Devolution could be a way to help reverse the “zombie state” created as a result of the long-term funding crisis in local government.
But while further devolution is no ‘silver bullet’, if done right it could be part of the solution to local government’s funding problems, according to a panel discussion on the topic at Public Finance Live, which is being held in Manchester this week (10-11 July).
Paul Kissack, group chief executive at the Joseph Rowntree Foundation, offered context by describing the “bleak” current picture of England being “in the midst of an enormous experiment” of centralisation, which has reached “quite an extreme point”. He noted that “more and more power and control has moved from the local area to the central area” and “powers have been removed”.
The UK is an “international outlier” on devolution, and lessons could be learnt from models in other countries, he said.
Dr Laurence Ferry, full professor in accounting for democracy at Durham University Business School, noted that because there was “inconclusive evidence” on devolution’s benefits, it was vitally important to determine the type of devolution that should be implemented.
“Some policy levers could be passed down, for instance, around economic policies, transport, and planning, but if you’re going to have those things, how would you give regional combined authorities power to drive things through? Because they might have local authorities in the area of different political persuasions not willing to do that. You’d have to give them some kind of special planning power to drive plans through,” he said.
Noting that the inadequate funding of local government had created a situation akin to a “zombie state”, Ferry said devolution might be “a way to get rid of this zombie state and put some finance back in local government and some belief”.
Ferry said the first thing the government will have to decide, with local government as a partner, is “what is local government for?”.
He said a “massive reform” of the “completely ridiculous” local government finance system was also needed, with local tax raising powers a necessity.
But, he added, “there’s no point changing the whole financial system if you haven’t got the audit and accounts system” fixed. Proper audit accountability is “just not in place”, he said.
There also “has to be a different speed” at which devolution is done, given “local government’s capacity for economic growth”, with those areas further ahead taking the lead. “But we should certainly be looking to put in place a devolution map and make sure that every area that wants it has some form of proper devolution by 2030,” he said.
Picking up on this, Susan Hinchcliffe, leader of City of Bradford Metropolitan District Council and who was instrumental in securing the West Yorkshire Mayoral Devolution Deal, said that widespread devolution would require different funding in different areas, “otherwise you’re not going to get social equal outcomes, and that needs to be reflected in all the funding formula that government coming out with, and that is a difficult decision”.
She added that while “devolution sounds great when everybody gets their share, when a share is more equal to some than others, then that’s when politicians start to get very worried and anxious” as making such a decision would need ministers to “take ownership” of the policy.
However, she said she was encouraged by the early words and actions of new prime minister Keir Starmer and his government, referencing a meeting with the metro mayors that showed “a real intent to work proactively and positively with a devolved agenda”.
Reflecting on the economic impact of devolution, Kissack said that “coherence” would make a big difference. “Combined authorities provide an opportunity to bring together things which coherently should sit together, so things like transport and planning, things like skills and employment services,” he said. “At the moment, these all sit at different tiers of government and are overly centralised.”
Another key difference-maker is the devolution of fiscal powers, he said, “which is why a lot of the conversation about devolution has been around power and responsibilities and funding flows from central government”.
But even at combined authorities, about 60-70% of their funding comes from the centre, he pointed out. “So it’s still a model which requires regions, in that case, to go to government seeking funding, rather than having control over its own tax base. That is very different from regional models in other countries,” he said.
“There is a risk that we think we are doing devolution because we are moving powers around, but actually we’re still reliant on a top-down fiscal model.”
—————
FREE bi-weekly newsletters
Subscribe to Room151 Newsletters
Follow us on LinkedIn
Follow us here
Monthly Online Treasury Briefing
Sign up here with a .gov.uk email address
Room151 Webinars
Visit the Room151 channel
