Earlier this week, very much under the radar, the Labour Party released its proposals to devolve economic power and funding in England, heralding it as ‘the biggest devolution of economic power and funding to England’s city and county regions in a generation’.
The Labour Party has been ‘behind the curve’ on the devolution debate since the Chancellor made his Northern Powerhouse speech, and followed this up with the Greater Manchester Devolution Agreement, so the publication is very welcome and puts them back in the game. So what did it say?
The proposals, which build on much of the analysis and recommendations set out in Lord Adonis’s report, will be available to ‘all city and county regions that have a coterminous Combined Authority and reformed Local Economic Partnership’. The document states that power and funding worth at least £30 billion over five years will be devolved, covering the policy areas of:
- Employment support – city and county regions would commission the Work Programme, getting the long term unemployed back to work
- Transport and Housing – local and regional infrastructure funding would be devolved to city and county regions, and more powers to work with local bus and train networks to drive improvement
- Skills – city and county regions would be allocated funding to commission 19+ further education provision based on local commissioning plans
- Business support – funding for business support and enterprise projects would be devolved to city and county regions, in return for matched private sector funding and/or in-kind contribution
Labour also proposes to allow places to retain 100 per cent of any additional business rates raised through supporting businesses to expand.
Before looking at how Labour’s proposals differ from those of the Conservatives and the Liberal Democrats, it’s worth noting the elements that are the same in all three approaches. The most obvious similarities are:
- The need for economic development strategies and service delivery to be organised at the functional economic area (FEA) level
- The central role given to Combined Authorities and LEPs as the respective public and private bodies to organise economic development at the FEA level
- The recognition that the policy issues that matter to creating successful local economies are skills, transport, housing, employment support and business support
- The need for collaboration between local actors – local authorities, businesses, universities – and between those local actors and national actors – government, Network Rail, Highways Agency, etc.
- The absence of any proposals around fiscal devolution.
So if that’s how the three approaches are similar, how do they differ? There are six main features that set Labour’s apart:
- Labour would introduce an English Devolution Act within a year of coming to power, which would enshrine in legislation the devolution of power and funding. Links can be drawn here with the proposal in our Cities Manifesto for a Cities and Prosperity Act, setting out a presumption in favour of devolution. This is markedly different from both the Conservatives’ and the Liberal Democrats’ approach, with neither proposing this type of enabling legislation.
- Labour would make a universal offer covering county as well as city-regions available to all places that wish to take it up and are able to meet their criteria. This approach is similar to the Lib Dem ‘Devolution on Demand’ proposal, but different from the Conservatives’ plans, which suggest a continuation of the deal-based approach. The movement towards a universal combined authority based approach is significant: it offers a lot more certainty to places, and provides a much clearer incentive structure, because right now, whilst the deal-based approach has advantages, it’s considerably more difficult for places to figure out what the real rules of the game are.
- Labour – like the Liberal Democrats, but unlike the Conservatives (or more accurately the Chancellor) – would not require places to introduce a directly-elected mayor in order to get the devolution offer.
- Labour would allow places to retain 100 per cent of the increase in business rates. At the moment, places are only able to keep a proportion of any increases. The exact position of the Liberal Democrats and Conservatives is unknown on this issue.
- Labour would require combined authorities to formally pool economic development funding and functions across their local area. This goes further than the Liberal Democrats and the Conservatives, which both encourage places to do this, but leave the final decision up to them.
- Labour are also open to possibility of local government reorganisation. Unlike the ‘pearl-handled revolver’ threat issued by Eric Pickles, Labour are prepared to support authorities in two-tier areas to become ‘Virtual Unitaries’. The Liberal Democrat position on local government reorganisation is not clear yet.
The gist of Labour’s proposals is welcome, and this announcement certainly puts them back in the devolution game. What we need next is the detail beneath each of these headlines. After all, as all those involved in the city deal process have found, the devil is always in the detail.
When this detail emerges, it will need to resolve, at least, the following issues:
- Whether combined authorities or LEPs are the more prominent institution for driving growth at the city/county region level. Obviously, both will need to work together but one will need to lead if progress is to be made.
- How will combined authorities, particularly the beefed-up versions proposed by Labour, address the democratic deficit question? Most council leaders are ward councillors, elected by approximately 1,500 people. Their democratic legitimacy to make decisions at the city/county level (which would affect not only the people in their local authority, but the voters in several other local authorities) is well below what could be considered to constitute a directly-elected mandate.
- In headline terms, the policy areas outlined are the ‘right’ ones for combined authorities to focus on. The missing policy area is strategic planning, which is a big omission. The ability of combined authorities to integrate and coordinate land-use planning with housing and transport will be critical for getting the city/county-region to function as a coherent place. This is the key lesson from London, and one that should be heeded.
- How will the £30bn be allocated? There are several ways of doing this – on a per capita basis, on a growth or need basis, on a first-come-first-served basis, etc. Some combined authorities already exist, and would be able to use some or all of the money tomorrow. Others are in the process of being established, and will take a while to get themselves to the position where they can meet the criteria laid down by Labour. Others still are miles away and may never get there. For an economic growth-minded devolutionist like me, this is a perfectly acceptable state of affairs. For a national government concerned about national coverage and committed to ‘fairer funding’, this presents a challenge and one that has the potential to derail their devolution plans.
My final thought is about money and scale. £30bn of funding sounds like a lot; because it is. But if you remember that approx. £23bn gets spent by the public sector in Greater Manchester every year, that the cost of building Crossrail 2 in London would be around £20bn, that the transport proposals included in the One North prospectus amount to between £10-15bn, and that the annual budget for all of local government in England is around £100bn, suddenly £30bn over five years doesn’t sound quite so impressive.
Even more significantly, Labour’s proposals – like those of the Conservatives and the Liberal Democrats – say nothing about fiscal devolution: giving city (and county) regions more control over the money raised and spent in their areas. But as we have discussed on many occasions, structural devolution without fiscal devolution threatens to empower cities as toothless tigers.
As welcome as the Labour Party’s proposals are, they and the other parties have a long way to go on the devolution journey if we are to create an economy and society where people and places have more control over the issues and money that affects their daily lives. The progress we are seeing is promising, but until the detail is on the table, we remain no closer to the end goal of driving widespread growth and prosperity.