Localis comment: The price to pay

The forthcoming English Devolution White Paper will set a course of travel to excite, entertain and frustrate in possibly equal measure. There is still a tremendous amount to learn from the first two decades of the millennium and its unheralded revolution in strategic local governance – something Localis hopes to explore further in our current research project for London Councils on New Mayoral Models.

However, much of the post-election debate has, for political reasons, focused on the needs of small towns. With it has come a focus and a return to founding Conservative principles in the notion, first espoused by Edmund Burke, of the role of ‘little platoons’ as a means to restoring civic fortunes and rebuilding national solidarity. Preserving the electoral gains in constituencies across the North and the Midlands will require a sense of uplift and aspiration and showing actual proof in people’s lives – from wages to high streets to healthcare.

But what does devolution and levelling up pragmatically mean from a One Nation perspective that reaches all parts of the country?

In a Burkean sense, if the newly formed and soon to be established Mayoral combined authorities are to be valued as institutions capable of preserving inherited ties to a proud industrial legacy, for reviving the fortunes in the here and now and safeguarding their areas’ economy and environment for future generations, then they must be robustly financed and invested in.

So this brings us to the nub. How to go about funding new infrastructure and resourcing the local state to deliver reformed public services that contribute to the health, security and prosperity of communities in both our major cities and across the broad green swathes of non-metropolitan England as yet unblessed with strategic economic powers?

Achieving the promise to ‘level up’ will depend in large part on better connecting small towns to big cities and cities to each other. Already this year, West Midlands Mayor Andy Street has thrown down the gauntlet to Whitehall for the type of control over transport services he feels it is vital he should have control over as a dynamic local leader.

Ownership of the farebox isn’t the answer entire. There are precedents from London to learn from – the business rates levy to fund Crossrail is one. Another, more tricky precedent, is Ken Livingstone’s use of bonds as London Mayor to fund Transport for London. This was achieved through promises to increase fares which were perceived as penalising those ordinary Londoners lacking cars.

The recent revival of the Municipal Bonds Agency does suggest a more creative and sustainable way of achieving the same investment result. How creative the Johnson administration is prepared to be, time and the 11 March Budget will tell. Recently Localis has argued for a Royal Commission into how local government is resourced and a return to the starting point of form, finance and function and a British Investment Bank to decentralise infrastructure improvements.

Even without these reforms, there is a favourable wind for changing tack at present. The Chancellor is open to challenging conventional Treasury economic wisdom on capital investment rules to make other parts of the country equally deserving. It is hoped this will counteract the predominance of the South East of England and also support regional entrepreneurship and capacity building. There should in this sense be a natural One Nation case for greater fiscal devolution to achieve these aims of rebalancing. This is just as significant if not more so for Mayoral combined authorities (MCA) with the power to work at scale alongside growth bodies such as the Northern Powerhouse and Midlands Engine.

Ultimately this will have to be a mixed bag of local tax-raising powers and, arguably a game of tailored trade-offs between MCAs and the Treasury. And a more sensible way of managing relationships between the centre and the emerging local powerbrokers. Now might be time to dust off the Cabinet of Mayors from its Cameronian slumber.

From Localis’s ongoing research into continental models of growth and economic development derived funding as it occurs in the Netherlands, Germany and Switzerland, there is ample scope for further powers and retention of business rates, ability to levy tourism taxes a la Birmingham’s Commonwealth Games proposal.

In similar vein, the UK Shared Prosperity Fund should support MCAs ambitions on skills funding to match disadvantaged people with jobs the labour market will need in the future as well as projects that enable clean local growth.

If a change is going to come, there’s an onus on getting the governance, funding and financing right first time. Now is not the time for small measures – trebles all round.

Jonathan Werran is chief executive of Localis

This article first appeared in The MJ on 28 January 2020