Devolution: the next five years and beyond Contents

1Introduction

1.We have a continuing interest in devolution of power from central to local government. In July 2014, our predecessors published a report entitled Devolution in England: the case for local government.1 That report’s principal conclusion was that local communities in England should be allowed to take greater control over how money is raised and spent in their areas and we remain committed to that approach. We were therefore eager to examine the Cities and Local Government Devolution Bill2 which introduces directly-elected mayors3 for combined authorities and transfers powers to local areas in England, and announced our intention to conduct an inquiry shortly after our first meeting as a newly constituted committee. Although the inquiry was designed around the contents of the Devolution Bill, it became wider in scope as it progressed, looking at the consequences of the approach to devolution that the legislation facilitates. It also became clear that the term ‘devolution’ was being used to describe situations other than, but similar to, the transfer of responsibilities to local government: for example, in the health context, it was being used to describe what is, in practical terms, delegation, and ‘devolution’ deals include various joint working initiatives.

2.The Devolution Bill does not enable fiscal devolution, giving only limited financial powers to local areas.4 One of our Greater Manchester witnesses said, “We have had devolutionary powers with almost no devolution of borrowing power […] It’s utterly nonsensical”.5 We agree, believing fiscal devolution to be essential to genuine devolution. The recently announced business rates reforms and the social care ‘precept’ are moves in the right direction,6 but we could go much further. We endorse the recommendations of our predecessors who called for greater freedom over council tax and business rates, devolution of other property taxes and, in time, the devolution of larger-scale, more comprehensive fiscal powers to groups of local authorities, including borrowing powers and examining the apportioning of income tax and VAT.7 Although not the focus of this report, we will continue to press for fiscal devolution: our next inquiry will look at the plans to allow local authorities to retain 100 per cent of business rates, and we will review the progress made on fiscal devolution.

3.We received over 50 submissions from local authorities, the voluntary and community sectors, academics, think tanks and members of the public. The themes emerging from our written evidence were explored in five evidence sessions, which took place between October and November 2015. We also visited Greater Manchester to see for ourselves how their devolution deal is taking shape and better understand the practicalities of it by speaking to the people involved. We also held a well-attended, lively question and answer session with residents to gauge their reaction to the reforms taking place in their city.

4.We are grateful to all those who gave us written and oral evidence, to our hosts in Greater Manchester, to the Working Well programme and to the residents who attended our public session. Particular thanks are due to our specialist advisers, Professor Tony Travers of the London School of Economics and Professor Alan Harding of the University of Liverpool.8

The development of devolution

5.Devolution of responsibilities and powers to local government has been developing incrementally. During the last Parliament, the then Government introduced a number of devolutionary measures, the most important of which were city deals and Local Enterprise Partnerships (LEPs).

6.A series of ‘city deals’ were agreed between 2011 and 2014; a ‘first wave’ with the eight Core Cities9 by July 2012 and, by July 2014, another 20 with smaller cities and city regions.10 The deals did not transfer general powers to local authorities. Instead, they provided cities, working with the local LEP, with a small amount of additional funding to be used flexibly for specific programmes and outcomes.11 Some of them also provided selective, additional borrowing capacity, retention of some or all of any growth in income from business rates and greater influence over programmes formerly delivered by Government Departments, their agencies and contractors.

7.A range of influential reports on devolution, published in 2014,12 proposed that local areas should take on more powers linked to growing local economies, such as skills, new housing development and business support, and reforming public services, for example health and social care. They also suggested new governance models, recommended devolution to combined authorities and the prioritisation of cities or ‘metros’, as well as enhanced powers over local taxes.

8.It was in this context that, in June 2014, the Chancellor gave a speech in Manchester in which he introduced the idea of a ‘Northern Powerhouse’, saying:

The cities of the north are individually strong, but collectively not strong enough [...] So the powerhouse of London dominates more and more. And that’s not healthy for our economy. It’s not good for our country. We need a Northern Powerhouse too. Not one city, but a collection of northern cities—sufficiently close to each other that combined they can take on the world.13

9.Devolution gathered further momentum after the referendum in September 2014 on independence for Scotland, when the Prime Minister announced that, alongside proposals for additional devolution to Scotland, Wales and Northern Ireland, “It is also important we have wider civic engagement about how to improve governance in our United Kingdom, including how to empower our great cities”.14 In November, the first ‘devolution deal’ was announced between the Government and Greater Manchester. This was followed by deals for Sheffield,15 Leeds16 and Cornwall.17

10.In May 2015, legislation to “provide for the devolution of powers to cities with elected metro mayors, helping to build a Northern Powerhouse” was announced in the Queen’s Speech. Originally trailed in the press as a ‘City Devolution Bill’, the announcement of a ‘Cities and Local Government Devolution Bill’18 was welcomed by local authorities as enabling devolution to all parts of England, not just cities.19

11.The Treasury invited areas to submit devolution proposals by 4 September 2015 to be considered during the 2015 Spending Review process. 38 cities and regions (including four in total from Scotland and Wales) put forward bids20 and deals were subsequently agreed with the North-East,21 Tees Valley,22 the West Midlands,23 Liverpool24 and a further deal with Sheffield.25 Other deals are still in negotiation. Deals are negotiated and implemented by the Cities and Local Growth Unit, a joint team from the Cabinet Office, Department for Communities and Local Government and Department for Business, Innovation and Skills. Previously, the Unit had been called the ‘Cities Policy Unit’ and, based in the Cabinet Office, had negotiated city deals.

12.Alongside the deals, two significant fiscal reforms have been announced. In a speech to the Conservative Party Conference in October 2015 in which he spoke of a “devolution revolution”,26 the Chancellor outlined his plan to allow local authorities to retain 100 per cent of business rates by the end of this Parliament. Local authorities will also have powers to reduce rates and increases will be restricted to 2p on the rate, to be spent on infrastructure, for mayoral combined authorities that secure agreement from their LEP. Then, in November, the Spending Review announced that local authorities dealing with social care could apply a social care ‘precept’ of a 2 per cent rise in council tax, over and above any referendum threshold set for local authorities in general (in recent years, 2 per cent), which implies a 4 per cent threshold for relevant authorities.27

The Cities and Local Government Devolution Bill

13.The Explanatory Notes describe the Devolution Bill as “enabling legislation” providing “a legislative framework which can be applied flexibly to different areas by secondary legislation”.28 It provides for the creation of a directly-elected mayor of a combined authority to exercise specified functions, widens the range of functions that can be conferred on a combined authority beyond economic development, regeneration and transport, enables the changing of local government structures (such as mergers of councils and moves to unitary structures) and allows for public authority functions to be conferred on a combined or local authority. It enables Orders to be made for each local area to transfer powers in accordance with a devolution deal. Evidence we received raised concerns about whether the secondary legislation arising from the Devolution Bill would receive adequate parliamentary scrutiny.29 A parliamentary debate on the North East Devolution Deal was held in November 2015 at the request of a local Member of Parliament,30 but this is not standard practice. Secondary legislation receives little or no parliamentary scrutiny. For most of the Orders brought forward under the Bill, parliamentary scrutiny is likely to be limited. We therefore recommend regular select committee scrutiny of statutory instruments implementing devolution and the Government’s annual report on devolution, which is required by the Devolution Bill; for example, the Transport Committee might wish to examine proposals for devolution of transport powers.

14.The Devolution Bill has been widely welcomed: for example, Greater Manchester Combined Authority welcomed “the permissive nature of the Bill […] drafted to incorporate the maximum degree of flexibility regarding the powers and functions that can be devolved”.31 However, Professor Colin Copus of De Montfort University said that it “maintains a centralist perspective in that ‘deals’ and ‘agreements’ must be negotiated with and agreed at the centre, rather than providing a framework within which local government can construct [...] its own ways of operating”,32 and concluded that “it does not facilitate a fundamental shift from the centre”.33

1 Communities and Local Government Committee, First Report of Session 2014-15, Devolution in England: the case for local government, HC 503

2 Cities and Local Government Devolution Bill [Lords] [Bill 80 (2015-16)] [hereafter “the Devolution Bill”]

3 Hereafter, the term ‘mayor’ or ‘elected mayor’ should be taken to mean a directly-elected mayor.

4 See, for example, the Local Government Association (DEV 021) para 2.3 and the County Councils Network (DEV 052)

5 Q74

6 “Chancellor unveils ‘devolution revolution’”, HM Treasury press release, 5 October 2015 and HM Treasury, Spending Review 2015, November 2015, p33

7 Communities and Local Government Committee, First Report of Session 2014-15, Devolution in England: the case for local government, HC 503

8 Tony Travers declared the following interests: Occasional fees for speaking engagements, work on commissions and consultancy. Alan Harding declared the following interests: I have verbally been offered the job of Chief Economist to the Greater Manchester Combined Authority and have accepted in principle, subject to contract. I am due to start the new role in January and remain in my current academic post until then.

9 Birmingham, Bristol, Leeds, Liverpool, Manchester, Newcastle, Nottingham and Sheffield

10 For full details of the 20 other city deals, see Centre for Cities, Cities Policy Briefing: Setting out Coalition Government policies across a common framework, September 2014, p9

11 For details of the Wave 1 city deals, see HM Treasury, Unlocking growth in cities: city deals—wave 1, July 2012

14Scottish Independence Referendum: statement by the Prime Minister”, Prime Minister’s Office press release, 19 September 2015

15 HM Government, Sheffield City Region Agreement on Devolution, December 2014, followed by HM Treasury, Sheffield City Region Devolution Agreement, October 2015

18 Cities and Local Government Devolution Bill [Lords] [Bill 80 (2015-16)]

19 “Devolution bill name change ‘encouraging’”, Local Government Chronicle, 27 May 2015

20 “Landmark devolution bids submitted from right across the country”, Department for Communities and Local Government press release, 11 September 2015

21 HM Treasury, North East devolution agreement, October 2015

22 HM Government, Tees Valley devolution agreement, October 2015

24 HM Treasury, Liverpool City Region devolution agreement, November 2015

25 HM Government, Sheffield City Region Agreement on Devolution, December 2014 and HM Treasury, Sheffield City Region Devolution Agreement, October 2015

26 “Chancellor unveils ‘devolution revolution’”, HM Treasury press release, 5 October 2015

27 HM Treasury, Spending Review 2015, November 2015, p33

29 NHS Confederation (DEV 046) para 4.3

30 HC Deb, 26 November, col 453WH [Westminster Hall]

31 Greater Manchester Combined Authority (DEV 009)

32 Professor Colin Copus (DEV 019)

33 Professor Colin Copus (DEV 019)




© Parliamentary copyright 2015

Prepared 29 January 2016