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Can devolved regions go global?

More local control over education, skills and revenue is needed to build on existing successes

By Andy Davis  

Read a companion piece by Jim McMahon, “How to make devolution work,” here

Britain’s city-regions compete for investment and skilled workers not just against other parts of the UK, but against a much wider international field across Europe and beyond. What part will greater devolution play in enabling them to attract capital and talent, and form effective partnerships between public authorities and private-sector players?

It is now established policy to devolve decision-making to city-regions such as the Northern Powerhouse centred on Manchester and Liverpool. To examine how the process is unfolding in practice and what more needs to be done to make it effective, Prospect held a roundtable at the Labour Conference in Liverpool. This discussion was in partnership with insurer Legal & General, which is halfway through a £15bn programme of investment in infrastructure, housing and regeneration across a swathe of British cities.

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From left to right: Richard Leese, Bill Hughes and Andy Davis

There was broad agreement around the table on the potential for devolution to speed growth outside London and the south-east. “Devolution plus cheap money and strong vision is a recipe for a new generation of civic politicians to take their regions global,” Bill Hughes, Head of Real Assets at L&G, told the meeting. “It empowers local politicians to make big decisions.” Partnerships that L&G had formed with local authorities in places such as Salford, Cardiff and Plymouth had resulted in major regeneration projects and given local economies a meaningful boost.

However, Joe Anderson, the mayor of Liverpool, argued that in his city’s case, a great deal of regeneration and economic development had been achieved without any formal devolution of powers, simply by creating partnerships and seeking investment.

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Joe Anderson, Paul Plummer and Catherine West

Sir Richard Leese, Leader of Manchester City Council, agreed that devolution alone wasn’t the key ingredient: “Manchester started growing its economy long before the devolution deals but what we had done was put in place the arrangements for 10 local authorities to work together and that gives us the scale to have a far bigger presence on the international stage,” he said. “Similarly, being able to band together under a Northern Powerhouse banner gives us even more scale and that really starts to resonate.”

This highlighted one of the central issues for speakers around the table: the overarching question of how England is to be governed in future: how large should the devolved city-regions be in order to be most effective, and what powers should be passed to them.

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Jim McMahon and Ben Harrison

Jim McMahon, MP for Oldham West and Royton and a member of the Communities and Local Government Select Committee, argued that there had already been plenty of local economic development successes, but that the picture was fragmented. “The reason is that central government is confused about how we govern England, compared with Scotland, Wales and Northern Ireland,” he said. “There’s real confusion about where power is best placed. A lot of this is about financial freedom and what I haven’t seen in the Northern Powerhouse or any of the devolution deals in any meaningful way is genuine fiscal devolution.”

Devolved regions had not been granted any additional scope to control the tax revenues generated by their local economies, he said, in large part because “the Treasury just isn’t set up for this.” He had not been able to discover how much air passenger duty is raised by Manchester Airport because the revenues are not attributed to individual airports. The same went for fuel duty, which is taxed at the refinery rather than where it is sold to motorists.

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Richard Leese, Bill Hughes and Andy Davis

Although Sir Richard Leese agreed that more tax revenue should be controlled locally, he believed that devolution did not depend only on securing greater control of the purse strings. “Devolution is not about getting more money,” he said “It’s how you make decisions about the money that’s already there and the ultimate argument is that we’re better placed locally to make those decisions than government is nationally.” The control over health and social care that had been devolved to the Manchester region offered a clear example of why devolution made a difference.

Ben Harrison of the Centre for Cities also cautioned against concentrating too much on issues such as infrastructure and transport investment, even though these were clearly important. The centre has just compared the 63 UK cities that it monitors against 330 of their counterparts across Europe and had found that transport and physical infrastructure were not necessarily the major constraints on UK cities’ economic performance.

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Catherine West, Jim McMahon and Ben Harrison

“The key factors are actually skills, educational attainment and the ability of cities to retain graduates,” he said. “Three out of four UK cities have a lower proportion of high-skilled residents than the European average. UK cities are home to the third-highest concentration of low-skilled residents on the Continent, behind only Spanish and Polish cities. And on the flipside, only two UK cities, Cambridge and Oxford, are in the European top 20 when it comes to innovation.”

Sir Richard Leese also believed that greater local control over education and skills—“very clearly the biggest hole in the devolution offers”—was vital, along with greater fiscal devolution. But he argued that city-regions should make what they could of the devolution on offer, even if it fell short of what they ultimately wanted.

“Certainly in Manchester we’ve taken the view that we’ll take what’s on offer now and then we’ll go back for more.”

With the support of Legal & General, Prospect hosted a private roundtable discussion at the 2016 Labour Party Conference examining how, within the context of devolution, cities can develop in a manner that best contributes to a region’s economic objectives. The discussion was chaired by Andy Davis, Finance Editor, Prospect. Speakers included: Bill Hughes, Head of Real Assets, Legal & General; Helen Goodman MP, Member of the Treasury Committee; Sir Richard Leese, Leader, Manchester City Council; Jim McMahon MP, Shadow Minister for Local Government and Devolution; Catherine West MP, APPG on Reform, Decentralisation and Devolution; Paul Plummer, CEO, Rail Delivery Group; and Joe Anderson, Mayor of Liverpool.

For speaker and partnership opportunities, please contact david.tl@prospect-magazine.co.uk.

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