Disparities in the economic performance of localities, cities and regions continue to widen
Differences and disparities in economic performance between localities, cities and regions in the UK are real and growing. The potential solutions to address decline or support growth differ between local areas, reflecting the different strengths, weaknesses and opportunities they each face.
Its time for local devolution: central solutions have failed time and again
The spatial blindness of central government policy continues to this day. If we go back just ten years ago (we could go further), within national enterprise programmes, there was a poor understanding of what was effective or was working in enterprise support and little attempt to develop initiatives which built on the local conditions and assets of deprived areas. You could apply this finding to most other policy areas over the past ten years.
From transport, to housing and skills, central government policies in the UK have largely failed to address the disparities in performance and there has been a reluctance to allow localities, cities and regions themselves to design and finance their own tailored solutions. The majority of specific urban policies and programmes implemented by the UK government over the past 10 years have been inflexible; inconsistent; and based on grant funding, often supporting only a limited range of activities. Not much better can be said of specific policy areas which have (spatial) implications for cities, such as enterprise, skills, transport and housing.
These policies are often too narrowly defined, inconsistent, partial and time-limited to make any decent headway in either addressing deficiencies in economic performance, or supporting economic growth at the local level. They are more often than not, too hidebound by functional specialisms and departmental silos to be capable of integration at the local level. The plans to reduce public expenditure have further illustrated the limits of centralisation – with the inability of many government departments to more effectively manage change by having integrated budgets and delivery for services and assets that affect our cities. For example, reductions in local authority budgets and provision for adult care has shifted cost burdens onto the NHS rather than achieved overall cost savings.
Overall, there is little evidence to support the continued centralisation of the bulk of policies, resources and powers which affect our localities, cities and regions.
Seven tests for city devolution
Reflecting on my own experience and research, I have set out seven ‘tests’ to gauge whether the UK government makes genuine progress in decentralising policies, powers and resources to UK cities.
If these tests are passed, we think that there would be significant progress on collaboration between local authorities, stakeholders and businesses, and that institutional solutions would be more likely and more rapidly emerge under their own steam.
TEST 1: Is there a ‘devolution first’ principle?
I back the Centre for Cites call (in 2014) for a national Cities and Prosperity Act to introduce a presumption in favour of devolution. I think that this is a strong and necessary signal to help ensure the success of any devolved powers and resources to cities.
UK Government legislation is about to be passed that provides this presumption for devolution and localism. Local authorities will soon be able to band together into a combined authority and in principal, bid to have any power or responsibility devolved.
CURRENT VERDICT: PASS – things are heading in the right direction. Various actors in Whitehall have pushed hard at this. The Minister responsible in the previous parliament has been promoted to a more senior, influential position.
TEST 2: Are there clear ambitions and objectives?
Any devolution policy needs to spell out why it is needed, and set out clear ambitions and objectives. Practically, devolution is likely to proceed in a series of steps. We should set out those steps, and the remit and objective for each one.
My own view is that this test is not being met. The ambitions and objectives are not very clear, particularly in terms of ‘if devolution is the answer, what was the question?’ From the local or city-region perspective, there are clear reasons, rationales and arguments. From Central Government’s view, the clarity of ambitions and objectives is less clear.
CURRENT VERDICT: MIXED
TEST 3: Are there genuine new powers and resources for cities?
Do the devolution proposals involve genuine new powers and resources? Are the conditions and limits on the use of these resources flexible and open to the city’s own interpretation and needs?
I think this is moving in the right direction, and recently we have seen flexible locally- driven priorities rather than excessive conditionality. However, when it has come to the funding award such as through the Local Growth Deals – there has been excessive conditionality and restrictions to use of funds.
CURRENT VERDICT: MOVING IN THE RIGHT DIRECTION, WAIT AND SEE IF REALITY MATCHES AMBITIONS
TEST 4: Is there a cross-functional approach?
Do the powers and resources for cities transcend the policy and funding silos of Whitehall and allow genuinely integrated or ‘total place’ approaches?
Currently there is not a truly a cross-functional approach, but it seems that Whitehall is designing one, and the city deals struck so far have been cross functional so far as requested by the local areas.
CURRENT VERDICT: MOVING IN THE RIGHT DIRECTION
TEST 5: Are there clear and simple measures of success?
Any new policy should have clear and simple measures of success. These could be related to the economic performance of cities, delivery of housing, private investment, or easing of transport congestion.
As far as I can see there are no clear and simple measures of success yet. Devolution remains a vague and confusing promise. This has not been helped by the ‘pick and mix’ approach, rather than wholescale or scheduled devolution of central powers and resources. A clear an unambiguous statement, or set of statements about the desired outcomes is needed.
CURRENT VERDICT: FAIL
TEST 6: Is there a statutory framework setting out a long-term settlement?
One of the criticisms of recent government policy is that, while progress on devolution has been welcome, there is no statutory basis for the new powers, flexibilities and resources that have been proposed. They could be removed overnight.
Clearly, for any new powers or system of decentralisation to be effective it needs certainty and continuity over a 10 to 20 year timespan at the least. One of the features of urban policy, and many associated policies in the past has been the very time limited nature and high rate of turnover in policy priorities, resources and delivery mechanisms. This has to change.
There seems to be some change to this, with the enabling legislation currently going through parliament.
CURRENT VERDICT: MOVING IN THE RIGHT DIRECTION
TEST 7: Can localities and cities raise their own revenues, vary taxes and design their own financial instruments?
Localities and cities will benefit and prosper from devolution when the have significant freedom to raise and keep their own revenues, and change financial instruments and taxes, as well as design new ones. Clearly the dependence on hand-outs from central government must end, as well as the often perverse policy incentives and narrowly prescribed actions that this results in. It is probably the ultimate test of whether the UK’s cities get meaningful devolution or not.
CURRENT VERDICT: MOVING IN THE RIGHT DIRECTION, BUT CRITICAL TOOLS MISSING. The Chancellor of the Exchequer’s comments about local authorities retaining all business rate income are positive. But there are questions about the ability of local authorities to borrow or issue bonds for example. In order to effectively address infrastructural gaps and physical development challenges – you need to money up front, and debt finance is the only way to address this. The good news is that these could be low cost financial instruments backed by business rates revenues. The bad news is that HM Treasury’s virtually nil appetite for more debt rails against the delivery of effective local financial instruments. Further, with many politicians and business leaders continuing to use the ‘household finance’ story for the nation’s finances, long term strategic borrowing and financing tools seem to be off the agenda. The missing part of household finances? Most households have mortgages, or extend mortgages to undertake major renovations. For nations, we call these mortgages the national debt – an innovation made 200 years ago that allowed the industrial revolution, railways, and fuelled the development of the US and Europe.
Why do we need these seven steps?
I’m old, I’ve been around a bit, I’ve seen the majority of Centrally designed (by Whitehall) solutions fail time and again in terms of improving the performance of localities and cities where needed; or helping successful places better manage their growth. Failure happens for four main reasons. 1) they are too narrowly defined and specified and don’t allow for variation based on local needs; 2) they are partial – they only address one aspect of an opportunity or problem. This is often because they are designed in functional silos (aka Whitehall departments); and 3) they are inflexible and unable to change for different local needs the fact that economies and markets evolve and change over time.
The final, fourth reason is perhaps the major reason they fail: 4) central government policy often does not have clear understanding of challenges, nor of objectives/ what seeking to achieve. Sound familiar?
