A furious political row has erupted after Birmingham City Council agreed that control of a £500 million fund to fight unemployment and improve workforce skills in the West Midlands should be placed in the hands of an unelected body.

Day-to-day delivery of the Multi Area Agreement for Employment and Skills (MAA) will be delegated to a ten-strong management team with only two councillors on board, neither of whom are from Birmingham.

It means that Birmingham, which makes up 40 per cent of the City Region in terms of population, will have no direct involvement in how 20 funding streams are used, including £38 million from the Working Neighbourhoods Fund, which is supposed to tackle worklessness and poverty in urban areas.

The decision has split Birmingham City Council’s ruling Conservative-Liberal Democrat coalition, with a number of Lib Dem councillors condemning the MAA process as cumbersome, undemocratic and doomed to fail.

Under the arrangements, an Employment and Skills Strategic Management Board (ESSMB) will administer the MAA and be responsible for meeting government targets to improve qualifications among school leavers and reduce unemployment – which is over 30 per cent in some parts of Birmingham.

Members of the ESSMB include the private sector chairmen of the region’s Employment Skills Boards, directors of the Learning and Skills Council, Jobcentre Plus, the chief executive of Solihull Council and two councillors – Ken Meeson, the leader of Solihull, and Anne Millward, leader of Dudley.

Rebel Birmingham Liberal Democrat councillors failed to secure changes, when a plea to the city council cabinet to rethink the MAA process failed.

Jerry Evans said funds were being placed in the hands of organisations such as the Learning and Skills Council that had “failed to deliver for us in the past”.

He contrasted the West Midlands to Leeds, where a similar MAA had six councillors on its delivery board.

Coun Evans (Lib Dem, Springfield) added: “This is a backward step and will not result in better decision making. There is a democratic deficit here.

“The worklessness agenda is absolutely crucial to the future of this city and if we don’t solve this problem we will leave a legacy of economic failure.”

Birmingham City Council chief executive Stephen Hughes insisted that the City Region Board, consisting of the West Midlands’ seven council leaders, would have an ultimate veto over any decisions made by the ESSMB.

Working Neighbourhoods Fund money could only be spent by “going through the normal processes of the council”, he said.

Mr Hughes added: “The MAA brings coherence to the tackling of worklessness, with the ability to draw in extra funding that otherwise wouldn’t be there.”

But Sir Albert Bore, leader of Birmingham’s Labour group, said anyone who thought the MAA was democratic was “having the wool pulled over their eyes”.

Sir Albert (Lab, Ladywood) added: “There is no accountability on the City Region Board because no reports have ever been published.

“Nothing that the City Region has done has ever been scrutinised, because there is no information to scrutinise.”