4 Practicalities of introducing devolution |
speed and spread of fiscal devolution
82. An incremental approach will stand
the best chance of success with the Government. We referred at
paragraph 70 to the Government's test of whether further decentralisation
supported deficit reduction. The Minister of State for Cabinet
Office (Cities and Constitution), Greg Clark MP, said that the
Treasury would not agree to general fiscal devolution but might
be persuaded to move incrementally and to adopt proposals in particular
areas. He said progress on devolution had been held back in the
past by concerns that, "'It is fine for some places, but
is everyone ready to take on these powers?'"
Others were more explicit, telling us that any attempt at blanket
fiscal devolution risked derailing the whole process. Professor
Travers warned that a proposal that the whole country adopt such
reforms in one go would "generate strong opposition within
He added that, "if we ask for the same localisation or decentralisation
for all of England at once, we are less likely to get it than
if we ask for one or two places".
The idea of devolution at different speeds, with Government incentive
leading to local initiatives, has been a feature of recent Government
policymaking. The Parliamentary Under-Secretary of State for Communities
and Local Government, Brandon Lewis MP, said that:
if any Government were to wait until
it felt every part of the country could go ahead with a particular
area (of policy), what you would end up doing is slowing down
the areas that can go forward further, faster.
He also pointed to the advantages of
local authorities moving at a different pace. He told us that
areas moving forward with local growth funds and City Deals drove
people in other areas to ask their elected representatives,
"What about us? Why have we
not got this yet?" [
] we use the fact that areas can
drive forward faster and quicker to encourage those others (saying),
"Look what can be done" [
] The more successful
some areas are, I would hope we can drive other areas to want
to be part of that as well.
Sir Merrick Cockell, Chairman of the
Local Government Association, explained: "we are used to
an imperfectly designed and imperfectly operating set of local
government structures and we can cope well with that".
83. A system that develops in line with
the features we have set out in the previous chapter is likely
to mean that most local authorities will take some time to devise
and bring forward proposals for fiscal devolution.
84. We conclude that in the short-term
at least fiscal devolution encompassing a range of taxes and enhanced
borrowing powers is likely to be implemented successfully by a
small group of local authorities, particularly those that have
already secured decentralisation packages or shown a strong interest
in fiscal devolution, such as London and some Core Cities. This
would be nothing new: local government in England has for a long
time been structured asymmetrically and developed at different
speeds. An incremental approach has more chance of gaining acceptance
from the Treasury, which has a tendency to be cautious on fiscal
matters. It would also allow those who want to make progress to
move forward faster.
85. The Core Cities, the County Councils
Network (CCN) and Key Cities were content to see fiscal devolution
start in other areas as long as there was a guarantee of their
being able to join the process within an agreed timescale. Tom
Riordan, chief executive of Leeds City Council, who also appeared
on behalf of Core Cities, told us that if fiscal devolution was
offered first to London, he would expect Core Cities' political
leaders to be pressing strongly for it themselves, too.
Cllr David Hodge, chair of CCN, said "So long as we were
given that assurance that we were going to get those powers then
I think I would be quite happy with that."
Cllr Peter Box from the Key Cities Group agreed but said that
it was "not acceptable to say that it would happen in certain
areas and not the rest". Instead, he envisaged the devolution
of different powers to individual cities, to county areas and
to combined authorities, depending on what suited local areas.
86. Witnesses told us that central Government
needed to put in place a programme of devolution which would allow
those ahead of the pack to move on while giving assurance to those
areas wishing to follow in their path. To that end several witnesses
suggested a frameworkor roadmapfor devolution. Core
We should [
] have a clear
and shared timetable for devolution [
] Some changes, for
example the devolution of property taxes, should be possible to
begin without large scale institutional change [
should recognise that there is no "one size fits all"
approach to local devolution. Some areas may wish to move further
and faster than others, taking on more responsibility within compressed
IPPR North said in its submission:
History tells us that without a
clear implementation plan, what is promised before the general
election is unlikely to be fulfilled afterwards. To this end it
is worth considering the kind of 'routemap' that might need to
be followed if fiscal devolution is likely to come to fruition.
This model has been used in other countries.
France and Japan looked at the powers that could be devolved to
different levels of government at different times over a 10-year
period. Expanding on this, Ed Cox, the director of IPPR North,
You come up with a programme [
that enables you to say, "Yes, at the beginning there will
perhaps be a big-bang approach for the Core Cities, counties and
those who have the capacity and the democratic accountability
to get on with it." Over a period of time though, we can
see what is coming down the line for smaller places [
then those things that are standard things that need to be decentralised
everywhere to local authority level, particularly around public
87. Ministers were uneasy about the
idea of a "roadmap". Brandon Lewis had reservations
about prescribing a timeline, but he added that:
That is why it is important that
we have got a menu of options out there at the moment [
There is a range of different things there that any local area
can look at and pick and choose what is right for them and at
what speed they can move. That reflects the fact that different
parts of our country are different. We will get differences in
This approach was not out of step with
others. Sir Merrick Cockell told us:
we would like government to let
local government go at its own speed but to make it clear that
the freedoms and the opportunities are there, moving away from
that 'earned autonomy' idea to, 'This is what is available and
you go at your own speed'.
88. While we are clear that the decision
whether or not to seek fiscal devolution must rest with local
authorities, the Government has a crucial role in facilitating
the development of the arrangements, not least in respect of the
redistribution considerations discussed earlier. Ministers
should, through negotiation with local authorities, expand the
range of powers available to all levels of local government as
part of a framework that ultimately includes fiscal devolution.
As part of a commitment to create balanced opportunities for growth,
the Government should in this framework spell out the range of
powers that would be available to different levels of local government.
For large and small cities and counties a framework would provide
an incentive to make plans for enhanced collaboration and, if
they wished, to pursue more meaningful, fiscal devolution in the
future. The framework should set out what powers could be available
to local authorities over the next 10 years.
89. We envisage that the framework
as well as setting out a range of devolutionary powers would contain
terms and conditions that the local authorities seeking substantial
fiscal powers would have to meet. These include an agreed approach
to equalisation and redistribution, and being able to demonstrate
that the devolved area functions as an economic entity, has a
strategic approach to planning and delivery and includes good
Enhanced powers for individual
90. We were told that some authorities
might want more control over local spending and public services,
but not large-scale fiscal devolution. Alexandra Jones from Centre
for Cities told us that devolution with a menu of options "would
reflect better the different needs of different places".
The Key Cities Group recommended that "government act in
a corporate and strategic manner by developing a cross government
menu of significant funding streams and powers that local areas
could adopt should they meet local needs".
The Group referred to some of the specific powers it would like,
the Work programme to cities;
to the New Homes Bonus; and
Cllr Peter Box, from Key Cities, added
that "in the first 12 months" of any such devolution
programme, they were also calling for devolution of sustainable
communities programmes and the localisation of probation services.
91. For all local authorities, the
framework should make provision for local control over spending
on a wider range of services and for them to expand or change
the range of services decentralised over time. This arrangement
would reassure those areas not wishing to proceed with substantial
fiscal devolution that tailored powersin particular, over
how money was spent locallywould be available. Decentralised
powers, such as the Work programme, should be accompanied by an
appropriate amount of decentralised spending to fund such initiatives.
92. Newcastle University said that
if fiscal decentralisation and public
service reform are to succeed there should be genuine decentralisation
by Government and then all Departments and Agencies need to subscribe
to the process rather than working, as has been the case in the
past, with different levels of enthusiasm, commitment and even
definitions of decentralisation.
The LGA urged "reform [of] the
Victorian departmental structures, developing a structure that
promotes a focus on public service outcomes and joint working
between public services".
Brandon Lewis responded that over the past four years "there
has been a phenomenal speed of movement there (in Government),
which is a credit to all of the Departments that have been involved".
Greg Clark added that: "We would not have concluded any of
these City Deals without colleagues in other Departmentsofficials
and Ministersagreeing to give up the powers and to back
a good deal."
93. Any process of decentralisation
that links to budgets allocated to places rather than policies
will require further changes in the attitude and organisation
of central Government. Its structures need to mirror more readily
those being developed in local government, so that budgets can
be developed based on the spending priorities of local people,
not national Departments. The framework needs to be able to assist
individual local authorities which are primarily seeking decentralisation
of spending programmes such as the Work programme with, if necessary,
an option for limited fiscal devolution allowing the authority
to raise low-yield local taxes, such as on landfill or tourism.
Enhancing the role of collaborating
94. Combined authorities were established
in 2011 in Greater Manchester and in April 2014 in West Yorkshire,
South Yorkshire and the Liverpool city region. Each process had
its origins in the local authorities in those areas taking the
initiative and deciding to ask Government to approve their collaborative
working in specific policy areas.
The legislation governing the establishment of combined authorities
allows counties to combine with such unitary councils.
The CCN noted that
There is interaction and movement
across county boundaries and therefore a need for any new arrangements
to acknowledge strategic links across county areas.
The Centre for Cities has recently put
forward the idea of a "strategic county". In self-contained
functional economic areas, with two tiers of local authority,
the county would, subject to local agreement, coordinate housing,
transport, regeneration and skills budgets and strategies.
Sir Merrick Cockell suggested that enhanced powers for more categories
of authorities to combine and collaborate would be an incentive:
If there is a clear understanding
that, "These powers are coming your way; sort yourself out,"
then my belief is that local government will move itself into
the right configurations to receive those powers.
95. Sheffield City Council urged the
Government to address the inability of combined authorities to
borrow to fund non-transport related investments. It said that
despite robust governance arrangements it had few resources to
invest in growth and, therefore, could not achieve its ambitions.
Leeds City Council said successful combined authorities should
be given council tax precepting powers.
As an overarching enhancement, the Centre for Cities has suggested
combined authorities should have similar powers to the Greater
London Authority, including powers to: levy and raise additional
funds for economic growth projects, such as a business rate supplement
and community infrastructure levy; intervene in strategic planning
issues; and control Homes and Communities Agency assets.
IPPR suggested place-based budgets and skills funding should be
available to combined authorities after 2015. As we noted at paragraph
90, Key Cities suggested such budgets should be available to individual
authorities, demonstrating how the level to which powers are devolved
will have to be locally agreed. IPPR added that building on the
principle of the Earn Back scheme in Manchester, combined authorities
should also be able to finance investment in infrastructure, employment
and skills based upon the savings from increasing employment and
the proceeds of GVA growth.
Professor Andy Pike, from Newcastle University, told us:
The crucial thing is trying to find
some ways of creating incentives and frameworks to get the local
authorities to co-operate and pool resources so that they can
actually accrue lots of the benefits.
96. Within existing legislation, the
Localism Act 2011 allows the transfer of any public function from
other bodies, or from Ministers, to 'permitted bodies', a designation
which includes combined authorities. It would therefore be possible
for further powers to be devolved to combined authorities by statutory
instrument without recourse to primary legislation.
97. We recommend that, as part of
any framework for devolution of further powers to all local authorities,
including fiscal devolution initially to a limited number, the
Government enhance the powers available to combined authorities.
This would align their powers more closely with those available
to the Greater London Authority, give them a greater strategic
role and enable them to prepare, if they wish, for more significant
fiscal devolution in the future. These enhancements would include:
control over place-based budgets; powers to borrow for non-transport
purposes, to become precepting authorities and to finance investment
based upon the proceeds of GVA growth; and strategic housing and
planning responsibilities, including the power to oversee local
authorities' duty to co-operate. (We would expect to address
local authorities' duty to co-operate in planning in our current
inquiry into the operation of the National Planning Policy Framework.)
CHANGES TO MEMBERSHIP REGULATIONS
98. On the regulations governing the
creation of combined authorities, City of York Council said that:
the legislative process required
to establish such a grouping is complex, and depends on the grouping
having contiguous boundaries, even though the travel-to-work area
may include non-contiguous local authorities. It would be useful
to remove bureaucratic restrictions to enable combined authorities
to evolve on the basis of economic market relationships, as the
Government committed to do in its response to Lord Heseltine's
report "No Stone Unturned".
During our visit to Lyon, we heard how
its combined authority, la communauté urbaine de Grand
Lyon, included municipal authorities with which it did not share
a geographical border. Brandon Lewis told the House recently that
a legislative reform order was expected to be introduced in the
summer to allow authorities that do not have contiguous boundaries
to join combined authorities.
We also heard that while district councils can join combined authorities
they do not have full voting rights. Combined authorities are
responsible for transport, but in two-tier areas district councils
are not transport authorities, county councils are, so the district
cannot exercise the range of powers available to other combined
Sir Merrick Cockell said it was in the Government's power to make
the situation easier for combined authorities.
Brandon Lewis told us there were no plans to change that policy,
but if areas had a workable proposal he would, in the interests
of looking at what was right for the locality, consider it on
99. We recommend that the Government
bring forward as soon as possible its planned legislative reform
order, to allow authorities that do not have contiguous boundaries
to join combined authorities. Similarly, Government should bring
forward legislation, to allow a district or groups of districts
that form part of a locally agreed functional economic area to
have full voting rights. The full powers of the combined authority
should then extend to cover such districts.
100. In the 2013 Autumn Statement the
Government encouraged the submission of public service reform
proposals made by local enterprise partnerships as part of the
Growth Deals process.
On 31 March Greg Clark told us:
There is a danger that if you just
keep it (fiscal devolution) at a theological and constitutional
level, then it stays there and you do not get to talking about
it. Where I think that the London Finance Commission could usefully
go a bit further is to turn their high-level analysis of which
taxes they think London should have under its control to think
about which particular investments and which areas of policy they
could, like Greater Manchesterand Greater Manchester was
for infrastructure investmentmake a proposal to the Government
saying, "If you do this, we will do that".
On the same day London's Local Enterprise
Panel did just that. It published its Growth Deal proposals, in
which it asked for certain funds from the Government's Single
Local Growth Fund and reiterated the London Finance Commission's
request for fiscal devolution: full control of property taxes
and a relaxation of borrowing restrictions. In return for this,
it said it would invest in the capital's infrastructure and introduce
employment, skills and housing programmes. It also said this would
offer central Government
ability to focus on national priorities rather than be distracted
by local and regional issues;
overall growth with continued receipt of the majority of the tax
spending negotiations with regional and local government; and
more mature dialogue between central and local government regarding
the latter's strategic priorities, rather than negotiations over
A comprehensive agreement based on London's
proposed growth deal might be one way forward for authorities.
101. The London approach is not without
international precedent, either. European governments, according
to Core Cities, have been moving towards more long-term contractual
relationships between national and local government to deliver
improved urban economic performance.
And Newcastle University said,
we support the creation of meaningful
'Centre-Local Contracts' to manage decentralisation. OECD analysis
of international practice, such as the 'Contrats de Ville' that
operate in France, suggests that it is possible to allow for innovation,
tailored local approaches and decentralisation but within a more
transparent, fair and accountable system.
102. Local and central Government
should devise a means of enabling those authorities covering functional
economic areas that wish to assume significant fiscal devolution
to enter into negotiations with the Government. The London Enterprise
Panel has made such a proposal within the existing mechanism of
the Government's Growth Deals. If the Growth Deal route is feasible,
those local authorities that wish to should take the initiative
and, subject to an agreed equalisation and redistribution mechanism,
make their own proposals within the framework arrangement we urge
the Government to develop and adopt.
LEGISLATION AND TIMETABLE FOR DEVISING
103. IPPR suggested legislation might
be required in England for what it called "big bang city
we noted in the previous section, the Localism Act 2011 might
provide a vehicle for transferring powers to a small group of
areas in England.
The matter was raised with us and should be clarified on the basis
of maximum powers that are likely to be devolved.
104. In responding to our report
we ask the Government to confirm whether the Growth Deal route
with, if necessary, the exercise of provisions in the Localism
Act 2011 to transfer powers is a vehicle for comprehensive fiscal
devolution. If this is the case, we would expect that by this
route similar powers should be made available to further authorities
in due course. If it is not, we recommend that the Government
bring forward primary legislation to enable fiscal agreements
to be negotiated. In addition, we recommend that within six months
after the next general election the Government and local authorities
agree and set out the arrangements by which certain areas might
secure a long-term fiscal agreement.
AGREEING THE TERMS OF FISCAL AGREEMENTS
105. As we have noted, witnesses told
us that the City Deal process did not feel like decentralisation,
given the amount of bureaucracy involved. They said it required
teams to prove each proposition and haggle with an "oligarchic
Ed Cox from IPPR North, referring to the criteria for fiscal devolution,
said that this should not involve
conditions that central Government
is imposing on local government; this is not earned autonomy [
This is about an arrangement between two adult partners trying
to sort out what the power relations need to be between the two
According to research cited by Newcastle
University, Contrats de Ville were used in France to "replace
traditional hierarchical relationships with contracts based on
Some in local authorities have argued they should not have to
have "proved their worth" to central Government but,
instead, should be given further powers and judged by their electorate.
The Minister Greg Clark told us, however, that Government could
not just accept local proposals at face value. Rather it had to
conduct due diligence, negotiate and "get the best possible
106. Given the evidence we received
about the city deals process being one-sided and bureaucratic,
we considered how any impasse in reaching a fiscal agreement might
be dealt with. In oral evidence the idea of a local government
finance "Office for Budget Responsibility" was put to
us. The office, it was suggested by Ed Cox from IPPR North, could
offer information and advice in relation to resetting any system
of equalisation and redistribution introduced under fiscal devolution.
Its remit might extend to include consideration of fiscal agreements
107. Central Government rightly has
to ensure any introduction of fiscal devolution is done effectively
and efficiently. Where an authority or group of authorities demonstrate
that they meet the principles we outlined in the previous chapter
and come within the framework we set out above, there should be
a presumption in favour of fiscal devolution. In our view it is
essential that the process develops on from City Deals which,
despite their considerable benefits, have been characterised as
bureaucratic, placing local government in the unequal position
108. To assist the development of
the process we make two recommendations. First, where agreement
between central Government and local authorities cannot be reached,
there should be a process of impartial evaluation. We see a role
for the independent body, described earlier in our report, to
advise. Second, we recommend that local government examine
whether a small group of strategic authorities, selected by their
peers and with an agreed approach based on the principles we have
outlined, present to the Government joined-up proposals for fiscal
devolution to several areas in one go. In our view this would
provide a collaborative approach, develop the framework and act
as a way forward for authorities in future.
WIDER ISSUES: LOCAL GOVERNMENT REORGANISATION
AND CONSTITUTIONAL CHANGES
109. Comprehensive fiscal devolution
raises broader issues relating to the reorganisation of local
government finance and the codification of the relationship between
local and central Government. We have, however, not examined these
in this report for two reasons. First, neither is a precondition
for fiscal devolution. The Minister, Greg Clark, observed:
if you can identify a place and
an area of policy in which the counterparty to the deal is ready,
willing and able and you can have confidence in their ability
to discharge their responsibilities, then get on with it; do not
wait for a great constitutional settlement that devolves these
powers on every place in the country at the same time. That is
my practical observation, and I think it was shared in the evidence
that Tony Travers gave to you, which I was interested to see.
Core Cities pointed out devolution of
the Work Programme, business rates and more significant devolution
"could happen under the current structures".
Second, fiscal devolution will create opportunities to develop
a new relationship between central and local government which
could inform both reorganisation and codification.
110. Professor Andy Pike of Newcastle
University pointed out that devolution had taken place "asymmetrically"
in the UK already, with Scotland, Wales and Northern Ireland,
London and the English regions forming a hierarchy of decentralisation:
further decentralisation could unfold in a similarly uneven way.
111. Wider questions about the role
and place of local government in our constitutional settlement
should not delay fiscal devolution. But implementation of this
significant change will require appraisal. We therefore
recommend that towards the end of the next Parliament a comprehensive
assessment of the operation of any fiscal devolution and decentralisation
take place. This assessment might be a starting point for a revised
constitutional settlement. On this issue we welcome
the Political and Constitutional Reform Committee's existing work,
which we expect will inform any such revision.
156 Q448 Back
Professor Tony Travers (FDC0033) p 3 Back
Q7; see also Q9 [Alexandra Jones]. Ms Jones suggested incremental
reform was more likely as there was no mass movement for devolution.
Core Cities (FDC0008) para 3.6 Back
IPPR North (FDC0020) pp 4, 5 Back
Key Cities (FDC0015) para 31 Back
Key Cities (FDC0015) para 18 Back
Newcastle University (FDC0009) para 2.7 Back
Local Government Association (FDC0005) para 40; see also Sunderland
City Council (FDC0022) para 1. Back
As above Back
Combined Authorities, Standard Note SN/PC/06649, House of Commons Library, April 2014;
combined authorities may be set up, by the Secretary of State,
at the request of local authorities in a specified area in order
to undertake joint functions; they were introduced in the Local
Democracy, Economic Development and Construction Act 2009. Back
See Combined Authorities Standard Note SN/PC/06649, House
of Commons Library, April 2014, p 3. Back
County Councils Network (FDC0013) para 4.10 Back
Centre for Cities, Breaking boundaries: empowering city growth through cross-border collaboration,
March 2014, p 13 Back
Sheffield City Council (FDC0034) paras 19, 48 Back
Leeds City Council (FDC0025) p 4 Back
Centre for Cities, Breaking boundaries: empowering city growth through cross-border collaboration,
March 2014, para 1 Back
IPPR North (FDC0020) p 5; any calls for enhanced borrowing run
up against Treasury Total Managed Expenditure Limits, which is
discussed in chapter 4. Back
See Combined Authorities Standard Note SN/PC/06649, House of Commons Library, April 2014, p 4. Back
City of York Council (FDC0010) para 5; see also Sheffield City
Council (FDC0034) para 19. Back
See Combined Authorities Standard Note SN/PC/06649, House of Commons Library, April 2014, p 7. Back
See Q322 [Stephen Hughes]. Back
Newcastle University (FDC0009) para 2.6 Back
London Enterprise Panel, A Growth Deal for London, 31 March 2014,
pp 5,6 Back
Core Cities (FDC0008) para 3.4 Back
Newcastle University (FDC0009) para 4.1 Back
IPPR North (FDC0020) pp 4-5 Back
See Combined Authorities Standard Note SN/PC/06649, House of Commons Library, April 2014, p 4. Back
See Q91 [Tom Riordan]; and Newcastle University (FDC0009) para
See Kamal-Chaoui, L. and Sanchez-Reaza, J. (eds.) "Urban Trends and Policies in OECD Countries", OECD
Regional Development Working Papers 012/01, p 161. Back
See, for example, "Nothing to Prove", MJ, 24
April 2014. See also Localis, "Can Localism Deliver? 10 Lessons from Manchester",
it says "Presumed autonomy is the most localist approach
] There should be no centralised measure of 'performance'
as national departmental perspectives do not always align with
local priorities and needs." Back
See for example Political and Constitutional Reform Committee,
Third Report of Session 2012-13, Prospects for codifying the relationship between central and local government,
HC 656-I. Back