Comprehensive Spending Review: What does it mean for devolution?

7^th December 2015

The devolution proposals within the Comprehensive Spending Review have been labelled by some as a recipe for increased regional inequality. The limited and growth-focussed nature of the powers devolved in the CSR make these a legitimate concern, so long as city and county devolution does not make available the powers needed to achieve true place-based public service reform.

There was good news for the Core Cities group in the CSR, with confirmation of the 100% retention of business rates that they had long argued for. Others, however, were more wary. Sonia Sodha, the Observer’s chief leader writer, who spoke at a New Local Government Network panel discussion on the Spending Review last Tuesday, expressed concern that the measures announced were likely to lead to serious divergence between rich and poor regions.

Looking at the measures announced in the CSR, this is a credible fear. The Chancellor’s focus on economic growth has led him to apply the bulk of his devolution efforts to the largest core city-regions, with dense urban characteristics which offer the potential for significant future growth through agglomeration effects.

The concern for post-industrial areas and sparse rural counties is that not only do they lack those characteristics, but that the core city-regions will no longer be sharing the fruits of growth in their productive, dense economies with the disadvantaged periphery and its citizens. The new infrastructure levy, for example, is only available to mayoral combined authorities and in any case would raise far less outside of the cities.

However, it is now widely acknowledged that as a means to tackle economic weakness and deprivation, the history of inter-regional redistribution is one of abject failure. Neither the ‘spatial Keynesianism’ of the 1960s, nor Blair’s relocation of large public sector employers to the North-East, nor higher levels of spending per head in deprived areas has been able to tackle the fundamental long-term drivers of high demand for public services and insufficient high-skill jobs.

But devolution need not mean leaving the local state to wither in pursuit of growth in the metropolises. The real promise for localities with poor growth and high levels of need is the opportunity for a total re-think of the way public services engage with the citizen. Local authorities, as democratic place-based guardians, should have the powers to devise interventions which tackle the root causes of deprivation and low productivity in a holistic way, whether that be through early years, adult skills, infrastructure, mental health, or housing provision. Stopping divergence between regions means giving them the powers to break the link to their troubled economic past, person-by-person.

Unfortunately, this was not on the table at the CSR. Housing benefit, for example, is staying with the Treasury, subsidising buy-to-let landlords when councils could be using it to provide affordable housing. So too is stamp duty. The plethora of challenge funds and departmental silos remain, with different budget holders at different levels of the state pursuing different goals.

The biggest danger is if devolution continues to be seen by the Treasury as essentially a tool to edge up GDP. Place-based public services offer a realistic chance of ending the current waste of economic and human potential that cripples once-proud counties. But not without meaningful powers.