31
Examination of witnesses
Andrew Carter, Stephen Jones and Councillor Vince Maple.
Q130 The Chair: Hello, and welcome to the ninth evidence session of the Economic Affairs Committee inquiry into fiscal devolution in England. We have three excellent guests with us today: Andrew Carter, chief executive of the Centre for Cities; Stephen Jones, director at Core Cities UK; and Councillor Vince Maple, chair of Key Cities and leader of Medway Council. Thank you for being with us today. I should state at the beginning, this session is being broadcast on Parliament Live TV, and a full transcript will be taken and made available shortly after for any corrections of fact.
Without further ado, we have quite a few questions to get through and will get straight into it. First, do you expect fiscal devolution to boost economic growth? How strong or otherwise is the evidence for this? Related to that, do you expect devolution to prove equally beneficial to all areas?
Andrew Carter: There is some evidence to show that more fiscal devolution supports economic growth; work done by the OECD highlights this. We see that wages are slightly higher in places that have more devolution and GDP per head productivity is also slightly higher. But it is important to say that it is a mixed picture.
To get a little nerdy almost immediately, causation is a problem. We cannot definitively say that one thing causes the other and so we should be relaxed to a degree about the matter. We cannot claim that this is the thing that will revolutionise or transform the performance and make-up of our economy, but we should think of it as one of the interventions that will give more places more reasons to support growth. That would be my observation.
My other point is this. The status quo—as I am sure you have heard over time—which is highly centralised, does not seem to work very well for a great number of places. When we think about what else to do, we should be mindful that what we are currently doing is considerably less than perfect.
Stephen Jones: Can I pick up from that last point? The real difficulty is working out what the counterfactual is; that is true of all the international evidence. We are trying to capture the marginal benefit of decisions being made locally rather than nationally, rather than asking whether some places grow faster than others. Often, those things are too conflated in the discussion. A lot of attention is rightly placed on Greater Manchester, having had a successful first quarter of this century. How much of that was related explicitly to the devolution journey versus changes in the sectoral mix and the overall macroeconomic position? Equally, in places where growth has been sluggish, that is not necessarily a consequence of decisions made locally.
Where the evidence is more sophisticated, as Andrew started to point to, is when think about what the factors are. What is the ability of local leaders? Can they respond more quickly? Are they more aware of what is going on? Are they able to respond to what they hear from their business community? Can they hold relationships with their research institutions? The active process is where the evidence is stronger when it comes to impact.
Will devolution have equal outcomes across all the country? No, but as Andrew says, we do not have equal outcomes across the country anyway. It is a matter of what the relative improvements are and where we think there is good evidence, but it is really hard to prove it.
Councillor Vince Maple: To add to the excellent contributions from my colleagues, in one sense the answer is, “No, but”. It is not the act of fiscal devolution itself that will lead to growth; it is better local decisions leading to better investment into communities, better conversations with public and private institutional organisations, and the ability to make sure the conversation about a particular area is not dealt with by somebody in SW1, who I am sure does a great and laudable job, but the ability to know a place cannot be underestimated in those conversations.
It is also about preventive approaches: who can see the truck heading towards you? It is the local communities, first and foremost. It is important to have direct funding available to you and the methodology behind that, but, again, no one thing by itself will result in fiscal devolution leading to growth.
The other thing—Stephen spoke about this—is that we are not starting with a blank piece of paper where every community is the same. Some communities do very well today without fiscal devolution, and growth is happening; there are other places where that is not the case. Things such as deprivation are long-term, systemic issues. Fiscal devolution may help to pull some levers more quickly, and that would be a good thing, but that by itself is not enough. There are much wider issues to be tackled, and ultimately communities want to tackle them; they want to move on, but sometimes those challenges can feel too far away. Having some of those financial levers closer to home will help those conversations as well.
The Chair: Following on from that, you pointed to other reasons why you may pursue devolution, such as local accountability or improving service provision. Do you perceive those as complementary to a growth-driven form of devolution, or are there trade-offs potentially involved in what your aims might be with devolution and how you might then pursue it?
Councillor Vince Maple: We may speak about this later on, but, as we speak, councils are meeting to discuss the issue of planning and the balance between a strategic overview on planning, and the economic growth that can often come from good planning decisions, and the ability of locally elected members and local residents to have a say in their community. There is a tension between those two, which we are working through at the moment. As I say, in real time, there are councils meeting this week and decisions are being made around the structures of their local governance processes for planning. That is a good example from my perspective. Certainly a number of Key Cities members feel that perhaps the discussion around devolution, in its broadest sense, is moving powers away, rather than bringing them more closely to the community.
Andrew Carter: At this moment in time, we are talking about fiscal devolution in England in relation to the mayoral strategic authorities and not local authorities. That is a critical point to make, because a lot of the conversation conflates those two issues. When thinking about service provision, there is a degree of universality in our expectations to do with common delivery elsewhere, which by definition is not true when it comes to MSAs. Think about bus services. There is no argument that we should have comparable bus services in all parts of the country, but buses are potentially critical for some MSAs. Thinking about service provision and uniformity across them applies slightly less, in some respects, to the MSA model than it does when we get into what local authorities do. That would be my first point.
Secondly, giving responsibility to the mayors and strategic authorities for services that the public think they are already responsible for actually enhances accountability, awareness and transparency. We did work on this, polling the public in different places that have mayors, asking, “Do you know that you have a mayor? Can you name the mayor? Can you tell us what they are doing?” Recognition, awareness, understanding and engagement with mayors is materially higher in those places relative to the council leaders or to the local MPs.
Think of understanding and awareness—I know that accountability is much broader than that—as part and parcel of whether the public know what is going on. Over time, places with mayors have proved demonstrably that their public know them better than they necessarily do other public leaders in their area. There is a relationship between giving the mayors increasing responsibility for things and that inducing, informing and developing, as it should, stronger forms of public awareness.
Then we have related questions about holding them accountable for the various things that they do and the appropriate format for that. Should it happen at the local or national level? The answer is probably a bit of both, but those are details to get into.
Stephen Jones: To your question about complementarity or trade-offs, the answer is probably both. There are certainly lots of examples of things that we at Core Cities are keen to do with our respective strategic authorities to improve service delivery, in particular joined-up service delivery in our cities, around housing, mental health, worklessness, education and skills. If we can join up those services and deliver a better offering to the individual, will that boost growth? Probably. It is more likely to get people out of long-term sickness and worklessness and into new employment opportunities.
As Councillor Maple said, there are definitely options where there will be trade-offs. Purely in a budgetary sense, do we spend more money on X or on Y? Do we invest in the long term versus the short term? Do we think more about prevention or dealing with acute? In all those challenges that all Governments face, there are naturally trade-offs between the services you offer and your long-term growth strategy.
The opportunity of fiscal devolution is, first, that it builds a feedback loop into those choices, more so than currently is the case. If a particular area does not choose to invest in its long-term growth potential, it will not necessarily see the proceeds to increase tax revenues. There is that feedback and that circle, which we think is critical.
Secondly—this goes to Andrew’s point about accountability—on the choices made by mayors and elected councillors, if they prioritise one thing over another, or they put forward a manifesto that says, “We’re going to spend our flexible budgets on this activity and not that activity”, people can choose whether they want that. That is fundamental and at the heart of what we are trying to achieve in devolution, in particular with the fiscal dimension.
The Chair: You have expertly moved us towards our second question from Lord Young.
Q131 Lord Young of Cookham: Can I follow up the answers you gave to Baroness Penn’s first question about whether fiscal devolution leads to economic growth? Is what is on the table actually fiscal devolution, or is it simply redistributing central government grant but using a different formula?
Andrew Carter: It is more than that, but I understand why you ask the question. Essentially, we will remove government grant from all or some of the MSAs—I am sure we get into that. In the first instance, that will be replaced with a share of income tax, as you know. In some respects, you could rightly say that this is a degree of replacement of one form of money over the other. I understand that, but I would suggest that, due to the nature of the money that then is available, if their place does well and begins to grow, because it is related to a tax base or bases that are growth-related then they will get more money to invest and spend on different services.
That is not how the system currently operates. Most MSAs get a form of grant from government—one year, three years, whatever it might be—that is relatively fixed. In some respects, their performance during the period of one to three years bears no relationship to the next grant negotiation that they go through. The Government, whoever they might be, then decide what the next round of funding is. In this newer system, there will be flexibility and autonomy so that, if the tax base grows, they will get receipts from that tax base to allow them to invest in the ways they want, and will be less beholden to negotiations with government about exactly how that money is spent.
We should think about the terms and conditions that come with the money, as much as the nature of the money itself.
Lord Young of Cookham: Does it not flow from that that they will not know for two or three years whether they do indeed have any more money? In the short term, what effect will it have?
Andrew Carter: When we get into the process of planning it out, the programmes offered are essentially over a rolling period of two, three or maybe four years, and they are getting the money from that. Our proposal, in the first instance, in the current spending review system, is to take the integrated settlements, where we know what that money is for the next two to three years, and replace it with an initial share of income tax—we think corporation tax, but we can get into that as well. That gives certainty over that period. If you give them a share of their income tax that is broadly comparable, they get certainty for the next two to three years, and then they can think about what happens after that.
Ultimately, you are making judgments about whether your tax base is growing or not. Look, as we have, in detail at the tax base of some MSAs. There has been variation, but they have all grown over the last 10 to 20 years in nominal terms. You get some confidence and certainty. Year on year there will be vagaries, but that is also true of the way that MSAs and local government are currently funded.
Lord Young of Cookham: The other two might like to have a go at answering my supplementary question.
To what extent will you be able to distinguish the extra efforts that a local MSA may have made that increase revenue from the overall performance of the economy, which has, I would argue, perhaps a bigger effect on income tax than anything an individual MSA might do?
Councillor Vince Maple: There are a couple of parts to that. First, it is worth recognising—I say this in my capacity as leader of Medway Council—that there are lots of parts of England still without an MSA. I know that is a long-term ambition. There is a question mark around how to ensure parity between those with and those without. We will probably get into that as we go through this afternoon.
You pose an interesting point. We have talked about Manchester already today. It is not a member of Key Cities; it is a Core Cites member. Rightly, it has said time and again that it has had the fastest-growing economy out of all the major regions. It is an interesting counterpoint to say, “That is great, but how much of that is because of the national growth?” People with far greater economic brains than mine will probably say that this bit is definitely down to a local decision and that bit is definitely not and this other bit might be.
There will be tests and challenges as we go through this. It will be reasonable to ask whether it is around the local GDP, employment rates, tackling NEETs, quality of housing, or all those things and more. The answer is, probably.
I am a fan of KPIs and think they are a good thing. The challenge will be that you could have an almost unlimited amount of KPIs to ask whether fiscal devolution is better or worse for a community. It will be better but by how much? I accept that it is difficult to tick, say, five boxes to show that this has made it better than if you had not ticked those five boxes or had made five different decisions”.
Lord Young of Cookham: You cannot impose an overnight visitor levy, is that right?
Councillor Vince Maple: I definitely cannot, at time of speaking.
Lord Young of Cookham: Is that a disadvantage from your point of view compared with what other authorities can do?
Councillor Vince Maple: Certainly. Not all 22 members are within MSAs. The previous chair was from Salford, but the majority of Key Cities members are not currently in MSAs. However, they are from big, important communities, such as Bournemouth and Plymouth. They play an important role in our country’s economic regeneration as we move from a point of austerity, and they also places where people visit. I suspect those council leaders, often but not always unitary authorities—that is another part of this conversation, certainly from a Key Cities perspective—will say that every part of England should have access to those powers. I am very happy for the default to be that if it is an MSA then it sits with the mayor. There is always a conversation about local government as well.
Q132 Lord Prentis of Leeds: My question is about equalisation mechanisms. I understand the conviction that fiscal devolution may well boost economic growth. As Andrew said, it is one of the interventions. I also understand that, if you redesign the fiscal system, others will argue there has to be an equalisation mechanism. It may be for some of the reasons you have already given—they may not have the revenue-raising powers that another authority will have; there may be underperformance; it may well be the cost of providing public services. Equalisation is an inherent part of the discussion when talking about fiscal devolution. My question is very simple: what sort of equalisation mechanism would you propose to assist devolved authorities which have only limited capacity to innovate or to promote growth?
Andrew Carter: We should start from the premise that all MSAs, to varying degrees, will have some ability to see and promote growth more than others. The advantage of doing it at the MSA level is that, in itself, it provides some form of aggregation and equalisation across a bigger geography. That is an obvious statement. There is no reason to start from the position that any MSA will not be able to promote growth, but we should also accept, understand and then deal with the fact that some will grow more rapidly than others—some because they do things deliberately that might enhance growth even at the margins, and others because they will be the beneficiaries of legacy decisions that they ride on the back of. That is an important first point to make.
Secondly, we should think about redistribution within the system but not necessarily fundamental and basic equalisation. We do not have an equal system now; no one can claim that to be realistic. We have to ask ourselves whether we can create a system where there is some variation—as there is variation already—that encourages all places to do better than they currently are and become better versions of themselves, which importantly offers enough incentive in the system for places to make decisions about growth. I think we can do that.
We have examples from elsewhere. We looked at the Swiss style of doing things. Essentially, you set a benchmark, threshold or baseline, whatever you want to call it, and, when places grow more rapidly above the benchmark, through different mechanisms you take a proportion of the growth—not the base—put it into a pot and allow that to be redistributed to places that are growing less quickly or less strongly.
We do this in other formations, for example, in part through business rates, although it is devilishly complicated, and your specialist adviser can give you chapter and verse on that. But it is not impossible. In fact, it is entirely possible to have a system that encourages, rewards and supports growth but also provides revenue from those that are doing particularly well. Let us be honest and clear here that what we really mean is London. London will provide enough surplus to compensate for lower growth—it is still growth—in other places, to the point that you can say that we will not let any place drop below a threshold of, say, 90%. That is relatively straightforward. That is what the Swiss do and it seems to work there. That is what we are advocating here.
There are decisions to be made about where you start, but these are not fundamentally impossible things to reconcile. That is important.
Stephen Jones: To build on Andrew’s points, which I agree with, there are two things I would add. First, there is a difference between what the funding is for and what services or actions are provided with that money, and how important equalisation is in that regard.
If you are delivering care services or universal services, equalisation in the funding model is quite important because people need those services no matter where they are. Often, you then need to build deprivation metrics into the way those indices are played out.
If you are talking about the investment side or growth side, the reality is that different parts of the country need a higher or lower level of that fixed money. A metro public transport system requires more money than if you do not have such a light rail system. If you are generating growth, you will then need to reinvest to build more housing.
Depending on the function of the funding, that will determine how important the equalisation dimension is. There will always be some—you do not want to create vicious and virtuous circles—but you will probably have a little more tolerance for equalisation on the economic investment side than with universal services.
The second point I want to highlight is this. If you are designing an equalisation model, how do you build in something that is predictable and ongoing rather than something that is time-stamped? One difficulty is that, where there are reset moments—in five years we will look at this and rejig it and then start again—that removes huge amounts of long-term incentives. We are talking about investment decisions that we want places to make over five, 10 and 20 years, particularly where that funding is, we hope, used to leverage private capital to have a revenue stream against. If you build an equalisation model in that space that ultimately feels like a spending review, you remove one of the key opportunities of that long-term certainty. However, designing for equalisation at a 5% top slice each year or a set floor target in the way that Andrew described, you can build into your modelling something that reduces those risks and the dampening of the incentive and certainty. That is one of the key arguments.
Councillor Vince Maple: One of the things to recognise, as Stephen touched upon, is the importance of not leaving things for ever. At the moment, councils up and down the country have to deal with a council tax system based on evidence from nearly four decades ago. That is not in anyone’s interest, but that is where we are. That means that, ultimately, any review will be much more difficult than if it had been done after five or even 10 years. Key Cities is supportive of using indices of multiple deprivation. We see that used in calculations such as the fair funding formula for local government.
It is about trying to be fleet of foot as well, recognising that, even if you create a system today, in five or 10 years that system may need quite fundamental review because the world has changed quite a lot, and so service provision and service requirements have changed.
For example, we are having a national conversation about adult social care. Whatever the conclusions, that almost certainly will play into this conversation as well. We need to have systems, including those for equalisation, that are fit for purpose both on day one and day 10,001. We also need to recognise they do not exist in isolation; other things are happening. Service delivery, either through MSAs or unitary authorities or other local government bodies, needs to recognise that as well.
Lord Prentis of Leeds: All three of you recognise the need for an equalisation mechanism. What if the shortfall in a devolved authority was caused by bad decision-making or underperformance? Would you still move money from the growing authority to the one that is in difficulty?
Andrew Carter: That would be a judgment for the system to make: to identify where there are shortfalls, however we define those, and then to understand the reasons behind them. If the conclusion of some due process is that there is unlawful behaviour, or whatever it might be, then that place should be compensated for it. But if due process has been followed and bad investment decisions have been made, places need to accept that there will be a funding implication on account of that.
If we went into a large-scale economic shock such as a recession and/or a Covid-related event—let us hope not—and the economy shrinks quite dramatically, we already have stabilisers in the financial system to compensate for those kinds of things. We can deal with those shocks as and when they arise because we have systems in place to deal with all of that. We are not trying to design a system that can deal with all those things internally, because that is just mad, and we do not do that anyway. We need to have a system that, all things being equal and in normal circumstances, creates the conditions that we want, accepting that sometimes things come along that need extra special interventions.
Can I make another point? It connects to a question that Lord Young and Lord Prentis asked. My conversations with MSAs, particularly leadership, both politician and officer, tell me that they are prepared to accept and embrace some degree—“some” is doing a lot of work there—of uncertainty on funding because the flexibility that they will get through the new system, and the potential upside, more than compensate for the concerns that others might have around some of that uncertainty. That is the decision that we are considering. The MSAs I talk to say, “Yes, we are not blind to this situation, but we accept it and we want to move forward never the less”.
To Lord Young’s point, this is where we probably need to test this out, through running it over a period of two to three years in places where we have some understanding of the funding, and then see what happens. After that, we can take a pause and make a judgment. We will need to do because there will be a lot more MSAs, and more variation within the MSA community as more players come in.
Stephen Jones: To pick up on your question, it is an important point for how we design the system. We will see what comes out of the Budget next week.
The lesson I would draw on is this. When we were designing the Manchester earn-back model, in 2011-12, which fed into the gain-share model that most MSAs have, that was originally conceived of as a payment-by-results model, and Greater Manchester was going to get up to £30 million per year for 30 years, subject to five-year review points around whether it had met various agreed targets. Before the first five-year milestone was met, it became evident that the quality of the metrics that were set could not disentangle whether activity was due to the decision-making of Greater Manchester or to lots of other external factors. Quite quickly, that up to £30 million subject to five-year reviews translated into—as Lord Houchen gave evidence to this committee—we have £30 million, or whatever the Tees Valley pro rata equivalent is, for 30 years.
There is a need for pragmatism. Can you truly design in value judgments over the decisions that are made—positive and negative decisions—vis-à-vis what is happening in the wider economy, or do you accept the fact that there is some form of blurring and compromise for other benefits that talked about?
Councillor Vince Maple: A real-life example of the question you pose is where local government funding has gone over the last seven or eight years and exceptional financial support. MHCLG—the clue is in the name—started, it would be fair to say, on a cross-party basis. The first to access it were those who made bad political decisions. I think most people in local government would agree with that. We are now in a position where the majority of those accessing exceptional financial support are just dealing with the day-to-day, and there is not enough resource to deal with that.
Flipping that to where you get to with an MSA, you might say here are some expectations but, if there are challenges and difficult decisions, and the local and regional government and the community say that it was not a very well made decision, it should not be the residents of the place who suffer.
That is the potential challenge. It is about having those MHCLG-style safeguards and recognising that as an example. The tool was originally made for people making bad political decisions, and that was the case for the first councils that had to access it. Now, that is a tiny amount of the proportion of people accessing it.
Q133 Lord Razzall: I would like to bring us on to different levels of responsibility and powers. We have central government, the mayor and strategic authorities—which now seem to be rolled together into the acronym “MSA”—and we have different levels of local government. The Government have clearly decided that major devolution will go to the MSAs. What do you think of that, particularly in the context of the current mess in local government reorganisation, or its postponement, which I know is going to come up in a subsequent question? What level of responsibility should be given to local authorities, particularly in the context of the mess that we are now faced with? The three of you are clearly pro devolution to MSAs, but can you think of any disadvantages of powers being given to MSAs rather than retained in central government?
Andrew Carter: The original guiding principle for the MSAs—they were called combined authorities back in the day, but we move on—was that we should have some form of political geography that is coterminous with the economic geography of a place. That was the original principle behind Greater Manchester. If you look at its economy, it is broadly cognisant within the 10 boroughs; it is slightly larger for higher-skilled travel to work on the south side, but there is a degree of coterminosity. You want an institution that can make economy-related investments and decisions that are broadly comparable to that geography.
When you take that principle, which is still a solid one, and think about the economy-related issues of strategic transport and planning, skills, and the interaction between all those things across the geography in which everyday life is lived, then, yes, they make perfect sense in that regard.
Lord Razzall: What about local authorities though?
Andrew Carter: That is a different question.
Lord Razzall: Particularly where we do not have MSAs.
Andrew Carter: We have tried in various ways through different periods of policy to deal with that problem. We had RDAs back in the day, which were an attempt to deal with the economic problem relative to local authorities that were, invariably with few exceptions, too small to do economic planning sensibly and appropriately. Then, in a similar vein, we tried the local enterprise partnerships, and they lasted as long as they did.
There has always been an attempt to grapple with the fact that, from an economic planning perspective—I am making an important distinction there—many local authorities are too small to do that sensibly, because 50% of people live in one local authority and work in another. You cannot plan transport systems at the borough level. You have to do it at a strategic level. If you have that in mind then the MSA idea, and the geography, to most degrees makes perfect sense.
Stephen Jones: With the Government’s rewiring the state delivery plan, which they intend to publish later this year, there is a huge opportunity to move to a way of describing a system that works up and down the vertical channel. There are, broadly speaking, four tiers of government: central government, the strategic authority tier, the local authority tier, and the community neighbourhood tier. No matter which policy area you talk about, all four tiers have a legitimate say and role, not just in delivery and implementation but in decisions, policy, and strategy. You need to design a system where they talk to each other. That is where there is a need for some principles.
The conversation I am currently having with civil servants is that we should not try to produce a NEETs table with one row for what, for example, the strategic authority tier does. It is about principles and how that framework will work. How do you build subsidiarity into decision-making? How do you build in accountability and alignment of incentives? For any given place in the UK, if the community wants one thing for the economy and the local authority wants another, the mayor wants something else and the national Government want something else, then that place will get stuck and will not go anywhere. How do you recognise that all four tiers have equal status, importance and stake in that decision?
We can design that system. It is not the one we currently have, but that is the challenge. If we are to rewire the “state”, we need to build into that thinking what this means for the delivery of health and care services, transport and so on. The balance between those four tiers will look slightly different. Some places will lead and some places will follow, and vice versa.
Lord Razzall: It will always follow the money. If money is given to the MSA, clearly that reduces the capabilities of the other authorities.
Stephen Jones: Indeed, but, equally, MSAs are not dictatorial organisations. We might have dropped from their name the term combined authority, but their governance is still made up ultimately of a mayor and the leaders of the constituent authority councils. Decisions need to be passed through a majority. There is still a sense of the structure and system that we would look to design.
Equally, we in Core Cities are very conscious of the fact that, within the constituent authorities that our eight English cities sit within, our city councils are hugely important economically and for where we have the capability, relationships, design, structures and assets. The money is one part, but other dimensions to do with legitimacy, relationships, structures and assets are also part of the system that we can contribute to.
Lord Razzall: It is easy to call them MSAs and combined authorities, but the mayor of Teesside was very clear that the money should be given to him and not to a strategic authority. There are two different levels of power there, in addition to the others.
Councillor Vince Maple: To use a wonderful cliché, the power should sit where it needs to sit. On local regional government structures, we have mentioned the pause, but the Government are clear that they want to move to everybody being a unitary authority. I support that as a principle. Key Cities is certainly not opposed to that.
It is worth recognising today that, in some areas, both with and without any form of combined authority, it is the districts and boroughs—places such as Exeter and Norwich, which are not upper-tier authorities—that we need to hear from. They need to be part of the conversation. I say that as a leader in an upper-tier authority. In my region, having places such as Canterbury and Dover would, for obvious reasons, make sense, but we are where we are with that.
We talked earlier about fiscal devolution. It has to empower people and communities. The Minister of State has been pretty clear on that: devolution is not just down to councils and mayors; it is down to back-bench councillors and communities. Pride in Places is a good example of a programme that does exactly that.
It is also about recognising that one size does not fit all. What will work for a coastal community in the south-west will be very different from what will work in an urban area in the north-east. Trying to have a system that helps and supports both those communities in their wider regions is tricky. That is why this conversation has probably taken longer than we all would have wanted—decades, realistically.
Lord Razzall: What about the disadvantages? Can any of you think of any?
Stephen Jones: Do you mean of the mayoral model?
Lord Razzall: The disadvantages of giving power to the MSAs rather than retaining it with central government.
Stephen Jones: The interaction with business is interesting, particularly those businesses that operate across the whole of the UK or globally. How do you design a system where you do not get a duplication of effort or of engagement? There is an equivalence in the business environment to strategic infrastructure, in that there are some things that are genuinely national. How do we have a conversation where you can genuinely join together and streamline, rather than have to work your way around every mayor?
Partly, it is incumbent on us as local government groups and mayoral groups to come together and join up those conversations. One of the reasons that Core Cities exists is to have a conversation on behalf of 12 cities, as opposed to having to have 12 separate conversations. There are mitigations to that, and the risk of duplication or proliferation of action is something that we need to balance. I think the advantages outweigh them.
Lord Razzall: We have another level of power between MSAs and central government, which is Core Cities.
Stephen Jones: No. But I would say that there is a difference between control and power, and the ability to convene and work together informally. As much as I would like to hoard more power to Core Cities, I am not sure I would introduce yet another tier of power.
Councillor Vince Maple: The only real disadvantage is the risk of powers from local authorities going up. If devolution is supposed to be moving powers from Whitehall down to town halls, I have found very few people who are not supportive of that. Lots of council leaders are concerned about some powers which currently sit with them going up to mayoralties and combined authorities. There are not huge examples of that. Planning is probably the first area where we have that collective tension, and we will work our way through that. For me, that is the major disadvantage.
Q134 Baroness Wheatcroft: To some extent, you have touched on this already. How do you see the tensions that you have already pointed to between mayoral strategic authorities and other local authorities? How can those potentially get worse? What would you like to see done to ameliorate them?
If I may, I will start with you, Vince. What is your experience in Medway, where you have a county council that I would guess you do not see eye to eye with?
Councillor Vince Maple: That is correct. I am very happy for that to be on the record.
In the region of Kent and Medway, there are 14 councils, one unitary, one county and 12 district boroughs. If you came to us 15 years ago, it would have been 13 Conservative councils and one Labour council. Now we have one Reform council, an independent council, Green councils, Lib Dem councils, and Conservative and Labour councils. It is very politically diverse.
Interestingly, on this issue of wanting to be a combined authority—we are not overly precious about exactly what form that takes—there has been unanimity. The 14 of us have written on more than one occasion to more than one Secretary of State over the last couple of years with a very clear message to say, “Yes, some of us disagree on pretty much everything, and sometimes even when we wear the same rosette, but on this issue we are absolutely front and centre”. We know that, for the 1.9 million people who we collectively represent, we are losing out, potentially to Essex and Sussex as our nearby neighbours. London is a different matter. We are near London, as people will be aware, but that is a different conversation.
Lots of arm’s-length bodies came to Medway last week, and it was great to welcome them. Over the last 10 years, one organisation had put £5 million into our area and £50 million approximately into Salford, which is 10 times as much. That will be for lots of different reasons, but part of it undoubtedly will be because Salford is within a very successful mayoral authority. We see the real-time losses that we collectively feel for our residents.
Baroness Wheatcroft: The 14 councils are united in wanting more power and more money, but how confident are you that, once that is on offer, it would not become the subject of tremendous in-fighting between the different organisations and the different levels?
Councillor Vince Maple: I have always said that it is better to have a bad mayor than no mayor. I have always believed that and continue to do so. The nature of politics is that you have to deal with people of other political persuasions to bring investment into your area. We do that now. We have strong cross-party representations on bringing back to our region international rail, which has been shut down since Covid. There are already examples where politicians are putting their rosettes to one side for the greater interest of the region, but that does not mean we agree on lots of other things.
Baroness Wheatcroft: Stephen, where do you see the tensions between the two authorities?
Stephen Jones: There are tensions in policy, personality and politics. They all exist and always will. It is the nature of the beast to some extent. Things are successful where there is a mutual recognition, respect and dependence between the leadership of the local authority and that of the mayoral strategic authority. There has to be recognition that this is an ongoing conversation and relationship. You need to get around the table. Even if you disagree on things, you have a meeting next week and you have to do it again.
One thing that is materially different is, if the council leader in any of my 12 cities has an issue over a particular decision their mayor has made, they know who their mayor is. They can phone them up and will be able to get a meeting that day if there is a particular issue. However, if there is a problem with how a Jobcentre Plus operates, or a decision that Homes England has made, or the impact of a decision made by the Home Office in an asylum claim, you can write a letter but you are lucky if you get a reply.
There is a level of personal relationship. In the last 10 years of mayoral combined, now strategic authorities, the ones that work, or have worked, most effectively are those that recognise that relationship. People know on a given issue where to hold their ground, where to take a position, where to share things, and where they want to send the mayor in to bat on an issue and stand behind them. It is a matter of understanding how you operate politically in that space.
Baroness Wheatcroft: The various tiers of local government have always had to operate together one way or another. Could tensions be less rather than more if a mayor was involved?
Stephen Jones: There is more opportunity to resolve tension, rather than the tension just be a product of the system.
Baroness Wheatcroft: Thank you very much.
Andrew, I would like to go back to a point you made right at the beginning of the session, when you said that individuals were very confused about who was responsible for what at the moment. Might those tensions be ameliorated to some extent if there was greater clarity over just who was responsible?
Andrew Carter: Yes. I am always struck by Lord Heseltine’s comment when he first went to Liverpool back in the day, on the back of the riots. He asked the most fundamental question: who is in charge? He did not get an answer for the best part of 40 years. There is something in that. Unsurprisingly, the public ask, “Who is responsible for this?” The answer is, “Well, it’s all very complicated, and we’ll tell you, but here is a policy brief that you should read in your own time”. The advantage of the mayor is, essentially, to cut through some of that.
As I said to you—this was a few years ago, but nevertheless—we asked the public various questions in places that had had mayors for a while, such as Greater Manchester, Tees Valley and the West Midlands. Could they name their mayor? Did they know what the mayor was responsible for? To pick one at random, let us choose the place where the Prime Minister was the former metro mayor. Some 85% of the public knew they had a mayor, could name him and could say two or three things that he led on and was responsible for. This is not a slight but, when we asked them if they could name their local MP, they said no. When asked if they could name their council leader, about 10% of them could.
I make no judgment other than it tells us something about awareness and engagement, particularly for those mayors that do the job well. It is comparable not just in Greater Manchester. The numbers were very similar if not higher in London, and equally in the Tees Valley and elsewhere.
There is something about public awareness and understanding of the mayoral model. If we can use that and fortify it, by giving them the responsibilities that people think they have, even if they do not necessarily have them at the moment, we can strengthen all this accountability, scrutiny, public awareness, civic understanding, et cetera.
Baroness Wheatcroft: Now that it is proposed that mayors should be able to call in planning decisions and completely overrule local authorities, does that pose a danger to the mayor rather than being a positive, because it will alienate quite a few people?
Andrew Carter: It introduces a new challenge for the mayors, let me say that. Again, I am not speaking out of turn, but it is noticeable that several mayors, past and present, were reluctant to take and did not advocate for that particular power precisely for the reasons you mention. Understandably, they are trying to create a set of conditions where the vast majority of decisions can be made by consensus, collaboration and discussion.
There is also a recognition—you see this in the way that the Government are evolving the system—that, when things reach an impasse, the mayor has the executive capability to make the decision. That does not mean they go there first; they should probably be thought of as last resort interventions, but that is where the system is going. For the mayors outside London, it means giving them comparable executive capabilities to the mayor in London—call-in being a perfect example, where the mayor has the responsibility and the capability to call in certain planning that fulfils a certain set of criteria. This has not been done very much over the duration of the London mayor being in existence, because it is the last resort.
We have to think about those types of intervention for no other reason—this goes to other conversations we have had—than the mayors are responsible for strategic decisions at that scale; the authorities are not. Also, they are the only politician around the table who is directly elected at that scale. Their mandate comes from being elected by the entirety of that place—not one ward or not even one council, but by the entirety of that place. There should be something in the system that recognises that and allows the mayors to make decisions, even in extremis, in that space. That is where the system is going.
Baroness Wheatcroft: Does either of you want to add anything to that? Do you differ?
Councillor Vince Maple: The fact that this power has been used only very sparingly by the only mayor who has had it for a long period of time is something that lots of people in the system have recognised.
Baroness Wheatcroft: Thank you so much.
The Chair: That brings us nicely to Lord Carrington.
Q135 Lord Carrington of Fulham: I want to continue the discussion about democratic accountability in all this. I was very worried by the last lot of answers where you were saying that the mayor should have the power because he or she is elected by a large electorate and therefore would be able to impose his or her views on that electorate.
I will bring you to London since we have discussed it and I am a London politician—I do not pretend to have great knowledge about Manchester and so on. The structure in London is one that is not replicated very often. You have a lot of very powerful, historic boroughs with a lot of recognition of where people live, whatever the local politician’s name recognition is. They see themselves as living in Kensington and Chelsea, Westminster, Hammersmith and Fulham, Hackney or wherever.
The mayor is elected across the whole of London, and London is a very differentiated city. In other words, there are people who very strongly vote Labour, people who very strongly vote Conservative, people indeed who very strongly vote Liberal Democrat down in the south-west, and increasingly Greens as well. Are you saying that the mayor and the new mayors coming out in the strategic authorities should have the power to impose their partisan view on the local people: for example, the mayor of London imposing his partisan view on a borough that is a different political colour to that of the mayor? That is the implication of what you were just saying in that last set of answers.
Stephen Jones: It depends on the actual decision we are talking about.
Lord Carrington of Fulham: Let us talk about housing, because housing in London has been the critical one since Herbert Morrison and his famous quote about building the Conservatives out of London. The same criticism could be made of Westminster City Council 30 years ago, which was attempting to gerrymander the vote by deciding where housing should be placed and what type of housing that should be over the decisions of the local people who live there. Is that a power that the mayor should have?
Stephen Jones: I am not arguing for that and have not been.
Lord Carrington of Fulham: I thought you were saying that mayors should be able to call in planning applications and decide them. The mayor in London has just decided—against the wish of Westminster City Council—to close Oxford Street to traffic without making any provision for where buses go. Is that a decision that the mayor should be able to take in that circumstance? I am asking: what power should the mayor have in any city to dictate against the political wishes of the people in the area where his decision is having its impact?
Stephen Jones: There are two elements in answer to that. First, it is about where it is a decision that is genuinely strategically significant beyond that. Oxford Street is a good example. It is not just a street in the middle of Westminster City Council; it is a service to the entirety of London in terms of its retail offer. There are aspects where there is a strategic decision for a bigger geography than just the local council one. There is an element where it is something that firmly falls into a decision that genuinely affects the whole of the geography that the mayor sits atop; there is a legitimacy for at least a role in and a decision there.
The bit I would emphasise, though, which plays to Andrew’s last-resort point, is that it is not how a mayor should operate, because they will get stuck on every other decision. If they throw their weight around and impose decisions against the views of individual councils on the very few things that they genuinely have that executive decision-making power over and everything else is subject to them operating through a committee-based system with their constituent authorities—admittedly London is a different operating model to the ones that I represent—they will get stuck and not make any progress. The ability to do so does not mean the ability to act when you should do. There is nuance in what might be permissible versus what is actually advisable that is material in this.
Lord Carrington of Fulham: I have had my rant. Moving on to where the money goes, one argument we have had put to us is that it should go to the combined or strategic authority and be allocated based on a consensual decision by that authority. We have had other arguments put to us; you mentioned Lord Houchen saying that it should go to him in his area because that is where it would be most effective. You are saying that it should go to the strategic authority to be spent out of there and not the mayor, with the mayor being able to be overruled by the strategic authority.
Stephen Jones: In the main, yes, you should look to the thing that was established—the combined authority, now strategic authority—as the principle. It is one of those things that depends on which element of the money we are talking about. Something such as the overnight visitor levy is a good illustration that where that revenue will be raised within any strategic authority geography, it will not be even.
If I think of the amount of visitors that come into the core cities that I represent, they have a lot more annual daily visitors than some outlying smaller unitary authorities that surround the hinterland. We are comfortable with the money being collected and operated at a mayoral geography area and the strategic authority being the operator of the visitor levy.
We as core cities have an argument and a discussion within our group, not just with the mayor but with our constituent authorities that surround the core city. The argument is that if this funding is to be reinvested in improving the visitor economy—driving up visitors and the attractiveness—a disproportionate amount of the money that is raised in the core city should probably then be spent in the core city to improve the services to visitors.
That is a different discussion from a conversation about improving transport access; you might want the money to go disproportionately away from the hub centre if the metro system is already built. The money should be extended to the surrounding towns and boroughs to bring more people in. Depending on what the issue is, the funding should not necessarily just be a “pro rata divided by six” type model but should recognise what the objective is. It is important to have that consensus among the constituent authorities and the mayor as to what we are trying to achieve and where the balance is.
Lord Carrington of Fulham: If consensus cannot be reached, who takes the final decision? Is it a majority vote?
Stephen Jones: The way that the legislation is drafted, it is a majority vote with the mayor having the casting vote.
Lord Carrington of Fulham: Is that the model you think should be used?
Stephen Jones: When that legislation was passing last year, we had a debate about whether you needed to pro rata on population size of the authorities because not all authorities have the same scale of populations. The reality is, to go back to my answer to the previous point, that if you are in a situation where you are voting on every issue, something has gone wrong upstream. Our sense is that you need to make this work and our belief is that it works, because that is what we have seen in the last 10 years.
Lord Carrington of Fulham: Do you think it is proof against the increasingly fractious politics that we are facing now, with the splintering of parties and extreme views of the various parties?
Stephen Jones: We are coming up to half a year since the May elections and a year and a half since the previous May elections. The East Midlands Combined County Authority has been operating with two Labour cities, two Reform counties and a Labour mayor. The North East Mayoral Strategic Authority now has a Lib Dem-led and Green coalition in Newcastle, Reform around most of the rest of the place and a Labour mayor.
These bodies are not in the news at the moment because they are completely dysfunctional. The reality is that once you are in the room, most people—depending on what rosette they are wearing—have stood for local council because they want to try to make their place better. That overriding drive and motivation for people wanting to be on the council is about, “I can make my place better”.
Lord Carrington of Fulham: This is my final question on this: if they reach consensus continually and the voters do not like the outcome, how do the voters change the consensus?
Stephen Jones: We have had changes of mayors and councils in the last 10 years.
Lord Carrington of Fulham: The mayor does not have the casting vote. What worries me is that it is starting to sound like a cabal of people getting together and saying, “Hey, this is how we are going to do it”. It is very difficult electorally to change cabals.
Stephen Jones: The cabal—I would not use that word—is a mixture of people elected as either councillors, councils or mayors. It is a group of people who are fundamentally sitting in those jobs because of decisions by the electorate, and if the electorate do not like what they are getting, they will exercise that and change it.
Lord Carrington of Fulham: Do you see what I am getting at? If you have a group of people who are elected they and all agree, and a couple of them get elected by people who do not agree, you end up without consensus because those people have their mandate to change it.
Stephen Jones: Without trying to sound facetious, I would suggest it does not necessarily sound dissimilar to the operation of how government works and parties operate in Parliament.
The Chair: Lord Reid, did you have a follow-up on this point?
Q136 Lord Reid of Cardowan: I will put it as briefly as possible. It is about this question of accountability after devolution. Presumably, you think that devolution of power has to be accompanied by devolution of responsibility. Presumably there is a two-fold accountability in terms of the relationship to the powers and responsibilities of the mayor: one is the accountability of the mayor to his or her electorate, but I am more interested in the responsibilities of the electorate.
It arises from presumably an off-hand comment that was made—forgive me if I am misrepresenting it. During the discussion of equalisation, somebody—one of the contributors who I cannot now remember; I have been sidetracked by some of the interesting questions here—said, “Of course, if bad decisions are made by the mayor, the local electorate should not have to suffer”. If they do not have to suffer while they benefit from the good decisions, what is the point of devolution of power balanced by responsibility?
Councillor Vince Maple: I think I said that.
Lord Reid of Cardowan: Why do you think that?
Councillor Vince Maple: Let me put that in the context of the previous comment. It was around exceptional financial support. The first three or four original exceptional financial supports were councils that made bad decisions. Yes, the electorate put them there, but the council leaders made bad financial decisions and therefore the Government had to support them. However, the Government were also supporting them with a very punitive interest rate of PWLB plus 1%. Therefore, the electorate—which, yes, put those people in power but did not make the specific decisions—are now having fewer resources available for their day-to-day services. This has changed under the most recent Government, but at that point less money was available for local services because additional money was having to be paid to the Government through the exceptional financial support programme. That is my context for how, ultimately in that case, it is electorates which are losing out because of bad political decisions in that case.
Lord Reid of Cardowan: In effect, are you saying that the electorate will suffer?
Councillor Vince Maple: Yes, certainly in those examples.
Stephen Jones: We have had double-digit council tax increases in many councils so they have absolutely taken the burden where some decisions have been poorly made.
Lord Reid of Cardowan: That has clarified that it was a gesture but in reality, if bad decisions are taken, the responsibility will accompany the devolution, meaning that the local people will in fact suffer from those bad decisions.
Stephen Jones: There is a genuine question about where the backstop is. Do we want to be in a situation like that of Detroit, where bad decisions were made and the federal position was to step away completely from the city and people of Detroit? We probably do not want to model the design of our system on zero sense of backstop. But equally, you do not want a situation where there is literally no downside because—as you say—that undermines the incentive. There is an interesting design question about where you put the level of local accountability and responsibility for future decisions in terms of taking increased future tax to fill deficits and those kinds of questions.
Q137 Lord Burns: The Government’s plans for local government reorganisation seem to have come to a halt. What happens now? Is it possible to have a workable governance system for the whole country that people can understand? What I have been listening to this afternoon certainly leaves me in a position of having almost less understanding of what I thought different bodies here had in terms of both their powers and responsibilities.
I have a lot of sympathy for the idea that cities have an increasing part to play in economic performance, particularly on things such as planning and transport systems. What kind of local government system is going to work best with that view and with the position of the combined authorities and local mayors? Do we need one model or can we let 1,000 flowers bloom? What is the mechanism or government system that is going to give people a clearer idea of what the different levels here are going to be doing?
I understand the point that there is greater identification with the mayors than with other aspects of local government, but does this not simply mean they are going to be blamed for more and more things and that it will be assumed that they have this power? If they are going to take the responsibility, they will then wish to acquire the powers. How do we set up a system that is one that people are going to be able to understand throughout the country? It all seems like suck and see: we will try a few different systems and decide which one seems to be working best. But how long is that going to take to resolve itself? Is a clearer wiring diagram necessary at this point if we are going to make this work?
Councillor Vince Maple: I will say a few things on this. First, I have only ever served on a unitary authority so I have never had that situation where, as a councillor, someone has phoned me up and I have had to say, “No, that’s the other councillor; yes for your street but on the other council”. Most of my colleagues have that experience in local government, certainly across England. The Government are right to say that we should move to unitary authorities across England. It is not a universally held view, I have to say. Some people—more so in district and borough councils rather than county councils—probably share that view. However, I would say there is a consensus to say that the Government have taken that view and most people would say that is sensible.
Why is that important to this question? We saw the example when Kent and Medway went forward for seeking to become a devolution priority place. The response from government was, “Well, you can’t have a governance structure where you’ve got two institutions, one of 16% of the residents, aka Medway, and the other with 84% of the residents, aka Kent County Council”.
That does two things. Longer-term, moving to everyone being a unitary authority across England is the single tier of local government. We are in an interim phase though, and the pause probably amplifies that more. As I said earlier, there are examples of having the voice of district and borough councils, certainly on an interim basis while they still exist, and most people would say, “It’s not unreasonable to want to hear from them”, not least in the remit of growth, because some of those are the real economic drivers for their regions. Exeter and Norwich are a couple of examples I would certainly use there. It is right that we go on that journey.
It is difficult because as a local government family we are trying to do almost three different things at the same time. One is to sort out the mess of English local government with its different tiers: districts, boroughs, unitaries and counties. We have not even talked about town and parish councils today; that could probably be a whole separate evidence session on loads of different issues. Another is to resolve the issue of fundamentally asking, “Is it right that communities feel more empowered?” I would say yes. Is the mayoral system the right system for that? I would say it is the least bad option, to quote other things in other places. No system is perfect but trying to do both those big fundamental shifts is really difficult.
I now come on to the third issue. It is not particularly a partisan comment but there are no council leaders saying, “I’ve got too much money”. There are plenty of us going, “We’re really struggling”. Adult social care and temporary accommodation are both increasing issues. You are trying to sort out the day job, create a new council and think about something that sits strategically above that. That is a challenging set of circumstances. The Government are right to say we have to move at pace; I agree with them but that is challenging in itself too.
Stephen Jones: I absolutely recognise that. Of the eight English core city councils that I represent, only Nottingham was impacted by the change on local government reorganisation compared to other local government groups you have had in front of you so I will not overly comment on that.
I note that we have just recently heard from the Scottish Government that they are talking about local government reorganisation in Scotland, which opens a debate for Edinburgh and Glasgow that we hoped we were coming towards the closure of in an English context.
We have an incredibly complicated patchwork system of governance in the UK. In having a Government and a Prime Minister who have put such attention on this issue as something that they want to resolve, for the first time at least it is in the top handful of priorities for the Prime Minister to make better. It is incumbent on us all acting within the system to work with that impetus and ask, “Okay, what are the issues that we want to design? How do we make this easier and more understandable for the public? How do we build in the checks and balances and avoid creating either complex, shadowy room deals or monomaniacal dictatorial decisions?” Now is the moment to design it and design it right, given where we are in the political cycle.
Andrew Carter: I agree with that. I will offer two thoughts on it. First, having a two-tier system—essentially unitaries with strategic authorities sitting over them—makes perfect sense for the big urban areas. Otherwise, you are creating massive unitaries for the size of Greater Manchester, which is nearly 3 million people; that is obviously too large. You have 10 authorities. As we have already discussed, they cannot make decisions rightly on strategic planning and strategic transport. You need the overlay in the same way as you get the overlay in London. You cannot have those decisions made at the borough level; they are strategic in nature, not individual decisions.
That model—two-tier MSA with unitaries underneath—makes perfect sense around our big urban areas. This is contested; you identified this and your various witnesses will attest to that. There is an argument outside the big urban areas, which is what we made at the time, to move towards a unitary system. We recognise that that is debated; people have different views and I fully respect their views. Our view is that the rest of England essentially should be unitarised.
There should then be a question—a genuine question to which the answer might be no—of whether there is any added value from introducing a strategic authority to those unitaries as collections. The genuine answer could be yes and it could also be no. We should have done it that way around and the Government at the time should have been super clear on that. They were not; they went through a different model and have done it the other way around in some respects. They tried to deploy MSAs everywhere and then figure out local government reorganisation.
There is merit to that because otherwise we are now in a position where we have the Cornwall scenario. We have unitarised Cornwall to be quite a large geographical borough and now we are asking it to be created as a strategic authority. That is slightly strange, if I can be honest with the committee. That is like having something in your hand, you are looking for the answer and the thing in your hand is no longer applicable. I accept that it is contested and others have different views on that but you could see a logic through that that would make some sense.
Lord Burns: Is this pause that we are having at the moment by any chance going to give us the opportunity to achieve something that is a bit more rational?
Andrew Carter: Maybe.
Lord Newby: To pick up the Cornwall point, Cornwall is going to be a unitary and strategic authority. That has one great advantage of simplicity: everybody in Cornwall knows who is going to be in charge. The question I have asked in previous meetings is: why should Hampshire, for example, not be a unitary and strategic authority as well? If I were Hampshire, is that not what I would want rather than having a mayor imposed on top of me?
Andrew Carter: Why would it need to be both? Why not choose to make a decision that if you unitarise Hampshire for argument’s sake—I am not making the argument for that—that is it? Essentially, then, it gets the responsibilities and capabilities et cetera that the strategic authorities have. Why would you add an additional label, which is largely meaningless, of also calling it a strategic authority? I do not understand the logic of calling the same place with the same geography and institution two different names.
Lord Newby: I absolutely agree with that but I do not think that is the Government’s approach. If I were Hampshire, I would want the money that I would get if I were a strategic authority. I would not mind what I was called; I would just want the loot and the powers that go with it.
Stephen Jones: Would your Hampshire include Southampton and Portsmouth?
Lord Newby: I am not an expert on Hampshire; I am really just trying to tease out whether the Cornwall model might have an applicability elsewhere that would lead to a clearer, simpler structure.
Stephen Jones: There are many things that are unique about Cornwall. The most obvious thing— obviously, I talk not as Core Cities but from my previous time in central government—is that Cornwall has only one neighbour. There is quite a historical and strong argument as to why combining Cornwall and Devon may or may not be a successful route either administratively or politically.
Hampshire is a really interesting example. If you are in the north of Hampshire, in terms of where your pulls and links are, the M3 is very important to you; you are on commuter lines into and out of London and you have a different economy from coastal Hampshire, which is very much built around the two big cities of the coast. Would you want a single decision-making body that had no sense of how to balance those trade-offs across Southampton, Portsmouth, Gosport and Basingstoke? I do not know. One challenge is that the economic geography of the UK is different from the political geography of the UK, and we are trying to marry the two together.
Q138 Baroness Wolf of Dulwich: I would like to come at some issues we have been talking about from a slightly different angle, which is to do with whether authorities have capacity. At the beginning of this inquiry we heard from George Osborne that when they first moved into this idea of having mayors and strategic authorities, there was a sense that a place had to be able to do it—that it had the capacity and had earned it.
Most recently, the idea has been that tax revenue-sharing powers would go not just to those who would earn them but to any mayoral authority. I would like to give another very specific example, which is chicken feed, as they say, in terms of budgets but quite interesting. Quite recently, the DWP announced that it was going to fund apprenticeship brokerages in all strategic authorities but would not give any money at all to the others; is that not correct?
Councillor Vince Maple: That is very correct; I am just shaking my head with disappointment.
Baroness Wolf of Dulwich: I have to say that this is really remarkable but also quite indicative of what may be happening in government, which is that whenever you dream something up, you give it to the mayors. I doubt if the amount of money available from apprenticeship brokerage is going to shift the views of Cornwall or Hampshire but it implies a default mechanism, because it is not as though they are the obvious or necessary place to give it to. I am sorry to get technical but you have to. We already have 39 places that are delivering local skills improvement plans. If you look at Germany—where they do it through the chambers of commerce—there are 79 or 80. This is not like planning rail networks.
It is a different question really: do you feel that what I will call the Osborne approach—the sense that you should demonstrate some capacity to do something before something is indeed devolved from Westminster—was ultimately a good idea? The risk of simply handing things out to everybody that became a strategic authority yesterday may bring it down the other way.
Secondly, we have talked here and there about what should be at the strategic authority level. In places where there is a double layer, how do you decide whether it should go to the strategic authority—or the mayor personally if you follow Lord Houchen—or that a lower layer might be more appropriate? Maybe I should start with you, Councillor Maple, since you also noticed this rather remarkable piece of decision-making.
Councillor Vince Maple: As a unitary authority leader who is not part of a strategic or combined authority—whatever the phrase is this week—I am absolutely frustrated. That is a really good practical example of that. In Kent and Medway region we have a local skills improvement plan but we do not have any money necessarily in the same way that other colleagues around England will be receiving. There are real practical examples as to why we need that pace to continue.
The point around the LGR and the pause is right, but ultimately we have to get on with this otherwise you will end up with places losing out. We have ended up in a position where perhaps some people somewhere have a broad assumption about, say, the south-east of England. I can tell you—I represent one of the wards with the highest levels of deprivation in the country—they need all the support they can get from central and local government and a combined authority if we had one.
I guess part of this is around those relationships—particularly where you have unitary authority single-tier authorities across England—because eventually some things will be better delivered directly by the council’s collaboration, co-operation and co-production. That is a model that certainly the current Government would want to see more of, and you see that even when there are political differences of council leader; certainly I have seen that across the country.
Of course, if money is coming down to strategic authorities that is frustrating for us who are not in the room, but it is about trying to ensure that you do not have a one-size-fits-all approach. A project of that nature may well be far more suitable to perhaps even not go to all the unitary authorities in a mayoralty. If you have an area of deprivation or an area where there are huge challenges around the issue of not in education, employment or training, you would want to focus it on there. Ideally, the mayor and council leader—whoever they are—on the strategic authority will be having those real-time conversations.
Some of this is about personalities and people, as others have said throughout the session today. We cannot ever forget that politicians are human beings too and have those human relationships. If you fall out with each other, you cannot do that for very long because the next 10 issues to deal with are coming along.
Baroness Wolf of Dulwich: Are you saying you go down to not the smallest possible level but you should not automatically go up?
Councillor Vince Maple: Sometimes it will be about where the decision is made versus who is delivering it. If the DWP is saying, “Here is some money for this particular strategic authority”, and you have eight unitary authorities in that strategic authority, it does not mean that you get exactly the same across all eight. It may well be that there are different focuses depending on whether it is young people or coastal or rural communities; it is done on a case-by-case basis. It is the basic premise of a conversation and working out the best delivery. Of course, the best delivery may not be by the local authorities; it may well be by the voluntary sector, for example.
Stephen Jones: The principle of go local and then aggregate up rather than go the other direction works. I have two observations on your question. First, on whether some places should get access and other places not, how do we avoid that being administrative gatekeeping? When the previous chancellor announced a city investment fund in March we had a conversation across the 12 core cities, which were looking to draw in financial transactions to improve city density and bring in private finance. Six of the 12 core cities got access to that funding. The other six—two in England and four outside England—did not, for administrative and constitutional reasons rather than economic reasons. There was not an argument as to why Bristol or Nottingham were less economically able to attract the type of investment that Liverpool or Newcastle were. Avoiding situations where you are creating administrative gatekeeping should be a principle of design that we need to do better at.
There is a chicken-and-egg dimension on the question of capability and resourcing. The stat that I keep coming back to is that we have roughly the same amount of public administrators working now as we did in 2010. It went down and has gone back up again. Back in 2010, roughly 52% worked in central government and 48% in local government. The last time these stats were collected it was two-thirds working in central government and one-third in local government. Over this time period where we have been doing devolution we have had a mass centralisation of staffing.
One of the most encouraging things that the new Government have said is to think about transferring the staff resource. That is not necessarily the individuals—although some of those people would be the right people—but the headcount and budgets. You could have a situation where you sit there saying, “But I’m not sure that place has quite got the capability to do this thing”, and the response is, “No, because you haven’t given them the people”. There is a real incentive and imperative to make sure that we are building institutions that have the capability, resourcing and skills to be able to do the things that we are expecting of them. We need to front-load that rather than wait to hand them the powers and then three years later say that they might need a few extra people to do the thing we have asked them to do.
The Chair: That leads us nicely into Lord Reid’s question, which picks up on this point.
Q139 Lord Reid of Cardowan: Lord Burns usefully suggested some time ago that we could do with a wiring diagram. If we had one we would find that in most discussions we spend most of our time talking about the generals—the mayors—or the tactical headquarters, that is, the strategic authorities, and so on. I would like to ask you about the poor bloody infantry: the local government people. Are they ready for devolution of this nature and the effect it might have on them? Do they have the capabilities, personnel and expertise to deal with what is required? Finally, is there not a grave danger that some expertise and capability will be sucked into the tactical headquarters to the detriment of local government themselves?
Councillor Vince Maple: The big challenge as we speak today is that lots of hard-working local government officers were making life plans that have now changed because of the pause. At the moment—I cannot speak for every single local government officer but I know from speaking directly to some in Medway and across our region—they are feeling a bit bruised at the moment because of that, so I hope that the rapid review is rapid.
Another thing I would always say about local government officers is that they are resilient without a fault. They were some of the driving force behind getting us through a global pandemic and have dealt with the wide-ranging implications on communities over the last 10 years since the Brexit vote, which has been different in different parts of the country. They are robust and talented and some will see this as an absolute opportunity. Some will say, “I would really love to go and work in the mayor’s office or in the strategic authority’s headquarters”. For others they will be incredibly proud of what they are doing today and their biggest fear might be, “Will I keep doing that in five years’ time or will that role go somewhere else?” In the vast majority of cases the answer will be, “No, you’ll continue to be in the role you’re carrying out”.
Of course, the bigger driver for most local government officers and the capacity generally will be around that transition from two tiers to single tier. Again, it is really nuanced. If I talk about my region, we have two directors of public health. If the Government’s initial plans go ahead as they were, we will have four directors of public health but we will go from 14 chief executives to four. It goes back to my earlier point that we are trying to do some really huge things all at the same time. I have confidence in the local government workforce; they are some of the best in this country. They are resilient and will deal with the challenges that are put in front of them. Some will absolutely see this as an opportunity to progress further because there will be new and different opportunities that are not there now.
Lord Reid of Cardowan: It does not actually answer the question. I admire what you say about the infantry; they are always resilient and can-do. Given the statistics we heard earlier that the centre has been growing like topsy whereas there has been a reduction in the whole of the employee forces for local government, is there not a grave danger that that expertise and capability will be sucked out of local government to the detriment of it? That is not a question of resilience or their hard work or anything; it is a question about whether the structural change will be to the detriment of local authorities vis-à-vis the others.
Councillor Vince Maple: I will say one final point on this. We have the workforce today that is dealing with two tiers of local government. Lots of these things are not currently in place. The world will change over the next three to five years. We will shrink the number of councils; there will be fewer councils in England than there are today so there will be some additional capacity in the system. At the same time, some new roles will be created in strategic authorities. I could not tell you whether those numbers will match perfectly or not—probably not, because that is life. I suspect we will see some capacity in the local government family at the same time that more is needed at the strategic authority level, but it will not be perfect, because things never are.
Stephen Jones: The wiring bit is important. In many ways, the thing that we need to spend the most time doing is some proper organisational design work and work out what capability we are talking about, where it needs to sit, whether it exists in the system and if not, and how we are going to build, recruit and train it. That work is essential to getting this right. The risk is that without doing that work collectively between local authorities, strategic authorities and central government, we will be in a situation where we see staff leaving a city council to go to work in the command authority. For them it would be quite beneficial because they have probably negotiated a decent pay premium in making that move but actually there is no net additional capacity or capability for the region if someone is moving from one job to another in that respect.
If we take the ambition that was in the Rewiring the State—Cabinet Statement to look at all the different policy areas, particularly in the public services and education space, what structures and teams need to be in place to deliver this? It is really important that we think through that work and do it clear-headedly because otherwise we will be in a situation where it will just be transferring chairs around.
The other thing I would say in support of Councillor Maple is there is a risk of focusing on the change rather than the stock when we talk about local government. If I think of my city councils, we have tens of thousands of staff who work for eight English councils. We still have operating budgets in the billions. Yes, things have been very challenging in local authorities and the direction of travel for local government over the last 10 to 15 years has been doing more with less squeeze, but there is still a huge residual of people with great capability.
On Friday we had Core Cities leaders in Gleadless Valley in Sheffield just talking with the community. There are staff who have worked for Sheffield City Council for years and know that place and patch. Even when some programmes have stopped on regeneration and renewal, these people have continued doing the work and engagement. I would not underestimate that there is still a latent capability that sits within local government to be able to grab the ball and run with it when things about public services and more devolution powers come down.
Andrew Carter: I agree with that. It is just the logic of where we are going. Essentially, imagine forward 10 years and we have done some if not all of what is in the “Rewiring the State” document, which is expansive. Central Government will be materially smaller. The DfT ought to be materially smaller as a department relative to what it is today because much more of what the DfT currently does—essentially man-mark every MSA and local government in the country and basically everyone else—will be materially smaller. That work will be done by the MSAs; it will not need to be done by the DfT.
If the DfT is the same size as it is today in 10 years and the MSAs have all the transport responsibilities that they are going to get, we will have definitely failed; we should be very clear about that. That is across the board. Central government departments should be really thinking—I know they are—materially about the numbers of people who currently work for government and will literally need to move into MSAs or those posts will be redeployed. That is a systems approach that we should take rather than a local government MSAs approach.
My other observation is that we have a bunch of national agencies or authorities—whatever you want to call them—such as Homes England, Natural England, the British Business Bank and UKRI. All those are also actively now thinking about what they have, their capacity and how it is better deployed into places to deliver what different places want. There is capacity across the board in the system. It is not only in the MSAs and local government where you have to think about how you shuffle it around. There is a broader question about how we redeploy and reuse the capacity that is definitely within the system but that would be quite a big shift across the board.
The Chair: We are expecting a vote at 5 pm so I will bring Baroness Alexander in last—but definitely not least—for our final question.
Q140 Baroness Alexander of Cleveden: I will be incredibly brief because that will give a minute for each of the panel to think about their answer. The subject of this inquiry is the fiscal devolution in England. As we have discussed today, we approach this against a backdrop of literally generations of politicians who wish they had done more to fix the regional divides in the UK against the backdrop—as we have heard—of asking Whitehall to pass power out.
The question is: what is the measure of fiscal devolution that you want to see in our report that gives us as a nation the best chance of delivering on those regional divides and doing it in such a way that builds consensus? Political consensus across generations is going to matter. What is the one thing in fiscal devolution that helps deliver the agenda that we have spoken about this afternoon?
Andrew Carter: In a very functional sense, ignoring the outcome, roughly 5% of the tax base is generated and stays local. You want to get that towards 10% and 15%; that would still leave us as an outlier but nevertheless it would be less of an unbelievable outlier than we currently are. If we do some of what the Government are proposing plus some things that we are proposing, you will get into that bracket and go from 5% to 10%, and ideally to 15%.
Councillor Vince Maple: We need to be clarifying what fiscal devolution is. If you put 10 of us in a room you will get 12 different answers. Absolutely co-produce that with local government in particular; that is critically important. We need to make sure that we do not forget about modernising council tax because that is a big chunk of fiscal devolution, which happens today but is not fit for purpose.
Stephen Jones: The Budget next week is a stepping stone but not the answer on fiscal devolution. Some things we have talked about—shares of income tax, and business rates—are positive moves forward but there is a huge place where we can go further in thinking about actual true devolution.
We have not talked at all about the future of motoring taxes. That is something where the levies on people—both nationally and locally—are incredibly complicated at the moment depending on where you are parking versus who you are registering your car with. There are multiple different examples of where we can think about where the incidence of the tax is and how we avoid overtaxing and be in a situation where we are designing that sensibly. The thing that was most attractive from what Rachel Reeves said when she announced this was that it is a road map. The sense of a journey on this will not be answered by what we get next week; it will be the service station on the way to our journey.
The Chair: Thanks to the panel, particularly for the quickfire answers to the final question. With that, the meeting is now concluded.
