Decentralisation for growth – do the English Devolution proposals move the dial far enough to achieve increased sub-national productivity?
The introduction of the English Devolution White Paper (EDWP) by the Labour Government soon after their election, with the twin objectives of completing the devolution settlement for the UK and improving sub-national productivity, was welcomed as being long overdue. The creation of a new strategic local authority for London in 1998, with a directly elected mayor exercising a range of powers over transport, EU funding, housing, planning, regeneration, fire, police and emergency services appeared to be a model that would eventually be offered to other major English cities. However, when the devolution deals came for Greater Manchester and the West Midlands in 2014, these were of a different order – on a reduced scale. The EDWP offers enhanced roles and competences for directly elected mayors of new Mayoral Strategic Authorities (MSAs) across England, through leadership of place and determining strategies for a range of policies including local growth, transport, energy, housing and planning. The strategies are accompanied with projects funded through government, pension funds, (under existing arrangements and the Pensions Schemes Bill 2025) and the private sector, with the Good Growth fund in Manchester an early model. The accompanying Integrated Settlements echo this project approach, leaving the provision of mainstream services to local authorities, although transport responsibilities have yet to be determined.
The second objective for devolution in England to improve productivity is based on research by the OECD since 2000. This has found a significant correlation between the degree of democratic decentralisation within states and their productivity. This issue poses a particular challenge for the UK, which is one of the most centralised states in the OECD. The question then is how far do the current proposals for English Devolution move the dial on UK centralisation to achieve increased productivity?
There are mixed messages from Government in response to meeting this challenge. The devolutionary narrative and tone of the EDWP are strong, as is the potential destination of MSAs across England, with some careful phrasing of this ambition. The transition pathway is supported through the creation of unitary local authorities across England, completing a universal structure across the UK. There is also some talk about the extension of the Strategic Authority model to Scotland, with Greater Glasgow included in several of the financial allocations made to established elected mayors in England. So, will the evolving set of proposals in England create a decentralised nation which will support the growth envisaged?
In its decentralisation handbook, the OECD identifies four levels of sub-national autonomy, primarily defined by fiscal federalism – that is the percentage of funds over which sub-national governments have direct control. Germany is at the top of this list with the UK, even with its 1998 devolution package, in the third grouping. In the UK, there is a unitary constitution which was not amended after the 1998 settlement leaving its devolutionary institutions as creatures of statute and subject to change by the Westminster Parliament, as the Miller case demonstrated. In Scotland, Wales and Northern Ireland devolved Parliaments and an Assembly have limited autonomy in the provision of legislation while funding relies primarily on Westminster and Whitehall.
The current proposals for devolution in England do not go as far as those for the Devolved Administrations (DAs). There are no proposals for a separate English institution with similar powers to those in the DAs and a separate civil service. Ministers and Whitehall will continue to deal with both English and UK policies and law. There is no place where England can be considered, including for its investment in infrastructure, health or environment, which is separate from the UK such as is possible in Scotland, Wales and Northern Ireland.
A second challenge within the English devolution proposals rests on the way in which funding is to be provided to MSAs. While there are proposals to allocate funding to support the delivery of the mayoral strategies there has been, as yet, little shift in central departmental behaviours either in relation to specific funding such as for housing or for grouped projects in the new Integrated Settlements. Six mayors have been given allocations from the English affordable housing programme and have ‘influence’ and ‘prioritise indicative spending of £7bn’ but not control of its distribution. This differs from London, where the mayor has £11.7bn or 32% of the English budget under his direct management. For other projects, Integrated Settlements are not included in the English Devolution and Community Empowerment Bill, relying on the roles of representatives of government department Accounting Officers (AOs) to agree their programme and individual projects while setting an Outcomes Framework against mayors must deliver. AOs are required by HM Treasury (HMT) to ‘control’ their expenditure when delegating its use by other institutions including sub-national governments. The Integrated Settlements do not cover all the activities of the mayors and could be expanded in future. They are most similar to the back office structures used for Government Offices for the Regions 1993-2011, where Regional Directors were responsible to departmental AOs for expenditure and had limited control over local projects.
Into this mix, there are further proposals from the Chancellor of the Exchequer, to devolve the use of taxation to mayors, starting with income tax, in pursuit of this productivity quest. As part of the UK/EU reset, also reinforced in this speech, the Chancellor was not only echoing the concerns over the effects of UK centralisation from an economic perspective but also the democratic principle of subsidiarity, which has been growing within the EU since Brexit.
While the Chancellor’s announcement has few details, the direction of travel appears to fulfil the twin objectives for English devolution, set in 2024. However, there is an elephant in the room, which has been steadfastly in place for over 150 years, shows all resistance to reform and could stymy the proposals for increased devolution. This is through the HMT system of the role of AOs and HMT’s associated relationship with the Public Accounts Committee (PAC). The advice to AOs, formerly set out in a Treasury Memorandum 1867, is that each departmental AO remains responsible for expenditure, even where it is given to other bodies to implement or administer. All AOs are appointed by HMT and are usually the Permanent Secretaries of departments although the responsibilities of the two are different. In their Permanent Secretary roles, civil servants report to ministers and as AOs they report to Parliament, through the PAC. These longstanding elements of the AO arrangements create an odd construction within the Westminster Model, where the executive – in the form of the Chief Secretary to the Treasury – is a member of PAC and HMT officials act as advisors to the committee, thus marking their own homework and shaping the mood music for departmental NAO reports. It is good financial management practice for fund holders to have responsibility for expenditure but its application, as demonstrated here through the Integrated Settlements and the Government Offices for the Regions before them, represents a high degree of centralised departmental control at the point of application and decision. The chair and members of the MSA Integrated Settlement programme boards are civil servants acting on behalf of their departmental AOs and mayors will not have control of the funding, although being able to request some flexibility and variance.
The EDWP suggested that there could be a review of the AO system. In Scotland, Wales and Northern Ireland, the head of each administration is a member of the UK civil service and, as such, is appointed as the AO in the same way as central government departmental heads. There are delegated PACs in each of the DAs and each has its own audit service creating some separation. To implement the changes in fiscal autonomy suggested by the Chancellor, what reforms or methods of implementation would lead to compliance with the current AO system or will it need to reform? Public accountability requirements could be established through local PACs with public hearings although this might require a directly elected body in each mayoral area, as in London. Another approach could be to create the role of each chief executive of an MSA as a member of the UK civil service, so that they could then be formally appointed as AOs. In practice, many of the chief executive roles in MSAs are filled by former civil servants so this might be a short step to compliance with the existing AO system and would be similar to the management of sub national government in other countries such as Ireland.
Another approach might be to reform the system and put it within a legal framework. In 2000, the Cabinet Office considered the role of AOs in its pursuit of joined up government and could see no reason why their roles and accountabilities could not be changed although these changes were never implemented. There could be a review of sub-national financial accountability systems in other countries, although these might be problematic in practice as sub-national government in the UK has no constitutional rights. Lastly, Local Accounting Officers (LAOs) could be appointed, like 1972 Local Government Act s151 officers in local authorities, where they already have accountability powers for directly collected taxation, through council tax. We await further developments….
About the author
Janice Morphet is an independent researcher, Visiting Professor in the Bartlett School of Planning at University College London and is a Design Council Built Environment Expert. Janice was a member of the Planning Committee of the London 2012 Olympic Games. She was a Senior Adviser on local government at DCLG 2000-2005, having been Chief Executive of Rutland CC, Director of Technical Services at Woking, and Professorial Head of the School of Planning and Landscape at Birmingham Polytechnic. Janice has been a trustee of the RTPI and TCPA.
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