The case for farming spending decisions out to regions and cities could have cynical roots, but there are positive arguments for doing soby Emran Mian / July 11, 2014 / Leave a comment
There goes the power, and the money too. Westminster is having a decentralisation moment. A report by Lord Adonis for Labour, endorsed by Ed Miliband, proposes sending down as much as £30bn from the centre to more local institutions. The Coalition has already made a number of City Deals and the Chancellor raised the prospect of city mayors again when he spoke in Manchester recently about creating a ‘northern powerhouse’.
The strange thing about these announcements is that they are not obviously popular. Birmingham, Bradford, Coventry, Leeds, Manchester, Newcastle, Nottingham, Sheffield and Wakefield all voted No to having a mayor as recently as May 2012. Implementing decentralisation is pretty difficult too. Remember when Lord Heseltine proposed that skills funding should be devolved? Talks with local areas to do that concluded in early July. Only 3 areas got the nod and the schemes are being billed as pilots – peeking under the stone if you like rather than flipping it over. And this hesitance is on the spending side, never mind taxation. Annual Eurostat analysis shows that the proportion of tax collected by central government in the UK is 94 per cent; the European average is 49 per cent.
Read more from Emran on his blog, “Policy and Promises”
In one sense, this means that decentralisation is overdue. But why do it now? A cynical explanation is that there are more budget cuts to come and handing over the budgets before cutting them lumps someone else with the difficult decisions on how to make savings. More skills funding may be devolved, but the number of adults funded by government to receive training has already fallen by around half a million since 2008 and that trend will continue with each cut becoming harder than the last.
A more hopeful view is that decentralisation in itself creates opportunities for saving. Labour’s view is that ‘people-powered public services’ will do more than managers can do and with less money. Economic theory too might suggest that putting decisions closer to where the information is will achieve greater efficiency. Looking across the field of austerity since 2010 though, some of the biggest savings have come from decisions made by the centre, whether that is restricting by edict the use of consultants or freezing public sector pay.
But ultimately, the movement for decentralisation may have other roots than purely financial ones. There is real worry that we are experiencing an unbalanced recovery and there may be no macroeconomic tools for changing that. There is also a humility born of experience among some senior civil servants and politicians that there are a bunch of very talented people in city and local authorities, a “new generation of Joseph Chamberlains” as Lord Adonis has put it. Who knows? They might be better at this than we are.