Government urged to continue devolution drive by incentivising council mergers

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EEF, themanufacturers’ organisation, is today urging central and local government to continue the drive towards devolution in England by incentivising local authority mergers. The call is made in a new discussion paper published today which sets out how devolution can be spread to areas that are currently struggling to take it on.

The discussion paper – Manufacturing Local Growth - is being presented at the County Council Network’s Annual Conference today (8th November). In it, EEF says that devolution remains the best way of tackling local business environment concerns. Devolution deals agreed between central and local government so far place a strong emphasis on transport and infrastructure and all areas need to gear themselves up to take on these new powers and deliver for their local areas.

It follows new research showing that local roads, transport and infrastructure are still top priorities for manufacturers and continue to present considerable challenges to their operations. Almost seven in ten manufacturers (68%) say they would have access to a wider talent pool if there was better public transport in their area[1]. Just under half (47%) rate the quality of local public transport as bad – making it manufacturers’ biggest challenge in the local business environment, closely followed by the quality of local roads (41%)[1].

As a result, when it comes to improving their business environment, 62% of manufacturers want local roads to be a priority, while 51% want to see a step up in the provision and regulation of public transport[1].

EEF says that the framework and approach taken on devolution so far is the right one – the underlining principles, including the need for regional decisions to have a direct regional mandate, are backed by evidence and offer clarity to business, while the focus on transport is spot on. But these benefits will not be felt everywhere as not all areas have the capacity or capability to take on a devolution deal from Government.

What is needed now is for central Government to come forward with the tools and financial incentives to encourage local authorities to merge, and for local authorities to come forward with proposals to do so, to enable them to then take advantage of devolution.

These incentives from Government include limiting the benefits of proposed business rates retention to Combined and Unitary Authorities, extending fiscal retention for Combined and Unitary Authorities to other taxes such as stamp duty. A debate on how council tax can be used more effectively to incentivise council mergers will also be needed.

Scaling up through mergers would provide benefits such as: lowering the cost of delivering services, enabling faster decision-making and delivering a larger local tax base to enable local areas to more effectively balance fiscal risk and reward. Business would also benefit from having just one local authority, with a clear mandate, to deal with.

Chris Richards, Senior Business Environment Policy Adviser at EEF, says: “There is a compelling case for the continued drive for devolution. The weak business environment in parts of England – including decades of underinvestment in infrastructure – still needs to be tackled. But beyond that, devolution offers an opportunity for faster, more responsive decision-making to build stronger, more fertile business environments across the country. Devolving power, responsibility and money to local areas will help to achieve stronger growth and will help to support our sector’s strong growth ambitions.

“Despite this compelling case, some areas of England are being left out due to the legacy of inefficient local government structures – this needs to be tackled. If England did not have a two-tiered council structure, no one would be arguing for its creation. With a new Government there is an opportunity to look again at local government mergers as a solution - and central Government should push this by putting in place funding and fiscal incentives to make it happen.”

The discussion paper – Manufacturing local growth - can be downloaded here.

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