Why EEF is calling on local authorities in England to merge

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With Devolution Deals falling apart and Ministers reviewing various aspects of policy, you may be forgiven for thinking it isn’t, but devolution in England is still happening.

Next year will see the first set of elections for new mayors in a range of local areas including Greater Manchester, Tees Valley, the West Midlands and Liverpool, each with their own Devolution Deals and powers and funding for economic development.
But this isn't just about power in exchange for mayors, other areas have adopted their own models including Cornwall, which negotiated a deal on the basis that it was a single unitary local authority covering a large functional economic area.

 

EEF’s regional team held a successful Devolution Forum in Cornwall to tease out what manufacturers want Cornwall Council to focus on as part of implementing this Deal.

The principles and governance around devolution matter

Although a desperately dry subject, the principles and governance that underpin devolution matters if it is to support businesses to grow. For this reason EEF has been playing an active role in our engagement with government on getting devolution right.

Central government is devolving its power to local government and has requested accountable and effective governance to devolve that power to. It also wants devolution to work and there are some broad principles that sit behind the approach to devolution which make sense.

Principles-and-approach

But some local authorities are struggling with this requirement, with the mayoral model being a particular focus of anger. Coupled with this is a lower level of cross-boundary cooperation in non-metro areas and the structure of local government in England. For some local authorities the financial risk of taking on a Devolution Deal also serves as an obstacle.

Something needs to change to remove the barrier stopping all areas of England to take on Devolution Deals. These Deals are important, the UK has a weak business environment in parts of the country – with decades of underinvestment in infrastructure.

Additionally as central government will be focussing over the next few years on negotiating Britain’s exit from the EU, local government will need to step up.

What needs to happen

Our discussion paper (Manufacturing Local Growth) published today outlines a way forward. In it we set out the need for local authorities to come forward with proposals to merge and for central government to put in place the financial incentives to encourage them to do so.

There are benefits to scaling up including:

  • greater impact in the delivery of services
  • lower cost of delivering those services
  • balancing budgetary risk and reward across a larger area

Businesses would also benefit from the reduction in the multiple of voices to just one clear vision for their local area, speeding up decision making and delivering for functional economic areas.

England has over 300 local authorities, the vast majority of which are district councils (just over 200) which exist under county council areas – however in these areas county councils provide 80% of the services. Scotland, Northern Ireland and Wales all have large unitary councils.

Reducing the number of councils to create larger unitary authorities should be pursued.

Others agree, a recent poll by the Local Government Chronicle shows that even officials working within local government see the need for some reform with 78% of county officials and 64% of district council officials agreeing that ‘there are too many councils in their area’.

 

A role for central government too

But this isn’t all on local government, central government also needs to play a role. We’ve identified three steps:

  1. Reaffirm that the approach to devolution remains the same

    Many of the recent Devolution Deals have fallen by the wayside because local government isn’t sure if central government still sees this as a priority.

    It should be. Last year our report showed that manufacturers were largely sceptical about devolution, because they felt it would just be a passing fad. The passing of the Cities and Local Government Act highlighted that it wasn’t, and offered some much needed clarity.

    The new government must come out more robustly behind the currently devolution approach, particularly in light of discussions about the role of ‘place’ in industrial strategy.

  2. Put the financial afterburners on devolution ambition

    But there is a bigger step government can take to demonstrate their commitment. Our report sets out how government can boost funding to Devolution Deal areas to put the afterburners on the ambition to support improving local business environments.

    These steps include boosting local transport funding through existing central government sources and devolving fiscal retention of other property taxes such as stamp duty, to Devolution Deal areas.

  3. Encourage mergers through fiscal incentives

Our report set out how government should change the current proposals on the devolution of business rates to incentivise councils to merge.

Using-business-rates-to-incentivise-council-mergers

The omission of council tax from the debate

But there are other areas that could be explored, including starting the debate on the future role of council tax. With property valuations for council tax now 25 years old, revaluation may need to be considered soon.

Willthegovernmentrevaluecounciltaxsoon

If the government does see the need for revaluation of council tax to take place there are opportunities to use it to support areas in taking advantage of devolution including:

  • Devolving the responsibility for triggering a revaluation to local decision makers – this has been recommended by many

  • Limiting that opportunity to Mayoral Combined Authority and Unitary Authority areas that map onto a functional economic geography, as the geographic scale and the regional mandate for the revaluation will matter

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.

Author

Head of Business Environment Policy

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