Written evidence submitted by Core Cities UK [DEV 014]
The Role of Core Cities
Core Cities UK are a unique and united voice to promote the role of our cities in driving economic growth. We represent the city authorities of Birmingham, Bristol, Cardiff, Glasgow, Liverpool, Leeds, Manchester, Newcastle, Nottingham and Sheffield. Core Cities UK develop evidence-based policies that support the critical role of these important cities in delivering the country’s full economic potential, creating more jobs and improving people’s lives. The Core Cities sit at the centre of the UK’s ten biggest urban areas and economies outside London, delivering 25% of the UK economy – more than London - and are home to 19 million.
The importance of cities to delivering national economies and stronger communities has never been clearer, with report after report highlighting their importance. However Government policies often seem split between those that support the role of Core Cities as economic drivers on the one hand, and yet undermine this role in the way in which resources are then deployed across them. Cities drive the economies of nations, not the other way around, and this fundamental point should underpin future UK urban policy.
Regional economic disparity and devolution
The Core Cities already contribute around a quarter of England’s wealth, yet by international standards they are underperforming, largely due to the heavily centralised state systems within which they operate.
This is in part responsible for a structural imbalance within the UK economy, resulting in an over-reliance on London and South East and the flow of investment that results from this. Although the capitals’ continued performance is critical to the UK’s future, evidence demonstrates that this kind of imbalance is bad for an economy over the long term, an argument that has in principle been accepted by successive governments in their attempts to rebalance the UK economy.
This debate has however often been positioned as a ‘zero sum game’, where an increased focus on Core Cities might be detrimental to the interests of the capital. Legislative circumstances in Scotland and Wales are significantly different and this is discussed in the CSR prospectus. Core Cities have a strong working relationship with London Government, one which is based on increasing the national economy – and the investment available to support it – overall, rather than only focusing on the distribution of resources, although over time this will need to happen.
Unlocking Core Cities’ potential for the UK
This Government has two overriding economic and fiscal priorities: increasing economic productivity; and reducing the deficit. Yet despite efforts to rebalance the economy and following five years of austerity, across the Core Cities productivity is not going up sufficiently, and public spending overall is not going down within them, resulting in two gaps which, if not closed, will have serious consequences for the whole of the UK economy and the national balance sheet.
- The productivity gap. The difference between the Core Cities and the UK average economic output, currently standing at a negative balance of some £66.8billion a year, is creating an unbalanced economy and hampering international success. The UK now has the widest regional economic disparity in Western Europe . Compared to the Core Cities’ average, productivity per person in Munich is 88% higher, Frankfurt it is 80.7% higher, Rotterdam 42.8% and Barcelona 26.7%.
- The public finance gap. The difference between what is spent on all public services across the Core Cities (health, welfare, police, councils etc.), and the total amount of tax raised across them. This gap is currently £53.6billion per year more spent on services than raised in taxes, and has not reduced much despite 5 years of austerity, because centralised cuts have hit services that prevent problems or stop them getting worse, resulting in increased health, social care and welfare costs.
Core Cities have the assets, scale and capacity to achieve much more for the UK. Cities have welcomed the recognition that there has been of this potential, in City Deals and now further Devolution Deals which have begun to return real power and resource to the cities. Yet despite increasing recognition of their role and an impressive track record of success, the Core Cities true economic potential remains untapped, and they could contribute much more to raising productivity for the UK, whilst closing the gap within them between the total tax raised and the total cost of all public services.
A Place-based multi-year Comprehensive Spending Review
The Core Cities all have the potential to become financially self-sustaining over time. To achieve this, cities will need to share more in both risk and reward, including fiscal reforms for them to retain more of the local tax base, and public sector reforms which allow a portion of savings to be retained and reinvested locally, putting them more on a par with international competitors.
Core Cities political Cabinet has made an offer to Government, to grow the economy and manage public spending sustainably, through devolution, bringing together policies for Growth and Reform powerfully within their cities to deliver jobs, housing, economic growth and reformed public services critical to quality of place and life.
To achieve this, Core Cities want to engage in the co-design of policies with Government, including a place-based Comprehensive Spending Review and engaging with the relevant Prime Minister’s Task Forces including Constitutional Reform, Economy, Troubled Families, Digital Infrastructure, Health and Social Care, Exports, Immigration and Housing.
In respect of the Comprehensive Spending Review (CSR), it is critical that place-based settlements are over multiple years, at least the term of the CSR period, to allow for investment to made where need upfront to deliver improvements and recoup savings downstream. The Core Cities submission to the CSR 2015 is attached to this response.
The Committee invites written evidence on the following 6 issues.
1 How far the Manchester devolution deal provides a model, and the extent to which this is applicable to other areas
1.1 The Greater Manchester (GM) Devolution Deal has taken forward a number of policies that are supported – and indeed have previously been advocated – by the wider Core Cities Group. The Deal is based on a strong, evidenced case for reforms to grow the GM economy and to reform public services, based on an understanding of local priorities and the improved outcomes that can be delivered through a broader ‘place-based’ approach.
1.2 As each Core City’s circumstances and needs are distinctive, a blanket approach treating everywhere the same does not allow for flexibility in supporting the strengths or requirements of the different cities, for example in respect of the nature of the local labour market, or the specific profiles of demography and deprivation. As productivity relative to the UK average has fallen despite cities’ increasing contribution to growth, the Core Cities know that today’s challenges and tomorrow’s opportunities require different responses. The transformational reform we need requires long-term commitment, it should not be unduly delayed.
1.3 Elements of the GM model could be applied to other consenting Core Cities in that if they can demonstrate similar outcomes for the local economy and residents, alongside the capacity to deliver, they should benefit from similar freedoms and flexibilities. Cities and local authorities must be empowered to discharge their place-shaping role to create high quality places that attract and retain more productive people and businesses and to reform the way that public services are delivered to improve outcomes for their people. Whilst the GM devolution deal provides an example of the kind of deal that can be developed, a one-size-fits-all approach is not appropriate for all cities.
1.4 A set of core ‘devolution packages’ should be agreed between Core Cities and Whitehall so each part of each deal does not need to be renegotiated from scratch every time. These would not be instead of bespoke deals, but would reduce the effort required of cities and of Whitehall in future deals, streamlining the process and requiring less resource (see Core Cities CSR submission). These would be drawn down by cities according to a set of criteria set out by Government which would determine the extent of the package, accepting that it would be detrimental to the national interest to hold places back that can generate economic growth and contribute to sustainable deficit reduction. It is for each individual city to demonstrate appropriate but locally determined and relevant governance arrangements capable of delivering robust accountability in relation to any additional powers and responsibilities conferred.
1.5 Government should also accept groups of cities – including all Core Cities members where appropriate – in forming negotiating blocks to aid the delivery of the above. This would be particularly pertinent to the delivery of a more localised Work Programme Plus for example.
1.6 Core Cities suggest that national principles or a framework that set out standards should guide this process, rather than a prescribed single governance model that is implemented top down. This should not include a nationally-set framework for referendums where increases in taxes are to be considered, which should be a matter for local decision for those taxes in local control. Devolution deals should adopt the following principles at the 2015 Spending Review, with the aim of achieving full fiscal devolution to Core city-regions by 2025:
Clear lines of responsibility and accountability, built bottom-up and avoiding the blurring of democratic mandates;
Empowering cities to align national and local systems and investment for tackling low skills, worklessness, health, education and crime;
Arrangements for pooling budgets to enable public funding to focus on specific sets of locally relevant and improved outcomes;
Flexible and locally relevant performance and inspection frameworks, which reflect agreed local priorities;
Consistent approaches to data collection and monitoring, enabling local alignment of data to support evidence based decision making; and
A risk and reward structure which is implemented and understood by all investors (including a greater local retention of tax up-lifts and public finance savings).
1.7 Devolution Deals, as currently structured, will not however unlock the full potential of Core Cities, or deliver the productivity gains and sustainable deficit reduction Government seeks. The Local Government Finance System is no longer considered to be fit for purpose, and contains within it (and related policy like New Homes Bonus) incentives and formula which act perversely against the interests of the Core Cities, and therefore against the economic interests of the nation.
1.8 In addition, a wider programme of fiscal reform is required, building on Core Cities joint work with London ‘City Centred’ (citycentred.com), exploring greater fiscal retention, with the long term aim of greater fiscal devolution, within a national system that allows for the redistribution of resource between places with lower tax bases.
2 The devolution of health spending to Greater Manchester and how it will affect delivery of health services locally—and the merits of extending this model to other cities and counties
2.1 The integration of health and social care within and across Greater Manchester has been a major priority for some time, and a key component of GM’s growth and reform strategies. This was reflected in the GM Devolution Agreement agreed with the Government in November 2014, in which GMCA, working with GM CCGs and other stakeholders, was invited to bring forward a business plan for the integration of health and social care across Greater Manchester. In February 2015, the government announced that local authorities and clinical commissioning groups (CCGs) in Greater Manchester would take control of £6 billion in local healthcare funding from April 2016.
2.2 Since that agreement, the GMCA has been working closely with key stakeholders including NHS England, CCGs, health and social care providers and a Memorandum of Understanding was ratified by the GMCA, NHS England and GM CCGs and endorsed by GM NHS bodies. This Memorandum does not change the position of NHS services in GM with regards to the Constitution and Mandate; they all remain part of the NHS. It provide the foundations for GM to exercise the freedom and flexibilities to provide innovative approaches to better meet the needs of GM residents. An over-centralised system and a reliance on national delivery models are not delivering the outcomes required at a local level. Greater local decision making and control of resources will help to ensure that services are delivered more efficiently and effectively, in line with local priorities. The GM model is supported by robust governance arrangements and a clear delivery plan.
2.3 Other cities would benefit from using the learning from Manchester’s experience; however, as each city or county have different health needs depending on their demographics and geographical spread, it would be for those cities and counties to use their freedom and flexibility to decide how best to meet those needs. For example, using the statutory Joint Strategic Needs Assessment at city/county level would support cities or counties to jointly commission health services that better meet those identified local needs and gaps in provision and trial innovative approaches to local issues.
2.4 Health and Social Care Integration is a significant component of wider Public Sector Reform. Achieving wider reform is partly an issue of devolution, but also one of integrating national and local services and spending more closely, and treating Core Cities as co-commissioners, where their local knowledge can make national and local investment work better together, for example for the Work Programme Plus and Apprenticeships. There is the potential for several or even all Core Cities to work jointly on Public Sector Reform, creating common performance management frameworks, saving money on procurement and sharing best practice
2.5 The largest blocks of public finance spent within cities relate to health, social care, welfare and education. There is both a national and local appetite for changing the way these funds are spent, based on two primary factors: an increased understanding of the mechanics of demand reduction; alongside an imperative to manage spending if services are to be sustainable.
2.6 Applying integrated principles of working allows a much greater toolkit to be applied to challenges in the round which will impact positively on these budgets and ultimately also on levels of productivity. To do this, cities and their local partners should be given responsibility for directing the total public spending across a place, aligning resources and strategic plans to achieve specific aims, sharing in risk and reward.
2.7 The biggest prize that can be gained through this approach is a wider alignment of all local and national services within a place, establishing cross-cutting links between the integration of Health and Social Care with other policy areas like Skills and Employment, which will reduce costs by some margin, for example by reducing unemployment, the biggest single contributing factor to poor health.
2.8 It is early in the process of the GM Deal and indeed many of the other City Deals to measure significant impacts (although early impacts from City Deals can clearly be seen), however, there are early positive indications from the Greater Manchester Health and Social Care integration programmes which aim to reduce hospital admissions and costs to the acute health sector, through greater coordination and preventative support and treatment in the community. For example, in Wigan, Integrated neighbourhood teams are providing bespoke packages of support for those at high risk of readmission to hospital. Initial evidence from one year of working with 2,990 such individuals has demonstrated a 41% reduction in non-elective admissions, 38% reduction in A&E attendance, and a 17% reduction in outpatient attendance. Applying these approaches at scale could help to reduce mortality as outlined in the GMS and make a significant contribution to the potential £410 million benefits outlined above – while recognising there will also be significant cost pressures in the health system and national policy frameworks about health spending to work within.
3 How the Bill will build on existing local accountability structures and ensure appropriate governance mechanisms are put in place for devolved functions
3.1 Cities, city regions and combined authorities have evolved bottom up, over time and this is a common feature of strong governance models internationally – they are rarely successful when imposed top down.
3.2 Promoting greater joint working between central and local government is not a new idea. In recent years, for example, local area agreements and multi-area agreements were intended to help areas focus on an agreed set of priority outcomes. City Deals, however, represent a new way of working. They provided local places with a chance to set out their own priorities and the negotiations allowed local Leaders and Mayors to explain their growth priorities directly to senior government decision-makers. In response, the government committed to removing barriers to cities’ growth plans by providing funding and devolving specific decisions. The cities were primarily responsible for then implementing programmes agreed in the deals, with government support.
3.3 The City Deals have been an important catalyst for cities to develop their capacity to manage devolved funding and responsibilities; for example, several of the cities have since established combined authorities to make decisions on economic development and regeneration issues that go beyond local authority boundaries. They observe that the scope and size of the deals reflected each city’s governance arrangements for their economic area.
3.4 Joint working between local authorities across functioning economic areas is not new however, and all Core Cities have had robust arrangements in place for some time, suitable to local circumstance and need, and respectful of the particular traditions and history of partnership working in that area. The Deals have provided an opportunity to strengthen some of these arrangements, whose evolution should be supported as a matter of local choice.
3.5 We welcome the Bill and understand its scope, but an essential part of the narrative is missing on how different speeds and models of devolution in different places can deliver more for the nation. Core Cities are not anti or pro any specific governance mechanism, they are pro-devolution, to improve specific outcomes for their cities, people and the nation. It is detrimental to the national interest to hold places back that can generate economic growth and contribute to sustainable deficit reduction.
3.6 Core Cities’ position has been that each place should be able to access the right governance model for them, including but not limited to Metro Mayors. But it may be detrimental to the national interest if only a handful of places are able to move ahead when others could similarly be contributing to growth and deficit reduction. We applaud and support cities that are moving forward, but also ask whether the nation can afford to hold other places back? If devolution is to take place to counties and smaller towns, then it is not a tenable position to hold back devolution from major cities, limiting their national contribution because a particular governance mechanism does not, in that time and place, apply.
3.7 Core Cities’ view is that as a starting point, there should be a ‘Core Menu’ on offer to cities, combined authorities and other places, alongside a set of governance tests, with places able to draw down powers according to their ability to meet tests. This would be a beginning and not an end point however and should not stifle innovation. As individual cities and as a collective we will want to continually bring forward new ideas and thinking for devolution that will improve outcomes.
3.8 As devolution takes place to Scotland and Wales (Wales is covered by the Cities and Local Government Bill), it will be important to ensure that cities in those countries are allowed similar freedoms to grow their local economies and contribute to Public Sector Reforms.
3.9 Bringing together devolved policies for public sector reform and growth in the Core Cities (and London) is Government’s best chance of increasing growth from its urban economic base and reducing the deficit sustainably.
4 How the range of models available in the UK and abroad may suit the needs of different authorities, including all areas which have or intend to have a combined authority
4.1 Most Local Authorities now see supporting and enabling local economic growth and development as a fundamental role and function of their community leadership. Mobilising mainstream resources for local economic growth and development is particularly problematic given continuing funding constraints. Setting priorities for intervention and delivering them requires strong partnership working – both within, and often across - local authorities boundaries. Prioritisation, resourcing and delivery of economic interventions raises issues over leadership and governance of both public policy and public money. Moreover, government has repeatedly stressed the necessity of being persuaded that cohesive, committed and competent governance is in place before they are prepared to devolve powers and resources.
4.2 The range of models available in the UK and abroad provides examples to be considered as places develop and strengthen their governance arrangements. Evidence from continental Europe is that increasingly the city is regarded as too small and the region too large a platform on which to base economic competitiveness[1]. The trend is to develop city-regional solutions, most often on an informal basis, although occasionally and successfully, on a formal basis. Continental cities have responsibility for a wider range of functions which affect their economic competitiveness than do their English counterparts; they typically have more diverse forms of local revenue and more buoyant tax bases, which make them less fiscally dependent upon the national state and more proactive in their development strategies. Examples include: Brussels Metropolitan which is a local bottom-up initiative by the three Belgian regional business associations and the federal business association; the 14 municipalities in the young democracy of the Metropolitan Association of Upper Silesia work together from bottom up on cultural issues and transport networks and the metropolitan area of Turin does not fit into the formal structure of provinces, so collaborations have been established bottom-up for different issues for network services (transport, water cycle and energy) and development projects (industrial, cultural heritage, tourism)[2].
4.3 The ‘models’ currently on offer have been adopted largely in unrelated processes evolving over time in response to local issues with some rooted in previous legislation. The principal variants of governance models that have been developed over time for Local Authorities, and groups of Local Authorities, include:
Devolved administrations (eg. devolved nations of Wales, Scotland, Northern Ireland)
London/GLA
Combined Authorities (CAs)
Economic Prosperity Boards
Statutory Joint Committees (eg. Health and Wellbeing Boards, Multi-agency Safeguarding Boards which specify a minimum of members from said organisation)
Leaders Boards and non-statutory committees – some LAs either continuing or evolving already existing arrangements for pan-LA collaboration in LED and related areas with responsibilities tending to be for LEP and/or city deals and for public money delegated through LEPs
LEP-based models - to assure democratic accountability through their membership of the LEP board and financial accountability through a lead LA accountable body (e.g. Preston city deal the LEP board as a limited company is the leadership and governance body for LED advised by the implementation executive arrangements)
4.4 While all offer varying levels of accountabilities and governance appropriate to each place and issue, the key focus in devolution should be on building on and developing arrangements that reflect the strategic agenda of the locality, are locally determined and that are robust and proportionate with the powers and functions to be exercised.
4.5 Core Cities have built compelling and evidence-based and place-based propositions for change, based on the critical importance of local leadership and governance. Some cities (if not all) are prepared to assume a significant proportion of the risks of priority interventions while others may require a tiered/staged approach of financing and risks.
4.6 Each governance model is unique to the relevant city or combined authorities’ context and the nature of its agreement with the government. Each city or combined authority should decide for themselves what the appropriate governance model are and for what level of decisions depending on the issue and geographical spread.
4.7 Moving between governance models can take time and there needs to be recognition and ‘welcoming’ of enhanced devolution 2015-20 as an asymmetrical process.
5 The appropriateness of current devolution plans for London and how these relate to the legislation
5.1 London and England’s largest cities have united to call for greater financial freedoms enabling local politicians to better direct growth to drive their local and the national economy. Local leaders, working with Government, are best placed to drive growth and reform in their specific localities.
5.2 The London Finance Commission proposals, endorsed by the Core Cities Group call for reinforcement of local economic leadership supported by the devolution of property-based taxes, enhanced flexibilities with revenue raising, income generation and borrowing powers. Such powers should be available to both the Core Cities and London, with greater retention of taxes first, and a mature and strategic debate on fuller devolution of taxes in the longer term, within a system that allows for redistribution of resource between places that have over tax bases as a starting point.
6 What lessons can be learnt from the City Deals programme
6.1 The Core Cities acknowledge that there has been positive change in national policy. The City Deals process has been welcomed by all the cities and is already delivering growth, jobs and training into each of our urban areas. Although many schemes will take a decade or more to complete, the City Deals already provide substantial early evidence
6.2 The government’s Wave 1 City Deals in England were an important catalyst for the 8 largest cities outside London to develop their capacity to manage devolved funding and increased responsibility for economic growth, according to the National Audit Office. Deals are now under way for Cardiff and Glasgow.
6.3 Measuring the deals’ impact on economic growth will require long-term commitment from government and cities to monitoring and evaluating projects and the deals as a whole. According to the National Audit Office, the government could have worked in a more structured way with cities to agree a consistent approach to evaluating the deals’ impacts. City Deals are designed to empower local leaders and businesses to create local growth, and enabled cities to present their local economic priorities directly to government decision-makers.
6.4 There have been early positive impacts from some of the individual programmes agreed in the deals[3]. It has, however, taken longer for cities and departments to implement some of the programmes that required more innovative funding or assurance mechanisms, and there were delays in reaching agreement on delivery, even when deals had been signed. For example, Greater Manchester’s proposed ‘earn back’ deal, which enabled the combined authority to retain a portion of additional tax revenue generated by its investment, required HM Treasury to calculate the extra tax revenues generated by local investment. It was autumn 2014 before HM Treasury agreed a simpler arrangement.
6.5 While some programmes have had early impacts, evaluating the effect of longer-term programmes in the City Deals on local economic growth is challenging. This is because the impacts occur over a long time and because it is difficult to assess what would have happened without the deals.
6.6 The government and the cities could work together in a more structured way to agree a consistent and proportionate approach to agree data collation, monitoring and evaluating the deals’ impact. This is the same within the 4 constituent nations in the UK and there is limited comparable benchmark measures.
6.7 Whilst there have been a number of steps towards further devolution, in particular through City Deals and the forthcoming Growth Deals, we view these as only the beginning of an ongoing process of moving power and resource from central to local government, based on achieving improved outcomes.
6.8 The City Deals process underlined the importance of differential devolution, whereby packages of powers and resources can be devolved to local authorities based on the ability of those places to contribute to national priorities, as well as the capacity to demonstrate effective structures for local leadership, decision-making and accountability.
6.9 Core Cities welcome this principle: a one-size fits all approach is not appropriate. It is essential that all cities with a clear vision, a proven track record of delivery and a history of collaboration should be empowered to shape their economic future, according to distinctive local challenges and opportunities.
August 2015