	Chief Executive	Appointed – 14 June 2021
Ed Cox	Executive Director of Strategy, Integration and Net Zero	-
Gareth Bradford	Executive Director of Housing, Property and Regeneration	-
Julia Goldsworthy	Director of Strategy	Resigned – 31 October 2021
Julie Nugent	Executive Director of Economic Delivery, Skills and Communities	-
Laura Shoaf	Managing Director, Transport for West Midlands	Resigned – 14 June 2021
Anna Shaw	Executive Director, Transport	Appointed – 12 July 2021 for West Midlands
Linda Horne	Executive Director of Finance & Business Hub	-
Siobhan Bassford	Operational Director of Strategic Communications	Appointed – 27 April 2021
Tim Martin	Director of Law and Governance, Clerk and Monitoring Officer	Resigned – 31 May 2021
Satish Mistry	Interim Director of Law and Governance	Appointed – 27 April 2021

Laura Shoaf was appointed as the interim Chief Executive in June 2021, following the departure of Deborah Cadman, and subsequently appointed as the permanent Chief Executive in November 2021.

Anne Shaw was appointed as the interim Managing Director for Transport for West Midlands in July 2021, followed by her permanent appointment in January 2022.

During 2021/2022, we reviewed the structure of the organisation to position the WMCA to best achieve our ambitions. This has resulted in a reorganisation of the Directorates and some changes in job titles at the Strategic Leadership Team level. The new roles are effective from 1 May 2022 and the new job titles are also reflected in the list of directors and senior officers on page 80.

Our executive team

Laura Shoaf - Chief Executive
Gareth Bradford - Executive Director of Housing, Property and Regeneration
Ed Cox - executive Director of Strategy, Integration and Net Zero
Anne Shaw - executive Director, Transport
Julie Nugent - Executive Director of Economic Delivery, Skills and Communities
Linda Horne - Executive Director of Finance & Business Hub

13. Auditors

Grant Thornton (UK) LLP are the auditors of the Authority for 2021/22. Their appointment was made by the Public Sector Audit Appointments (PSAA) under the provisions of the Local Audit and Accountability Act 2014 and regulation 3 of the Local Audit (Appointing Person) Regulations 2015.

On behalf of the West Midlands Combined Authority Board

Financial Position 2022 / 2023 Revenue Budget Analysis

AEB Grant

£140.6m

41.2%

Levy

£117.0m

34.3%

Devolution Deal Grant

£36.5m

10.7%

Other Devo Grants

£7.6m

2.2%

Business Rates Growth

£10.5m

31.%

Constituent fees

£4.6m

1.3%

Use of Reserves

£3.6m

1.1%

Investment Income

£0.9

0.3%

Non constituent fees

£0.5m

0.1%

Other

£19.2m (Inc £18.7m CWG)

5.7

Capital Budget 2022/2023

The WMCA Capital Programme is summarised in the tables below highlighting the current planned capital investment between 2021/22 and 2025/26. This position represents the latest 2021/22 reforecast. The final 2022/23 Capital Budget will be presented to WMCA Board at the earliest opportunity in 2022/23 following confirmation of the 2021/22 outturn position. It should also be noted that this view does not include any allocation of the recently awarded City Regional Sustainable Transport Settlement (CRSTS) funding of £1.05bn.

Financial Position 2022/2023 Capital programme

Revenue backed debt - £871m

40%

Investment Programme - £871m

DfT transport Grants £681m

31%

Transforming cities grant (£320m)
Metro Eastside (£131m)
Sprint Grant (£35m)

Income backed debt (£226m)

10%

WBHE (£141m)
Metro Eastside (£58m)

Land fund grants (£208m)

10%

Devo 2 Land Fund (£100m)
Brownfield grant (£84m)
Additional Brownfield (£24m)

Other Grants £169m

Get Britain Building (£74m)
University Station (£28m)
5G (£25m)

Administrated grants £32m

National Productivity fund (£17m)
New bridges funding (£15m)

Medium-Term Financial Plan (MTFP)

The Authority currently plans its finances over a Medium-Term Financial Plan (MTFP), covering a 5- year rolling period and includes all known and quantifiable financial pressures that it faces.

The 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;
Inflationary rises;
Business Rates Retention Scheme and the achievement of growth targets.

The current MTFP assumes a cash flat funding requirement from WMCA’s Constituent Authorities, both in terms of the Transport for West Midlands levy and their contributions to the Authority’s Wider Services Budget up to and including 2026/27. 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 is kept under continuous review and discussion with WMCA’s Constituent Authorities.

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 2022/23 will need to be managed within the available resources. These clearly may change significantly over the period covered by the MTFP, meaning a cash flat funding requirement may not be achievable without changes to policy.

The MTFP reflects WMCA’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.

Table 4: Medium-Term Financial Plan 2022/23 to 2026/27

	2022/23 £m	2023/24 £m	2024/25 £m	2025/26 £m	2026/27 £m
Transport Levy	117.0	117.0	117.0	117.0	117.0
Revenue Grants & Other Income	185.1	182.3	180.9	180.0	180.1
Business Rates Share	10.5	12.0	13.5	15.0	16.5
Constituent Membership	4.6	4.6	4.6	4.6	4.6
Non-Constituent Members	0.5	0.4	0.4	0.4	0.4
Investment Income	0.9	0.9	0.9	0.9	0.9
Mayoral Precept	-	-	-	7.9	7.9
Commonwealth Games	18.7	-	-	-	-
Use of Reserves	3.6	-	-	-	-
Total Funding	340.9	317.3	317.4	325.9	327.5
Transport for West Midlands	125.1	131.1	135.8	145.0	147.6
Commonwealth Games	18.7	-	-	-	-
Portfolio and Enabling Services Budgets	159.7	160.7	160.7	164.6	162.4
Investment Programme	36.6	48.6	50.1	58.6	60.1
Mayoral Office	0.8	-	0.1	0.9	0.9
Mayoral Election	-	-	4.5	1.5	1.5
Total Expenditure	340.9	340.4	351.1	370.6	372.5
Net Expenditure	-	(23.1)	(33.7)	(44.7)	(45.0)

The MTFP set out in the table above was noted by the Authority Board in January 2022. A balanced budget position for 2022/23 was approved. However, there currently remains a gap in available funding to support expenditure plans ranging from £23.1m in 2022/23 rising to £45.0m in 2026/27.

It is increasingly acknowledged that Mayoral Combined Authorities do not have an adequate sustainable funding base and therefore need to bid for many of their resources. This makes longer term financial planning more difficult, whilst the continued delay to Her Majesty’s Government’s Comprehensive Spending Review (CSR) has added to the uncertainty and means it is harder for WMCA to respond to changing priorities. The Constituent Authorities that make up Mayoral Combined Authorities also have a financial model that is subject to ongoing review. It is therefore clear that more stable and long-term funding is needed to enable Mayoral Combined Authorities to deliver their priorities.

WMCA will continue to review existing established expenditure budgets to drive efficiency savings in the medium term and is continuing to lobby Her Majesty’s Government alongside other Mayoral Combined Authorities for sustainable funding to be included in the Government’s spending plans, including funding future Mayoral Elections.

The process to refresh the MTFP for the period 2023/24 to 2026/27 has already commenced, to include the latest position on additional spending requirements and changes in income.

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

Current Economic Climate – the Consumer Prices Index rose by 7.9% in the 12 months to May 2022 and is currently expected to rise to almost 11% in October 2022. WMCA’s revenue and capital budgets are anticipated to be impacted by inflation and global supply chain pressures. These risks are being actively managed as part of the Strategic Risk Management Framework. As a result of recent increases to the Bank Rate, interest rates are expected to increase throughout 2022/23 reflecting current inflation levels. This poses a risk to WMCA on the cost of any borrowing required to support delivery of Capital Infrastructure, but also should allow WMCA to generate better returns on its investments.
Levelling Up Agenda – The Department for Levelling Up, Housing and Communities published its Levelling Up White Paper in February 2022. As part of this, WMCA and Greater Manchester Combined Authority were invited to apply for ‘Trailblazer Devolution Deals’ which would see both regions given far greater political powers and financial freedoms. Detailed negotiations will take place between WMCA and Her Majesty’s Government over the coming months.
COVID-19 – the impact of the COVID-19 crisis on WMCA’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 – WMCA opted to change the way it calculates Minimum Revenue Provision (MRP) in the 2017/18 financial year. The change was approved by WMCA Board in November 2017 and enabled a MRP ‘holiday’ to be taken. This ‘holiday’ period will end during the 2023/24 financial year, at which point MRP charges will be re-introduced. Any changes in Capital Financing requirements and timings will impact the MRP charge incurred in each financial year.
Pensions costs – WMCA received its triennial actuarial valuation which sets the contributions for the three years beginning 2019/20. It agreed to prepay these in order to benefit from a discount, however an updated actuarial valuation is expected, and may require WMCA to make increased annual contributions, or a lump sum contribution to offset any funding shortfall in the pension scheme.
Commonwealth Games – the 2022 Commonwealth Games in Birmingham will be the biggest sporting event to happen in England since the London Olympics in 2012. Between 500,000 and one million people are expected to visit Birmingham over the 11-day sporting event in July- August 2022, and the Games are anticipated to generate a boost of more than half a billion pounds to the West Midlands region. WMCA will play a key role in delivering a robust public transport network during the Games, as well as supporting West Midlands Growth Company who are delivering a Business and Tourism programme in order to leverage economic benefits across the region.
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.
WMCA’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 WMCA Board.
Borrowing Powers – the amendment to statutory regulations that extended WMCA’s ability 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 was rolled forward for 2021/22. WMCA is currently in dialogue with HM Treasury about the value of the borrowing cap which will be effective from 2022/23 onwards.
Business Rates Supplement – WMCA 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 WMCA Board in July 2019.
Midland Metro Limited – MML 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 and two service shutdowns in June 2021 and March 2022 have significantly increased the risk of this investment. This risk is under constant review, both in respect of ongoing operational costs, but also the ability of MML to generate the required revenues in order to secure borrowing for future investment in the network.
Commercial & Residential Investment Funds – WMCA’s 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 £20m. 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 WMCA will allow against the total fund is £210m.
WMCA 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 the appropriate level of general fund reserves is a matter of 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 to increase the level of General Balances to ensure risk can be managed within WMCA without creating volatility on Constituent Authority contributions. It is noted however 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.

8. 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’s Strategic Risk Register (SRR) supports the identification and management of the risks faced by the organisation in achieving its organisational or strategic objectives. The SRR captures only those high-level risks which are of such significance as to require oversight and assurance by the Strategic Leadership Team (SLT). Operational Risk Registers are in place within directorates, and review meetings take place across all the Authority’s activities enabling full visibility of key risks with the potential to impact on the organisation. The Risk Management Framework includes a process that allows for risks to be escalated from the Operational Risk Registers, ultimately to the SRR.

Regular meetings are in place with the management team of each business area 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 SRR is reviewed by SLT on a quarterly basis to ensure key risks are captured on the SRR and effective mitigation measures are in place to reduce or eliminate the resulting effects. Risk Management, Performance Management and Business Planning activity is being brought together to provide a strong evidence base to substantiate the risk assumptions and improve decision making.

Progress of the 2021/22 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 SLT and quarterly to the Authority Board.

We have reviewed and assessed the economic, financial, commercial and contractual risks associated with the conflict in Ukraine. Any emerging financial pressures, particularly in relation to capital delivery, and operational costs relating to pay, prices and utilities will be closely monitored and reported through the Authority financial monitoring report. We can confirm that the Authority has no investments or contractual ties to any Russian based companies or direct supply chain connections. Likewise, our pension fund administrators, Hymans Robertson LLP, have confirmed that some Local Government Pension Scheme (LGPS) Funds had direct Russian investment exposure which may have been written down, but these are typically very small proportions (<0.2%) of a Fund’s overall assets.

In addition, following the National Cyber-Security Centre’s announcement of a heightened cyber threat to the UK, and encouragement to organisations to bolster their online defences, we are revising the SRR to reflect both this advice and our response.

There are currently nine risks rated Very High even after mitigants have been applied, though seven of these risks have remained static for some time, as follows:

Financial assumptions for Investment Programme
External factors
Data protection and protective security
Stakeholder and political relations
Capacity and capability
Project / Programme Appraisal and Assurance – ensuring compliance to national devolution commitments
Longer term economic impact of COVID-19 on public transport provision
Commerciality
Financial resilience of WMCA to absorb fiscal shocks

Those risks with a residual high-risk score are explained in further detail below.

Financial assumptions for Investment Programme

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.

External factors

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.

Data protection and protective security

Cyber Crime, which includes social engineering (phishing, vishing and smishing), malware attack, direct ‘hacking’, theft of data and/or denial of service of ICT systems and services, is an increasing threat and public sector bodies are regular targets.

Human error or the failure of an individual/team to follow data protection legislative requirements, resulting in the loss of data and/or access to data by unauthorised persons.

A data breach event from outsourced services occurring at a partner organisation with whom we have contracted to process data on our behalf.

Stakeholder and political relations

As the Authority continues to expand and absorb new remits and accountabilities that WMCA’s stakeholder and political relations become more pressured. Positive stakeholder and political relations are needed to deliver the ambitions of the organisation.

The potential devolution of new powers and budgets from the government to WMCA under the Government’s ‘levelling up’ proposals and continued uncertainty on when and how this will be achieved will increase pressures on financial, operational governance and scrutiny functions. There may be challenges in maintaining the relationships across the region which helped to deliver the WMCA.

Capacity and capability

Capacity and skills amongst managers and officers may not be sufficient or fully aligned to meet the continuing focus for delivery of new and challenging initiatives within WMCA, particularly there are current known capacity issues in Procurement due to resourcing gaps.

The organisation has moved to a predominantly home working environment. There is a risk that operational efficiency and staff morale and wellbeing could be affected in the long term.

Longer term economic impact of COVID-19 on bus service provision

The budget for the provision of subsidised bus services within the current policy framework is forecast to be under significant pressure. Commercial bus operators are currently being supported by time limited funding enabling operators to maintain their pre-Covid service levels despite the loss of revenue from reduced patronage. It is unlikely, on the majority of routes, that patronage will recover to pre- Covid levels and may therefore affect the commercial viability of some services.

Commerciality

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:

commercial models not being able to deliver expected benefits and commercial revenue targets and/or
the structure exposing the Authority to greater financial risk if the delivery model is unsuccessful.

Project/Programme Appraisal and Assurance – ensuring compliance to national devolution commitments

New project and programme proposals are not effectively appraised or assured in line with the Devolution Deal commitments made to Central Government. Business Transformation has resulted in changes in support for Single Assurance Framework (SAF) implementation. In the short term this may have an impact on the capacity to implement and embed the SAF across all WMCA project portfolios. The risk may be exacerbated by new funding streams in response to the Covid pandemic.

Financial resilience of WMCA to absorb fiscal shocks

The revenue budget in recent years has been supported by reserves and other one-off resources. The nature of this funding limits the degree to which WMCA can quickly direct funding towards specific priorities (or changing priorities) and also reduces the extent to which WMCA has the financial capacity to effectively deal with fiscal shocks; examples being the recent pandemic and related / unrelated escalations in revenue and capital initiatives.

Opportunities

The Levelling Up White Paper, published by Government in February 2022, establishes the West Midlands as a national trailblazer for the transfer of ‘London-style’ powers to the regions and into the hands of the people who know their areas best. This represents the commitment from Government to negotiate a third, trailblazing, devolution deal with the West Midlands and enables WMCA to apply for more powers and funding, ensuring devolution goes hand-in-hand with levelling up. This will include WMCA given control over its allocation of the new UK Shared Prosperity Fund to improve education and training opportunities, launched in April 2022.

As part of the Spending review in October 2021, the Government confirmed funding of £560m for the new ‘Multiply’ scheme aimed at improving half a million adults’ numeracy. All mayoral combined authorities are to be allocated funding for providers to run the free courses from the UK Shared Prosperity Fund, with this new initiative to complement existing Adult Education Board (AEB) programmes.

The Government has awarded funding to WMCA of more than £1 billion over the next five years from the City Region Sustainable Transport Settlement (CRSTS), a new consolidated fund for local transport investment. The programme of works to be funded by CRSTS is designed to meet the ambitious vision set out in our recently refreshed Local Transport Plan Green Paper for a greener, more active, fairer and economically successful West Midlands, whilst taking strides towards our 2041 carbon neutral target as part of the #WM2041 initiative.

WMCA is working with the Department for Levelling Up, Housing and Communities (DLUCH) to achieve a Simplified Funding Landscape. This would enable WMCA to have access to long-term, single cross-departmental funding pots which are free of onerous conditions, where investment decisions are ultimately taken by local leaders. Organisational effort and resource could then be directed towards delivery (rather than competitive bidding) and for WMCA to be held to account by Government through single points of contact, consistent Monitoring & Evaluation / reporting arrangements; all to be supplemented by adequately robust oversight and scrutiny frameworks.

Opportunities to generate additional commercial 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 and forecast market opportunities for investment income, reviewing the borrowing strategy and making best use of capital financing. This includes making optimum use of access to the Public Works Loans Board, the UK Infrastructure Bank and other financial institutions.

During 2021/22 a programme of Business Transformation led to structural changes within Enabling Services to ensure the most effective and efficient ways of working were being implemented. A key outcome of this work was to build a business partner model, ensuring there was strategic and specialist resource in all teams and that outcomes and requirements are agreed and updated on a regular basis. This inward look will continue throughout 2022/23.

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

The largest subsidiary is ‘Midland Metro Limited’ which operates light rail in the region. The future 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 the European Regional Development Fund (ERDF) and 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.

The third subsidiary is West Midlands Development Capital Limited (WMDC) which WMCA employs as the fund manager for Commercial and Residential Investment Funds which support the acceleration of commercial / residential property developments within the West Midlands area where traditional lending is not readily available. Being the smallest of the subsidiaries, WMDC is not consolidated in the Group accounts.

9. 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.

10. 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, ERDF and the WMCA in respect of funding of initiatives and competitions to acceleration 5G Infrastructure and Applications.

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AUDIT OF ACCOUNTS YEAR ENDED 31 MARCH 2022 NOTICE OF PUBLIC RIGHTS