English Devolution: How soon is now?

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Today the Smith Commission reported on further devolution powers to the Scottish Parliament. The debate on devolution within England has also flared up with many taking the opportunity to cry havoc.


As we set out earlier this week, this is an issue that matters for businesses such as manufacturers with many feeling the debate is running ahead of consultation or evidence gathering on how this can be implemented in the national interest.

This blog sets out the current views of manufacturers on this evolving debate.

Growth as the ambition

Growth should be front and centre to this debate, with policy areas being devolved on the basis of local areas being better able to support economic growth.

Increasingly the debate about what should be devolved is linked to 'power', with little evidence of why that power is best placed at the local level or how that power would be used.

The size of budgets is also being used as a proxy for power, with many calling for their 'cut' of national budgets in areas such as apprenticeship funding or innovation spending.
Manufacturers don't believe a coherent argument has been made for the devolution of innovation or apprenticeship funding, except 'wouldn't it be nice if?'

Sharing the proceeds of growth

The present government has sought to address this first by introducing the business rates retention scheme and also the use of Earn Back in Greater Manchester.

We prefer this tax assignment route to the tax varying route that others have been advocating. Tax assignment maintains a basic national allocation of funding based on transfers from rich areas to poor ensuring a basic standard of service.

It also gives local authorities an incentive to grow their local tax base, while minimising the risk of budgets oscillating wildly.

Recognising the different starting points

There needs to be an appreciation that in England we are starting from very different positions, not just between areas in England, but also relative to Scotland, Wales and Northern Ireland.

Pursuing fiscal devolution within England straight away would see London's budget increasing significantly, at the expense of others. Encouraging local authorities to grow their tax base paves the way for more equitable fiscal devolution in the future.

It should also be recognised that Scotland has been on this journey since the mid-1970s. As the former Secretary of State for Wales once said, devolution should be seen as a process and not an event. Expecting England to jump to the end tomorrow is not only unrealistic but could be damaging.

There is no need for Mutual Assured Devolution between England and Scotland.

Making all of this stick

A particular concern of manufacturers is that this is simply the latest iteration of governance structures in the economic development landscape which has already undergone significant revisions in the last five years alone. What is now needed is for some of this to have the level of certainty that has been lacking for many years.

Our recent business environment survey shows that LEPs, which are the combination of local businesses and local authorities working together, still have some way to go in terms of engaging businesses in their areas.

Local Economic Development statements - net agreement ratings

This perhaps explains the resistance from manufacturers about devolving even more power and money to the local level as they don’t feel existing local structures have as yet demonstrated an ability to engage with businesses in a meaningful way.

This is important as growth can only ultimately be provided through the actions of businesses. 

 

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