Labour's devolution proposals - what we think

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This month the Labour party released their proposals to devolve economic power and funding within England. This is a key issue, not least because Labour intend to put English devolution "at the heart of Labour's first Spending Review” if they emerge successful following the General election.

 

Key aspects of Labour’s proposals include:

  • At least £30bn over five years, £4bn pa more than the current Government's plans in areas such as employment support, transport, housing, skills and business support
  • One clear offer on funding and powers for areas that meet the criteria of:
    • Combined Authorities based on functional economic areas which align exactly to Local Economic Partnerships, with no overlaps
    • A Single Economic Strategy signed off as part of a 'dual key' i.e. both the Combined Authority and LEP have to approve it
  • LEPs would become formalised through legislation
  • 100% retention of business rates growth, the current business rates retention scheme caps this at 50%
  • A final devolution settlement would be agreed within a year after Labour come to office to give "local areas and Whitehall a finite window to act".    
We’ve previously blogged about our approach to English devolution, setting out some broad framework principles to help steer the debate.

What we like

Allowing local areas to keep more of the proceeds of growth is something EEF strongly supports. Extending the business rates retention scheme to 100% will achieve this, particularly as it will force councils to make strategic decisions on what sectors of their local business environment should be supported through discretionary reliefs.

The proposals also recognise that economic activity doesn't just take place just inside metro areas, with plans for County Combined Authorities alongside City County Regions. As the County Council's Network points out, 54% of manufacturing jobs are in county regions.

The focus on place based policy areas such as transport, housing and long term unemployment is also the right one. However we would prefer devolved further education funding to be limited to just capital provision, to dovetail with plans for employer routed funding for apprenticeships.

Where we have questions

We have strong reservations about the pace of change proposed. We believe this needs to be dictated by local areas and not national government.

Some areas are ready to take on more but others are not and some would privately admit that they have no appetite as yet for a Manchester style devolution settlement.

There are many hurdles in getting this to work (and crucially 'stick') including citizen and business engagement (including taking the business community with you), political reality (e.g. getting local authorities to work together) and local capacity to deliver – literally, do you have the people on the ground to make this work.

We've previously highlighted the constant hoops that LEPs have had to jump through over the past few years. As their Local Growth Plans are moving from strategy to delivery now is the time for LEPs to improve efforts on business engagement.

Labour's proposals present several new hoops including geographic and board membership reorganisation and the need for a new economic strategy document.

And all of this within 12 months.

Where we have even more questions

Functional economic areas are not geographically neat. For these to be non-overlapping AND align perfectly with a Combined Authority would need new governance structures that straddle entire regions and beyond.

For example London's non-overlapping functional economic area would subsume most of the counties surrounding it as this map looking at city-region functional economic areas produced by the Globalization and World Cities Research Network shows.

CityRegionFEAs 

The uniform, one time only, approach also misses the wider point of devolution which is ultimately, different areas taking a different approach based on their own priorities and at their own pace. Or as a former Labour Secretary of State for Wales said "Devolution is a process, not an event."

We agree, Mutual Assured Devolution between areas, is unrealistic and could be potentially damaging for fragile local business environments.

Author

Head of Business Environment Policy

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