Devolution in England: governance, financial accountability and following the taxpayer pound Contents


7.Attendees at both our City of Westminster and City of Wolverhampton discussions were concerned that the programme of devolution had been undertaken via ‘deals’ rather than legislation, with negotiations on the deals often taking place behind closed doors. The Committee of Public Accounts has a role in ensuring the accountability of public expenditure and in a recent report we concluded that accountability to Parliament for the use of public funds has been weakened by the failure of the Government’s accountability arrangements to keep pace with increasingly complex ways of delivering policies and services.3

8.The Government needs to be far more specific about what it is trying to achieve by devolving services to local areas so that the Committee of Public Accounts is able to assess the economy, efficiency and effectiveness of public spending. It is vital that the Department has a list of expected outcomes of devolution and what metrics they expect to use to measure its success.

9.The Government response to our recent Cities and Local Growth report recommendation that the Department “be specific and clear about what it is trying to achieve by devolving services to local areas [and] set out how it will monitor progress against these goals”, was to report that devolution proposals “are subject to rigorous negotiation between Government and places” and places need ‘to make the case to central government’.4 5 It surely follows from both of these statements that central government must have its own objectives and requirements, and yet the Government continues to say it has no intention of expressing them more clearly. Earlier than this, the Communities and Local Government Committee made similar calls for the Department to state the long-term objectives for devolution, the mechanisms needed to achieve these and the means by which it will measure success.6 The Department has refused to define these in any way.7

10.Even in the recent published Annual Report on Devolution, the Department simply rehearses what has happened in the last year rather than providing the strategy, vision and detail requested by both the Commmittee of Public Accounts and the Communities and Local Government Committee.8

11.Conclusion: The Department of Communities and Local Government (the Department) needs to be clearer about what it is trying to achieve through the devolution agenda. If it is not clear to elected representatives, how can it be clear to local citizens and service users who are the ones directly affected by these reforms?

12.Very broad devolution deals will see cities and regions having increasing influence over more and more public services and this will inevitably be unequal across the devolution areas. Whilst this may reflect local need, the public may not be effectively informed of these changes and be unaware of who is responsible for decision-making in each of these spheres. There is also considerable scope for tension between local government, required to deliver and maintain services within a devolved budget, and central government which provides funding. This could result in both institutions claiming that the other is responsible for any policy failure or misspending, and neither having full accountability and oversight.

13.In our Cities and Local Growth report, we recommended that the Government must clearly set out accountability processes and relationships at all levels and should share draft accountability system statements, which set out the broad framework of accountability, responsibility and governance relationships, with the Committee before they are finalised.9 However, the Government response failed to address this recommendation at all.10

14.In the Communities and Local Government Committee’s report on the issue, they state that “careful thought needs to be given to determining the division of responsibility in a way that provides a coherent set of powers and makes sense to the public; this should be an integral part of the deal-making process with the division of responsibilities written into the deal”.11

15.Conclusion: Taxpayers must be able to understand who is spending their money, how that money is allocated and where responsibility lies if the system fails to deliver good value or things go wrong.

16.A number of attendees at our discussions did not believe that the Government had a grasp on how devolution and economic growth were linked. Whilst deals to devolve power from central government to local areas in England offered opportunities to stimulate economic growth, the Government should be clearer about how it envisages these deals will achieve the benefits intended.

17.Devolved powers in tax, such as pilots for retaining additional business rate growth beyond forecasts, pilots of full business rate retention and enabling mayor-led combined authorities to raise business rates by up to 2% to support local infrastructure projects are specific ways where devolution looks to support growth. We have seen no evidence of who is measuring whether these policies achieve value for money in a wider context.

18.To achieve economic growth, the Government needs to consider the wider issues that can impact this such as access to housing and addressing skill shortages in local areas.

19.We strongly believe that devolution should not be considered in isolation. We are moving in two directions at the same time: for example, on housing, local authorities are limited in their freedom to accept planning applications, based on rules set by central government. Making sure there is a sufficient supply of homes, transport to link homes and infrastructure to support communities is of critical importance. A speaker at our Wolverhampton conference said that the West Midlands Land Commission considered that to deliver target growth, the land available needed to be in the right condition, well situated and in a range of sizes.

20.The Association of Colleges also reported that approximately £1bn of £3bn skills budget is currently planned to be devolved. However, 16–18 funding is not to be devolved, nor are Department of Work and Pensions budgets to support the unemployed. Accountability and transparency of local governance requires strong evidence base based on labour market intelligence, not measures set by Local Enterprise Partnerships which could be subject to special interests.

21.Conclusion: The Department needs to more demonstrably understand the link between devolution and economic growth. Devolution is being considered in isolation, with less importance placed on housing, land, education and skills, which play key roles in promoting economic growth.

22.In our Cities and Local Growth report, we highlighted that we were not confident that existing arrangements for the scrutiny at local level of devolved functions are either robust enough or well supported.12 The opportunity exists, through the mechanism of the governance review in particular, to ensure that governance systems are grounded in the principles of accountability and local democracy. Fundamentally, meaningful local scrutiny and accountability is needed for the needed for the interaction between those in the wider public sphere and those taking decisions.

23.In terms of structural models, combined authorities will be responsible for setting up these overview and scrutiny committees but at our discussions there were concerns that these structures might only meet sporadically and be prevented from undertaking work of practical value, without access to required information. Therefore combined authorities should be prepared to set out how they will make policy, from beginning to end, how performance management will work and how the public and a strong, independent overview and scrutiny function will scrutinise these processes.

24.Local Enterprise Partnerships (LEPs) are designed to bring together the public and private sector, and identify economic priorities in their local areas. When first established, they were non-resource intensive strategic partnerships, but they are now negotiating local growth deals funded by a £12 billion fund over a five year period. LEPs have signed up to local authority accountability frameworks: but their functions and structures are very different to local authorities and accountability for their activities is opaque.

25.Several witnesses to the Communities and Local Government Committee inquiry and attendees at our devolution conferences highlighted the issue of resourcing for overview and scrutiny. Professor Colin Copus of De Montfort University commented that local authority scrutiny receives less resources and support than executives. Cllr Sue Jeffrey said:

What makes overview and scrutiny work is resources. It has to be properly resourced. The thing that concerns me about the combined authorities is the level of resource that is going to be available to them to do jobs like overview and scrutiny going forward. If it is going to be expected to do it on a shoestring, it is going to make that very difficult.13

26.Conclusion: The Department has not fully addressed our concerns about local scrutiny and accountability and the resources and capacity needed to rigorously oversee spending.

27.Ultimately, central government should not devolve problems to local areas without the resources required to manage them. The devolution of health has potentially significant implications for the NHS and local government, and presents both opportunities and risks for clinicians. We have heard in our devolution discussions how those in support of the move consider that it will enable local areas to reshape health and social care according to the needs of local people, however, at a time of severe financial pressure on the health service, devolution of health may not offer the answers the Department believes it can deliver in the timeframe needed. Unless government addresses the rising demand, spiralling costs, the structural issues and ensures that public health is delivering on reducing demand, the NHS will continue to face impossible financial pressures.

28.Conclusion: The devolution of health and social care must not allow central government to absolve itself of its responsibility to ensure that devolved areas receive adequate funding for sustainable services. With budgets stretched increasingly thin, local bodies must ensure value for money when delivering vital services.

29.It is vital that devolution works for all local areas and not just central zones or key cities. At our discussions focusing on the case study of the West Midlands, which took place in Wolverhampton, local councillors from authorities in the region expressed their concern that some of the regeneration and infrastructure projects may not be of equal benefit to all. Public support for devolution rests on understandable and clear structures for local areas, showing the benefits. At the moment, the devolution offers may not be easily understood by local citizens and the Department, in tandem with local areas, needs to define the ultimate benefits of devolving money and services.

30.Conclusion: The Department must ensure that the benefits derived from devolution are for all local areas and that we do not see a form of ‘local centralism’ where power and decision making sits in the dominant city heart of a combined authority.

3 Committee of Public Accounts, Accountability to Parliament for Taxpayers’ Money, Thirty-ninth Report of the Session 2015–16, HC 732

4 Committee of Public Accounts, Cities and Local Growth, Sixth Report of the Session 2016–17, HC 296, July 2016

6 Communities and Local Government Select Committee, Devolution: the next five years and beyond, First Report of Session 2015–16, HC 369, February 2016

7 Department for Communities and Local Government, Government Response to CLG Select Committee Report: “Devolution: the next five years and beyond”, Cm 9291, May 2016

8 Department for Communities and Local Government, Secretary of State’s Annual Report on Devolution 2015–16, Autumn 2016

9 Committee of Public Accounts, Cities and Local Growth, Sixth Report of the Session 2016–17, HC 296, July 2016

11 Communities and Local Government Select Committee, Devolution: the next five years and beyond, First Report of Session 2015–16, HC 369, February 2016, Page 35

12 Committee of Public Accounts, Cities and Local Growth, Sixth Report of the Session 2016–17, HC 296, July 2016

13 Communities and Local Government Select Committee, Devolution: the next five years and beyond, First Report of Session 2015–16, HC 369, Page 34; Q 185

Committee of Public Accounts