The Devolution Catch-22: Weak Local Institutions, Uneven Growth and Inequality Across English Regions
A Catch 22 is “a problematic situation for which the only solution is denied by a circumstance inherent in the problem or by a rule”. The phrase was coined in Joseph Heller’s war-time satire to describe a paradoxical situation in which any pilot that asked for a mental evaluation on their capacity to fly was deemed sane enough to fly by default. While it is not a common phrase in the English devolution debate, it perfectly captures the dilemma faced by English regions as they need to evidence their capacities and capabilities in order to gain devolved resources and powers. But – and here’s the catch-22 – without devolved resources and powers they cannot develop the required capacity and capability to demonstrate their ability to manage devolved funding and increased responsibility.
Following an extensive study (‘Local Institutions, Productivity, Sustainability and Inclusivity Trade-offs’ (LIPSIT), 2019-2021), we found that this problem is having a tangible impact on the uneven economic growth trajectory and growing inequalities across the country. It is a long term, cyclical and path-dependent problem which limits attempts to reduce regional inequalities across England, with significant socio-economic and political implications.
A lack of constitutional protection for local institutions within the UK’s uncodified system of parliamentary sovereignty means that there is a continuous cycle of often transactional central-local negotiations over resources and powers. This takes place in an institutional context characterised by asymmetric devolution, with a patchwork of different institutions with different interests and different relations with the centre. This in turn limits the capacity of subnational government to act as a single bloc in their attempts to secure investment and decision-making powers from the centre.
We analyse devolution across three components of governance:
- Distribution: the distribution of public investment (from infrastructure to public R&D funding and other endowments which underpin regional growth).
- Decision-making: the allocation of decision-making power over resource appropriation (e.g. tax-raising) and resource allocation (spending and investment) as central indicators of devolution.
- Institutional quality: the level of investment and resources to enable local institutions to develop locally appropriate growth strategies and to target and deliver effective interventions.
We find that a lack of decentralisation in relation to these specific components of governance – (1) distribution, (2) decision-making, and (3) institutional quality – is limiting the capacity and capability of local institutions to devise and implement growth and development strategies in England.
Our empirical analysis evidences the limited local allocation of decision-making power in relation to a series of indicators, including reduced operational budgets, limited tax-raising powers and ring-fenced funding allocated according to central government priorities. The prevalence of ‘devolution deals’ subject to ‘gateway assessments’, Green Book and other appraisal mechanisms are examples of a wider set of transactional bidding processes, handing central government the power to pick winners. Our study found a lack of consistency and clarity regarding both funding priorities and the ‘rules of engagement’, as well as a pervasive lack of trust undermining central-local relations. The limited organisational capabilities of local institutions, together with a low-level of direct investment in regions, underpin a path-dependency, which makes it more difficult for the least productive, most deprived regions to change their growth trajectories. Both limitations also appear to undermine agility, responsiveness, and resilience in the face of shocks of the kind we have seen as a result of Brexit and Covid-19.
These issues sit at an increasingly important nexus between institutions, powers and competency, on the one hand, and the regional competitiveness agenda and spatial policy on the other. It is increasingly recognised that tackling geographic disparities requires place-based economic strategy delivered by high-quality local institutions.
The UK government’s current attempt to reduce regional economic and social inequalities has received a great deal of attention under the ‘levelling up’ slogan. Delivering on levelling up is dependent on local and regional interventions in ‘left-behind’ places, which in turn depends on an integrated, systemic approach to understanding and addressing regional disadvantage. Perhaps of greatest importance, all of this requires subnational institutions that have the capacities and capabilities to intervene strategically in their local economies.
However, we argue that barriers to developing quality local institutions emerge from the lack of decentralisation of the three components of governance listed above: ‘distribution’, ‘decision-making’ and ‘institutional quality’. These barriers affect the ability of local institutions to build their long-term capacity and thus to devise and implement strategies for growth and development. What we identify, therefore, is a set of severe restrictions on the Conservative government’s levelling up agenda, and potentially on the Labour Party’s emerging plan for growth.
The full paper is published in Contemporary Social Science: England’s catch-22: institutional limitations to achieving balanced growth through devolution.
The authors acknowledge funding for the LIPSIT project from the Economic and Social Research Council (ESRC) (grant ES/T002468/1).
Photo Credit: Benjamin Elliott on Unsplash.
About the authors
Professor Simon Collinson is Deputy Pro-Vice-Chancellor (DPVC) at the University of Birmingham and Director of the City-Region Economic Development Institute (City-REDI) at Birmingham Business School, where he was Dean 2012-2016. He has held various roles, including: Chair of the Chartered Association of Business Schools, member of the ESRC Council and the GBS Chamber of Commerce Council.
Dr Charlotte Hoole is a Research Fellow at the City Region Economic and Development Institute (City-REDI) at the University of Birmingham. After completing her PhD in Urban Studies and Planning at the University of Sheffield, Charlotte won an ESRC Postdoctoral Fellowship which she completed in September 2019. Her research interests lie broadly within urban and regional studies, with a specific focus on sub-national policy and governance structures.
Dr Jack Newman is a Research Associate at The Productivity Institute and the Department of Politics, University of Manchester. Jack’s current research sits within the Productivity Institute’s ‘Institutions & Governance’ theme, asking whether UK productivity is constrained by the structure of its political institutions. Previously, Jack worked at the University of Surrey on the LIPSIT research project, which analysed the link between local economies and the design of political institutions.