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The paper was written to inform the Lyons Inquiry into the role and functions of local government. Centre for Cities argued that Sir Michael Lyons had a major opportunity to recommend devolution reforms that would give cities real freedom to promote economic growth. Eight years, three Prime Ministers, five Communities Secretaries and one economic meltdown later, surprisingly little has changed. The main issues around city devolution remain unchanged, and substantially unresolved. So where is devolution now, in the wake of the Heseltine Growth Report?
In Bigger, Better, Smarter Centre for Cities identified four areas in which devolution could drive city growth – money, leadership, political freedom and city scale – and the thorniest issues identified in the report are still the subject of debate today.
‘Money’ is perhaps the area where the least progress has been made. Bigger, Better, Smarter cited evidence that economic development is a local job that requires local investment decisions, and that more local control is needed of financial resources and levers. The report complained that “Cities remain dependent on grants and approvals from Whitehall departments.”
Fast forward to 2013, and local authorities are struggling to manage a succession of new, funding mechanisms from multiple sources, from the Regional Growth Fund to the Growing Places Fund, all of which are centrally directed and allocated. Devolution of revenue-raising powers has been on a strictly limited basis, via Enterprise Zones or the ‘licensed exception’ that is the Manchester Earn Back deal. Lord Heseltine’s Single Local Growth Fund could prove the most significant financial devolution undertaken by this government. However, the battles currently being fought over its size reflect just how tough the job of delivering devolution really is, especially when money is involved. Despite high profile support from Lord Heseltine and public backing by ministers, giving away any level of control of the purse strings never mind the purse itself, is politically hard for any government to swallow. Greater local control of financial levers makes economic sense, but few politicians are keen to reduce their own level of economic influence and control, especially if they feel they retain accountability for the end result.
The nature of the political freedom needed to influence local growth was also analysed in Bigger, Better, Smarter, which concluded that “autonomy is necessary” but that “having the freedom to develop policy isn’t the same as delivering it.” The Government would argue that the introduction of a general power of competence for local authorities in 2010 gave them the freedoms they need. Councils would argue that their “policy capacity” has been subject to unprecedented pressures from public spending cuts. The City Deals experience suggests that cities need to be much more confident in telling government what they want, but that government cannot expect a new era of innovation from cities if they are not prepared to concede control of financial levers as part of the deal.
Bigger, Better, Smarter discussed evidence that effective leadership, at both a personal and an institutional level, has the potential to “help create the conditions for economic success”. Following the failure to install mayors in most cities in 2012, with the notable exceptions of Bristol and Liverpool, the reform agenda is in abeyance. However, the potential for ‘metro mayors’ to run cities at the scale of their functional economies, as consistently supported by Centre for Cities, was raised again by Lord Heseltine.
Bigger, Better, Smarter also addressed the scale at which devolution would work, using the terminology of a past political era – ‘city-region level’ devolution – to identify what remains a hot concept. Centre for Cities’ view that this is the optimum scale for financial devolution was supported by Lord Heseltine, who used the term ‘Functional Economic Market Areas’.
Leadership and governance scale are the areas where real progress can be seen in a number of the largest English cities, with moves towards combined authorities to formalise economic development co-operation at ‘city region’ scale in Leeds, Newcastle and Sheffield. These new ways of working have been initiated by cities themselves, who have taken the lead in committing to local partnerships. This has proved much easier in some cities than others, with political divisions preventing the collaboration that would surely be in the interests of local economies and residents.
Devolution is not simply a question of an overbearing centre and oppressed local government. As Bigger, Better, Smarter made clear, while government sets the policy agenda, cities have an equally important role in providing “robust local data” and “strong economic development strategies”, areas in which many need to improve.
However, cities also need increased autonomy and resources if they are to take a greater role in their local economies. The extent to which governments of any party think that local authorities are the right vehicles for economic growth, or are prepared to introduce the scale of reform that would really empower cities, is not much clearer in 2013 than it was in 2005.
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