The Devolution Dilemma: A Long Road to Local Power

Andy Burnham’s promise to transfer power from Westminster to every postcode in England has been met with both enthusiasm and skepticism. As his team fills in the detail of this ambitious project, it’s becoming increasingly clear that the road ahead will be long and arduous.

The legacy of austerity has left English local government a shadow of its former self. The workforce has dwindled significantly since 2009, from 2.2 million to around 1.1 million, leaving many authorities struggling to cope with even basic tasks. This is not just about numbers; it’s also about expertise and capacity. As the Organisation for Economic Co-operation and Development (OECD) notes, many local authorities lack the resources and technical know-how to make effective use of their new powers.

Burnham wants to hand mayors a share of income tax revenue, which would be a significant shift away from the current system where most tax revenue goes straight to Whitehall. However, this could create problems of its own. If the winners in this process are allowed to keep a rising share of income tax, it could exacerbate existing regional inequalities. The fastest-growing mayoral authorities typically have the strongest economies, such as London and Greater Manchester. This could lead to a self-fulfilling cycle where weaker local economies struggle further behind.

The reforms will take time to bear fruit. It won’t be until 2028 that the income tax plan comes into full effect, and there are still dozens of new mayoralties in the process of being created. The OECD has endorsed devolution as a way to address regional inequalities, but it’s clear that this is not a straightforward task.

Despite these challenges, there are compelling arguments in favor of devolution. Local leaders are best placed to understand how to support growth in their area, and studies have shown that countries with higher levels of tax and spending devolution tend to have higher wages. Integrating bus, tram, and train networks in the six largest English cities outside London could generate productivity gains worth an estimated £17 billion.

However, there are potential risks to consider. The loss of local journalism and the abolition of the Audit Commission have removed important checks and balances on local government spending. Labour’s plans to strengthen the role of the new Local Audit Office are a step in the right direction, but more needs to be done to prevent waste and mismanagement.

The UK’s second-tier cities significantly underperform their peers elsewhere in the G7. Among the bottom 20 big cities in the G7 for productivity, seven are British. This has real-world consequences for people’s lives and livelihoods.

Powering up the UK’s regions would make a significant difference to the economy as a whole. Local leaders are better placed to understand how to support growth in their area, and studies have shown that countries with higher levels of tax and spending devolution tend to have higher wages.

The current system is not just inefficient; it’s also unfair. Tax revenue is concentrated in the hands of a few powerful authorities, while smaller localities struggle to make ends meet. Devolution could help address this problem by giving more power and resources to local leaders.

Burnham’s team faces numerous challenges, from repairing the damage caused by austerity to ensuring that new powers are used effectively. This will require a sustained effort over many years, not just a few weeks or months.

But it’s worth it. Devolution has the potential to bring real benefits to local communities and help address regional inequalities. It won’t be easy, but it’s a necessary step towards creating a more balanced economy that serves all regions equally.

The loss of local journalism and the abolition of the Audit Commission have removed important checks and balances on local government spending. Labour’s plans to strengthen the role of the new Local Audit Office are a step in the right direction, but more needs to be done to prevent waste and mismanagement.

This is not just about technical expertise; it’s also about accountability. As the OECD notes, countries with higher levels of tax and spending devolution tend to have higher wages. But this requires effective management and oversight, which are currently lacking in many local authorities.

The success of Burnham’s devolution agenda will depend on its ability to address these challenges head-on. It won’t be easy, but it could be transformative for the economy and bring real benefits to local communities.