Written evidence submitted by the UK2070 Commission [PDE 020]
 

Executive Summary

Despite being the fourth largest economy in the world it has deep-rooted inequalities that have persist for over half a century. Past policies have been inadequate and insufficient – short -term, silo-based and. Place-blind Part of the problem is the imbalance of power – with responsibilities being devolved but without the powers and resources to meet them.

The UK2070 has therefore recommended that  a comprehensive devolution framework is required to help deliver a more balanced economy. based

• Local authorities should be the corner stone of any devolution
• A common package of powers that are open to all areas of the UK
• The deal-based system of funding should be replace with a universally applied framework independent of whether there is an elected mayor or not,
• Block-funding regimes to offer greater local discretion about local priorities
• A new regional framework for England supported by parliamentary and ministerial portfolios for each region
• New engagement processes e.g. Citizens’ Assembly

The Chair of the UK2070 Commission, Lord Kerslake would welcome the opportunity to give evidence orally to the Committee

Context

The following views are from the UK2070 Commission. The Commission is an independent inquiry into the deep-rooted spatial inequalities that exist in the UK. It published its First Report in May 2019. The evidence in this report forms the background to this submission but it is not repeated here in accordance with the Guidance given for Commons Select Committee – it can be accessed via this link (http://uk2070.org.uk/) .

The UK is the most centralised country in the developed world. The current state of devolution has created asymmetry between the representation of people in England outside London, compared with people in Scotland, Wales and Northern Ireland. Although there is scope for further devolution in the devolved administrations there is a need to eliminate the democratic deficit that exists in England. This is the focus of this Second Report, although it is recognised that there is potential for further devolution in the other three home nations. This will be dealt with in the Commission’s final report.

Devolution in England must go beyond the current piecemeal devolution of responsibilities in England. There is not coherence to the pattern of devolution as illustrated by information in the Select Committee’s own briefing paper. The current ad hoc ‘deal-based’ devolution has served its purpose, run its course.  The original logic for devolution being focused, in the first instance, to major areas no longer is needed. A framework is needed that gives access a full suite of real powers and applied to all areas and beholden to a negotiated and in effect what is a centrally micromanaged system. There needs to be trust based on the long experience that local government can and does act strategically and with responsibility. As once eloquently expressed by the Prime Minister when Mayor of London, in support of greater fiscal devolution:

“We should be getting back to very proactive, strong, city‑led government that has an incentive to go for growth. I think it is something that all parties should support!”

The First Report of the UK2070 Commission therefore concluded that more effective devolution could be delivered by

•     Enhance local devolution, rolled out systematically with transfer of powers and resources to a comprehensive framework of mayoral and combined authorities, strategic partnerships and rural counties;

•     Establish four transregional arrangements for the ‘emerging powerhouses in England drawn from existing local leaderships which complement local strategic planning (e.g. of joint or combined bodies) focussed on the key transregional issues outlined in the main report; and

•     Decentralisation of central government functions for England in terms of budgets and ministerial responsibilities to align with the above local and transregional devolution.

These propositions have been not only been generally supported but also reinforced since its publication. Most significantly, the recommendations in the Heseltine Report ‘Empowering English Cities’, have a wider significance, even though its focus was on the cities, its. In particular, its proposal that the reform of government and Whitehall itself should be the crucial first step. involving a new Department for the English Regions a Secretary of State, Permanent Secretary and functioning civil service. This would be reinforced practically and symbolically by all government policy offices outside London being co-located regionally.

This report is echoed in the call by Phil Graham[i] of the National Infrastructure Commission for genuine shift in ambition and change of mindset from government through

proper devolution, involving, for example:

• a move to a five-year funding settlement, in line with the approach taken in London
• local leaders free to decide how to spend their budget
• a significant tranche held back to fund transformational strategies; and
• linked to joined-up transport, housing and employment strategies.

If there is to be real devolution any further transfer of powers and responsibilities will need to resolve the following issues:

• Scope: What powers should be transferred and to which accountable level of government?
• Geography: What local institutional arrangements are needed to avoid any wider strategic decisions always having to be made in Whitehall?
• Inclusiveness: How can the wider communities of interest be included in national and sub-national decision-making processes?

The Scope of Devolution

There is a need to move away from this bespoke deal-based arrangement to a system based on the presumption that devolution should be universally applied. There should be a common range of powers and capabilities available to all local government, and not restricted to elected mayoral or combined authorities. The choice to limit the range of powers should be taken locally. Local government can act strategically and with responsibility.  Devolution should be based upon the principle of the transfer powers to lowest accountable level both in terms of the management functions and control of resources.

Functions

The current devolution arrangements focus on four broad areas of responsibility -   land use/housing, transport, employment/skills and community services (e.g. health & social care) The Heseltine Report confirms this list with a five-year programme updated annually, and calls for the immediate transfer day-to-day responsibility for:

• Affordable housing
• Schools performance
• The skills budget
• The unemployment and employment programmes

It also recommends two over-arching duties – the spatial structure and carbon reductions and environmental improvement (i.e. strategic planning)., with local strategies given statutory status and incorporate into the government’s own national strategy.

Funding

Unlike Northern Ireland, Scotland and Wales, no taxes are devolved specifically to

England. This has therefore been a central issue in the devolution debate over the last decade. One of the key issues is the potential impacts of devolution of fiscal powers reinforcing the patterns of spatial inequality across the UK, since local taxes in any form are not raised equally around England reflecting differences in the proportion of properties in each tax band and different impacts of mandatory discounts or exemptions (such as for single adults or students).

This is illustrated by the fact[ii] that the council tax base/person in Kensington and Chelsea is three times larger than the area with the smallest, Nottingham. Business rates tax bases are even more unevenly distributed than council tax bases. The tax base per person for Westminster is 46 times greater than that of the council with the lowest tax base per person, Redbridge. There is also concern that the ongoing policy reviews by the Ministry of Housing Communities and Local Government will increase the extent to which councils gain or lose as local tax bases change (particularly in the longer term).

Over the last 40 years in the proportion of local services run by local councils funded by central government.  In 1980, only 40% was funded centrally, now it is over 80%. In addition, over the last decade, local authorities have had this core funding from the Government cut by over £15 billion. A loss of 60p out of every £1. Next year, 168 councils will receive no revenue support grant at all.

Local service provision and of funding are therefore subject to central control of policy. This imbalance needs to be redressed if devolution is to have any real momentum.  There is however a concern that the current transfer of powers is only a different form of centralised administration where decisions are still taken by central government. This concern is fuelled by the perception that in general the focus of devolution has been the transfer of responsibilities whilst Whitehall retains control of the level of resources.

The Institute of Fiscal Studies therefore recommend a local income tax as the vehicle for financial devolution.  A penny-in-the-pound local income tax could raise around £6 billion across England. It is seen as being administrative feasibility, accountability via the local ballot box, and an incentive for to boost incomes of local residents. Although it is also less spatially polarised than other options, like council taxes, the is still marked spatial variations which will require to be compensated for in any settlements by Whitehall. (see maps)

Income Tax                                          Council Tax

Although the UK2070 Commission does not seek to make recommendation on the most appropriate detailed mechanism, it is essential that the following principle are applied to revenue funding:

• Block allocations would allow greater local flexibility in prioritising and integrating activities and remove silo-based budgeting;
• whatever model is adopted it takes account and offsets the potential distortions of established patterns of wealth and land and property values: and
• Levels of funding should be linked to long term needs set out in local and national spatial strategies.

There is a similar need for a new approach to capital funding which is not silo-based departmentally and is on a sustained basis. The UK2070 Commission’s proposals for a UK Renewal Fund addresses this need (refer First Report).  The importance of this is highlighted by the Heseltine Report. The experience of last exercise in block allocations to cities where the single pot of the central housing, skills and transport budgets to create a £12bn fund reverted to its functional subdivisions with the change in the Chancellor. Therefore, these principles for revenue funding also apply to capital funding

The Geography of Devolution 

Few local authority boundaries relate to the areas within which people search for homes and work. Local powers must be exercised in a way that takes account of the interdependency of communities through regional planning. This has been part of the Scottish practice even when the regional councils were abolished. This contrasts with the gap left in England, except for London. The recent creation of combined authorities and joint statutory strategic plans are a major step in addressing this problem. This thinking needs to be extended across England to establish a systematic and secure approach to dealing with local sub-regional issues, for example in the labour market and in meeting demand in full across housing market areas.

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In addition, it is now generally accepted that there are also matters where there is an interdependence across a larger area than any individual metropolitan area, that need vehicle a pan-regional perspective, agenda and capacity to act collaboratively. These relate to:

• The hubs and drivers of regional economies (e.g. regional centres of excellence)
•                                                                                                                                                                                                                                          Regional infrastructure powers & strategies (e.g. TfN and TfL)
•                                                                                                                                                                                                                                          Regional environmental frameworks (e.g. climate mitigation & river basin management)
•                                                                                                                                                                                                                                          Resource Management (e.g. Regional allocation of UK Renewal Fund)

A research paper prepared for the Commission by Sheffield University highlighted the fragmented geography that is used by a range of strategic statutory bodies (see Table). A more coherent approach is needed. The specific regional arrangements must be tailored to the specific context of each trans-regional forum. They must however be linked to a change in relationship to Whitehall on the lines set out in the Heseltine Report including parliamentary committees and a Cabinet level portfolio for each province/powerhouse, who inter alia provides cabinet presence and ministerial endorsement of a regional spatial strategy or report prepared on behalf of the constituent bodies.             
 

The following Principles could be considered for guiding the choice of the most appropriate regional configuration, in England.

Principles for subnational regional arrangements for England.

The area, structure and organisation of any subnational organisation should,     

•          be based on groupings of existing English local authorities;

•          any powers or responsibilities should be collectively exercised by the constituent authorities;

•          have a ministerial champion and report to a parliamentary committee;

•          build on current strategic and regional planning initiatives;

•          be of a sufficient scale that differentiates it from CA and strategic planning bodies;

•          build upon existing strong sub-national institutions such as universities, local authorities and chambers of commerce;

•          require new engagement arrangements that include civil society in decision making

•          be designed with reference to regional identity, culture, history and experience.; and

•          have no maximum population threshold.

The IPPR report and the Independent Industrial strategy suggested a small number of transregional arrangements because it would be of a scale that:

• allows integration across the plethora of spatial units used by the statutory bodies (see Table above);
• allows flexible geographical partnerships to be put together according to the specific issue e.g. transport or flood management;
• is clearly differentiated from the major metropolitan joint planning areas; and
• to justify cabinet representation, enabling financial block allocations and the associated regional application of Greenbook rules;
• growing recognition on public debate e.g. powering up the north

There are however some specific issues that will need to be addressed if they are taken forward:

• arrangements for London and Wider South East; the special circumstances of London may argue for it to be treated separately  but this depends on arrangements for strategic planning going beyond a mere collaboration of the willing (as currently operates).
• there is a need for cross border cooperation with North Wales comparable to that initiated with Cardiff and Newport in the south west, and the Borderlands ith Scotland;

Inclusive Devolution

Devolution of powers to local councils and statutory bodies is only part of the solution to reducing the highly centralised approach to decision-making. Power must also be shared locally to involve those who are critical to the delivery of local strategies and by those affected by them. The detachment and disenchantment of people from the political decisions applies to local politics as well as national. There is the risk that this will happen, especially with the new larger strategic planning arrangements that are proposed. There is a need to balance strategic arrangements with mechanisms to allow participation in decision-making at all tiers – combined authorities and trans-regional bodies.

Research undertaken for the UK2070 Commission reinforces this. This research undertook in depth qualitative work with a series of focus group sessions across the UK to take the ‘temperature’ of views from a diverse range of interest groups – ranging from homelessness partnerships, through local economic support networks, to green activists.  Perspectives were sought on: priority concerns; barriers to action; aspirations for change; what action is sought and is already in hand; and the relevance of a more strategic approach to policy, The views received were those of people grounded in the day-to-day reality of local communities’ lived-experiences. The over-riding message was a fear that devolution would be ‘done to them’, as opposed to their desire to be ‘at the table at every point; especially from the start.

Across the diverse focus group participants there is an over-riding concern about fragmented policy response to the economic insecurity that people are facing. The study highlighted that there is currently a lack of institutional capacity to take action locally not just in terms of finance, but also competences and resources. Despite the local focus of those involved there as a clear appreciation and a call for a more strategic response.  Increased and improved local capacity for action on its own was not sufficient without a clearer and stronger strategic context. Indeed, the lack of a consistent strategy was undermining local efforts, and raised serious concerns about sustaining them over the long term.

The study also underscored the vital role and enormous value of engaging civil society. The participants highlighted how, in order to achieve this, local involvement needs to go beyond consultation embedding participatory systems in the formal decisions processes from the outset, not just as an add on. This is going beyond a duty to cooperate, beyond promoting local action and ownership and an inclusive economy. It is ensuring that devolution itself is inclusive.  The Commission proposes to undertake further consultation on the most appropriate range fo mechanism to deliver this including Citizens’ Assemblies

August 2019