Written evidence submitted by the UK2070 Commission [POD 012]
This needs to be supported new institutional structures and processes in terms of:
The UK2070 Commission has therefore undertaken an independent inquiry into city and regional inequalities in the UK. Chaired by Lord Kerslake, its terms of reference and programme of action are set out in its Prospectus (weblink: http://uk2070.org.uk/). The Commissioners are drawn from a wide range of backgrounds. This includes private and public sectors across the UK, policy think-tanks, international experience in Europe, the USA and the devolved nations, and from the three sponsoring universities of Manchester, Sheffield and University College London.
Its horizon of 2070 is an explicit recognition that the timescales for successful city and regional development are often very long, in contrast the short-termism of political cycles. If a new framework for settled devolution is to be realised, we need to think long-term and create stability and confidence.
These issues arising from the survey are presented for further discussion. Although there was general agreement across a wide cross-section of interests some issues in particular were highlighted which require special consideration in relation to the eight questions raised by the Committee as follows:
The questions posed by the MHCLG Committee therefore largely mirror those set out by the UK2070 Commission in Final Report which sets out the scope of the required devolution framework raised in Question 8 of the Committee’s Call for Evidence. The following submission sets out in summary its responses to the specific questions asked but does not duplicate the detail analysis contained in the Report and its background papers (refer Commission’s website.), but cross refers to them where appropriate. In addition, the UK2070 Commission would welcome the opportunity to give oral evidence directly to the Committee.
Responses to Specific Questions
Question 1A: The success of current devolution arrangements.
A survey of current devolution arrangements was undertaken on behalf of the Commission. It was an audit of high-level decision makers and opinion-formers not an opinion poll. It confirms the general agreement for further devolution. The full survey report by Devoconnect for the UK2070 Commission can be found on the website. It outlines ten emerging issues from this review, summarised below.
Issues on Devolution Arising from the Review Experience of Current Devolution
All Government Departments - including HMT and relevant quangos – need to be genuinely committed to the principle, and support the process, of devolution and rebalancing the economy with a Secretary of State could be appointed to lead the implementation of devolution.
A key finding of this research is that devolution should be outcome based by unlocking the potential of local government through whole-place leadership. Many councils are already using their influence and convening power to intervene in the economy and drive innovation and economic development, with a focus on social responsibility. With greater freedoms and flexibilities cities and localities could take such an approach much further. This is the clear aspiration of cities such as Bristol (One City Initiative) and Leeds, and has been demonstrated already, for example, by Cornwall County Council (New Frontiers).
Question 1B: What should be the scope of devolution.
A formulaic model for devolution is inappropriate. Devolution must be series of Stepping Stones whereby authorities can progress as circumstances change, experience of what works is gained and as capacity and inclusiveness are built up.
This needs a system based on the presumption of devolution. This means that there must be a common range of powers and capabilities available to all local government, and not restricted to particular authorities. The choice to limit the range of powers should be taken locally. Local government when empowered does act strategically and with responsibility. There are some outstanding UK examples of this, for example the GLA, Strathclyde and Cornwall.
The range of devolved powers available in Scotland sets a context for the scope of local ambition. In the short-term, the core devolved functions for most areas (but not exclusively so) would involve the immediate transfer of day-to-day responsibility for:
The transfer of powers should be in principle to the lowest accountable and effective level in terms of management functions and technical capabilities. There are however some duties which need to be exercised collectively (i.e. through joint strategic arrangements), normally at a metropolitan or rural county level. These include the spatial plan, carbon reductions and environmental action. The devolution arrangements for these are considered in the answer to the next question.
Question 2A: The geographical spread of existing deals, including to non-metropolitan areas
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 Greater 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 across England as a priority.
What is required goes beyond the current deal-based system of devolution. The current ad hoc ‘deal-based’ devolution has served its purpose, run its course, and has resulted in there being no coherence and is over-complicated. The ‘transactional costs’ for councils in providing services is great, and from a business perspective, results in confusion.
One-size does not fit all, and therefore there has to be flexibility, with the opportunity for local experimentation overseen within a broader strategic framework and long-term perspective. OECD countries the UK’s size have a comprehensive three-tiered governance structure and councils have greater control of revenues relative to their expenditure than in the UK. A comprehensive approach to devolution therefore should open up a full suite of real powers to be available to, but not necessarily taken up in all areas and supported by arrangements to deal with the key trans-regional issues aligned with the decentralisation of central government budgets and ministerial responsibilities (This is also dealt with in the answer to Question 2B below). This would be reinforced practically and symbolically by all government policy offices outside London being co-located regionally.
Question 2B: The impact on adjoining areas.
There are matters that need a wider geographical perspective than any individual authority. This particularly applies to the city regions within which there is a high interdependence in terms of labour and housing markets between their constituent council areas. Although the choice of joint governance model should be decided locally, some form of joint arrangement is needed for all city regions. There needs to be a capacity to act collaboratively, and a shared spatial framework. The new devolved arrangements show the value of combined authorities, but even their potential would be greatly enhanced by less restriction of their powers and funding.
There are also issues which are pan-regional in nature (i.e. even larger in the extent of their impacts than a single city region) which need a national perspective but do not have to be implemented nationally. These relate to:
For England, in the immediate future, it is most practical to build on the emerging arrangements for the Northern Powerhouse, Midlands Engine and the newly created Greater South-West partnerships. There is however an absence of an equivalent strategic initiative for London and the Wider South East. Various models have been promoted in the past. A useful starting point will be to convene a high-level grouping comparable to the Tristate of the RPA in New York-New Jersey- Connecticut.
These pan-regional arrangements could have the benefit that:
Any regional arrangements in England must avoid creating new layers of government or merely end up with central government operating out of regional offices. Specific arrangements must be tailored to the context of each area with devolution of powers to local councils. They must avoid the detachment and disenchantment of citizens from the political decisions, which applies to local as well as UK politics.
The UK2070 Commission therefore proposes the Principles for Collaboration that should guide the choice of the most appropriate sub-regional and regional configuration in England and allow for a diversity of areas in size and scope. Whatever regional geography is created, it should be based on a collaboration between existing bodies and communities.
Question 3: Further powers that local areas have accumulated over time and powers they should have which they don’t have already, including the specific case for London.
(REFER ABOVE Answer to Question 2: Scope of devolution)
Question 4A: The commitment to devolution across Government and capacity in Whitehall to promote and monitor devolution
Although there is a level of commitment to devolution the scale of change required, to be effective and inclusive, requires a changed relationship between local and central government. It is essential that there is a change in culture to create a ‘’parity of esteem’ between central and local government, which is currently missing. This does not need to lessen the status of the government’s own national strategy. A full analysis of this issue is contained in the report for the UK2070 Commission on ‘Two masters: the dilemma of central-local relations in England’ by Dr. M. Sandford .
Potential ways forward include a review of the ways in which Whitehall interprets requirements for policy and financial accountability; and how these could be relaxed to permit greater policy divergence. For example, Local Public Accounts Committees could be piloted in mayoral areas. They would enable practical exploration of the alternative approaches to accountability outlined above, as they could cover both devolved and non-devolved spending decisions.
Question 4B: The Government’s ability to capture relevant data at the right level – for example, in city region and combined authorities to assess the effectiveness of deals.
The Government’s ability to capture relevant data at the right level and enable the spatial-proofing of public policy, is constrained by the fact that:
Agreed analytical frameworks are required. This would be facilitated by an independent and resourced team and goes beyond the role of, for example, Office of Budget Responsibility (OBR) on policy or the ONS on analysis. The Commission has explored the options for undertaking this, including DATAR and the CGET in France. The French model has a much to commend it. However, whatever model is adopted, there is a need for a dedicated team to oversee the programme.
Question 5A: Governance and accountability: The impact of elected mayors and whether they are necessary to make devolution a success.
Local leaders need to be free to decide the level of devolution that they need for the delivery of their aspirations for the future well-being of their areas. Elected mayors have been successful. However, there are many examples of effective strategic leadership in authorities which do not have a mayoral system or even cabinet government. This has been dependent on not just having devolved powers and responsibilities and the quality of leadership but has been matched with control of resources, high-quality technical capacity, processes which link in those upon whom the delivery of local democratic decisions depend (e.g. utilities and government agencies) and a clear spatial framework.
Question 5B: Governance and accountability: Public engagement with the devolution process:
The over-riding issues for local communities arising from consultations are;
It is therefore essential that devolution is not simply a transfer of power between different parts of government – it must be inclusive. It means that decisions work for everyone and no part of the country is ‘left-behind’. All of the evidence suggests that ‘ordinary people’ want their own places to be better represented within national decision-making. A report for the Commission on ‘Civil Society Perspectives on Inequality: Focus Group Research Findings’ led by Dr. L Natarajan of UCL highlighted the need to rebalance the ‘voices’ within decision-making processes. This requires a more inclusive and participatory system of governance; devolution must ‘open up’ to new stakeholders with a reliable means for public participation operating equally across the country. Drawing on international practice in Participatory Democracy , this could include, for example, the use of co-produced decisions and an independent appeal process to protect the rights of individuals and communities.
Question 5C: How scrutiny is working in practice.
In terms of accountability, the prevailing approach by government amounts to ‘he who pays the piper calls the tune’. This means local decision-making – even with a devolution deals ‘single pot’ – is still restricted by departmental accountability for spending. As the National Audit Office recognised, a system that relies on local authorities and other local public bodies reporting to Government departments is often at odds with local service delivery, which is having to tackle complex local issues by working with budgets from
different sectors and across institutional boundaries. This is illustrated by the fact that devolution on matters such as rent controls involve a lengthy negotiation on reserve powers, the business case, independent evaluation, transferred funding arrangements and the period of operation. In short, accumulating additional power does not of itself alter the relationship between central government and metro-mayors.
This approach to devolution and accountability is not universal. Alternative approaches to ‘accountability’ exist in Scotland, Wales and Northern Ireland. There is no audit or accountability relationship between the devolved administrations and the UK Parliament. Responsibility for good working practices is theirs alone. Although these administrations have distinct and more comprehensive political systems, the broader point stands: the UK Government provides them with substantial grant funding but does not call the policy tune.
Currently there is a mismatch between the Government’s expressed aim of enhancing local choice and the UK convention that devolved powers remain subject to Parliamentary accountability for government spending. This is seen as integral to devolving additional powers in England needs a fundamentally different relationship with central government. As set out in the answer to Question 4A above, radical change is required to one where there is a parity of esteem between central and local government. Establishing local auditing arrangements would be part of this and has been used in London and historically by the EU Structural Funding regimes)
Question 6: Funding Arrangements: How access to new sources of income – for example business rate growth – have impacted local areas and how broader devolution of financial powers will affect the success of the policy.
(REFER ANSWER to Question 7 below)
Question 7: Funding Arrangements: The adequacy of existing sources of income and the potential need for more sources of income for local authorities that acquire more powers. Whether further business rate retention would provide additional funding for devolved services.
Unlike Northern Ireland, Scotland and Wales, no taxes are devolved specifically to England and its regions. Greater local control over resources is therefore a common ambition. There is however concern that fiscal devolution could reinforce the patterns of spatial inequality across the UK, since local taxes in any form are not raised equally around England. As the IFS has illustrated the largest council tax base per person in Kensington and Chelsea is three times larger than the area with the smallest, Nottingham.
It is also essential that in the transfer of responsibilities locally, Whitehall does not retain control of the level of resources. The UK2070 Commission does not seek to make recommendations on the most appropriate detailed mechanism for fiscal reforms, but it supports the views expressed by the Prime Minister when serving as 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!” (Q247. 04/03/14 CLG Committee)
The Commission therefore recommends the principles in the Box below be applied to revenue funding.
One specific funding stream that the Commission has considered is the current system for capturing the uplift in value and wealth requires considerable reform if it is to become an effective mechanism for the provision of local infrastructure. Most of the uplift in value and wealth created by public investment, infrastructure and policy is not shared equitably. There is scope for a more proactive approach to enable land and property value to be created that would not otherwise exist by being plan-led, as was historically the case with the development of New Towns.
The UK therefore needs to capture a higher proportion of the uplift in land values for local public purposes than is currently achieved. This would involve a more direct link to the provision of infrastructure that helps to create it than under the current systems of taxing development values (e.g. Stamp Duty Land Tax). This could also be achieved by a more strategic approach with the pooling of land value uplift and sharing the longer-term strategic returns; for example, within combined authorities or labour markets. The
most notable example of this type of thinking being applied is in the funding of Crossrail. It is possible to envisage such principles being used in tiered funding on a regional basis. For example, such a regional approach could be applied in and around Cambridge help fund the renewal of the rail link to Wisbech in Fenland, one of the most deprived areas in southern England.
Question 8: The potential scope of a devolution framework. Whether the current practice of bespoke deals for local areas is working or should some powers be made available to any local authority that chooses to adopt them.
The current ad hoc deal-based system of devolution in England needs to be replaced by a comprehensive framework of powers and responsibilities for all areas. Powers and responsibilities must be transferred to the lowest viable practical level of government, and should not be restricted to elected mayors or combined authorities.
It is therefore essential that different places are allowed to move up through different levels of devolution according to local ambition, need and capacity. A full portfolio of powers should be available for local authorities to select as they see best related to their local needs and capacities to manage.
In addition, England needs a new regional framework to facilitate common strategic approaches to address regional issues e.g. infrastructure priorities and the management of regional devolved funding. This should be built around the four partnership areas for the north, midlands, south-west and the Wider South East.
The need to devolve power, requires institutional change. Any arrangement should relate to emerging strategic local and regional partnerships, the decentralisation and relocation of central government functions and new inclusive mechanisms for citizen engagement to be ensured.
Any future roll-out of devolution arrangements to help deliver a more balanced economy should be based on: