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The Government asked a big question recently: how can cities and city regions have more say over their finances? It’s an important question because the answer will have big implications for, amongst other things, the future growth of the UK economy and how local areas provide vital public services.
The DCLG Select Committee invited submissions to examine whether and how fiscal and financial powers could be passed down to London and English cities. You can find our submission here. Below, we highlight the key messages for why cities need more fiscal and financial powers in order to grow, what powers to devolve to cities, and who to devolve them to.
In the UK’s highly centralised economy (one of the most centralised in the OECD), fiscal and financial devolution should empower cities and city regions to better support economic growth, transform services and manage expenditure.
The incentives and rewards for supporting growth need to be rebalanced, with more of the benefits of growth passed on to local areas where the costs of investment are borne and where reinvesting the proceeds of growth is likely to generate cumulative benefits to the local economy.
Since the Spending Review in 2010, the Coalition Government has devolved some powers and funding streams to local government. But Whitehall still directly determines almost 60 per cent of local government budgets, and national rules and regulations mean there are central government controls over much of the remaining 40 per cent.
Budget and service silos hinder the design and delivery of efficient, joined-up services. Funding for services currently ignores the need to work across departmental silos (locally and nationally) and does not give cities and city regions enough flexibility to meet place-specific demands, such as matching skills strategies to the local labour market.
Forthcoming Centre for Cities research demonstrates that better coordination across authorities on economic issues is needed so that budgets reflect the geography of the local economy. Currently, complicated administrative structures at local and national levels present a big challenge, as they restrict the ability to plan and deliver growth-supporting services efficiently and effectively at scale.
Centre for Cities proposes that ‘tailored’ devolution offers the best solution to this problem, as it recognises that different policies require different approaches, and different places require different approaches. Central government needs to offer the powers and financial structures that empower local authorities and their partners in cities and city regions to work across silos, coordinate strategic investments and recoup the costs of investment in the local economy or society.
In turn, local government needs to make the most of their existing powers, demonstrate success and, where they wish for more powers and autonomy, set out compelling, evidence-based and innovative solutions that can deliver positive change for their economic area.
If you would like to learn more about our work on city devolution or the forthcoming report in partnership with Capita, please contact Zach Wilcox, Analyst at Centre for Cities.
Senior Consultant, City Economics at Arup
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