Time to double-down and roll out devolution to all of England

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In our new report out today, ‘Fostering More Industrious Places – Getting the devolution revolution back on track’, we argue that rolling out Devolution Deals across the whole of England should be the main ambition behind local growth as part of the industrial strategy.

This is so that stronger foundations are in place to tackle the wide variation in regional productivity.

regions-underperform-on-productivity

Devolution Deals are focussing on what manufacturers want

The initial focus in Devolution Deals on transport and infrastructure investment chimes with the challenges manufacturers see in their local business environment. We’ve covered this before in a previous blog on the role of transport.

The focus on transport is about a lot of things, most notably access to highly-skilled talent with 68% of manufacturers agreeing they would have access to a wider talent pool if there was better public transport in their area.

With Devolution Deals so far focussing on transport and infrastructure investment and also providing a voice for economic geographies in the form of Mayors, these benefits must be spread across the country.

But post-EU referendum the ambition for devolution has waned

No new Deals have been signed under the May Government aside from those which grew out of collapsed Deals and the major show piece – Mayoral elections – were already in train from the post-2015 Cameron Government.

The industrial strategy, despite two pillars focussed on local growth, also limits devolution ambition to ‘further Deals for our largest cities’.

Post-GE2017 there is already some backsliding on previous promises around devolution, notably the abandonment of a Mayoral infrastructure levy (2% on business rates to fund infrastructure projects).

This lack of ambition matters for industry – manufacturers are based right across the country, and most will be outside Devolution Deal areas. The benefits must be available to all.

What needs to happen?

Getting Devolution Deals rolled out to all areas of England must be the ambition behind the government’s policy on place as part of the industrial strategy. As we set out in our recent Industrial Strategy Policy Digest, this is one of the five things missing from the industrial strategy.

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Establishing strong governance of real economic geographies ensures a more meaningful conversation on how local areas can support the industrial strategy.

Given that existing Deals have been signed in areas that have a long history of working together, the government will have to do something new for other areas.

But this will require overcoming two hurdles:

  • The opaque nature of the Deal making process and
  • The deadweight of fragmented local government in England

What needs to happen?

Step 1: Provide clarity on the devolution framework

While the original ambition was for Deals to be bespoke – a cursory glance at the Deals that have been signed shows that there are some common elements in all of them.

This is despite lengthy negotiations and back and forth over the contents of Deals. With Government busy negotiating Brexit, these lengthy negotiations are not a good use of time.

In our report we call on the government to stop this hide and seek and publish the framework or menu of what is on offer for local areas, along with the governance arrangements needed to unlock each item on the list.

Step 2: Designate LEPs as the trusted Deal-making agent

While publishing the framework will help some areas, the fragmentation of local government in England will be a major barrier to progress. We wrote about this before – there are too many local authorities in England.

This fragmentation maximises the financial risks associated with devolution and exacerbates long-standing political rivalries over who best represents an area.

The effects of this has not been lost on manufacturing, with a balance of 64% of manufacturers agreeing with the statement “local authorities are not working together enough to boost economic growth.”

The challenge of local government fragmentation requires central government to designate a local agent who will need to take the lead in getting a Deal over the line as part of the industrial strategy.

We think Local Enterprise Partnerships (LEPs) should be this trusted Deal-making agent:

  • Since 2010 they have been bringing together local authorities and business to focus strategically on growth - Overall a positive balance of 38% of manufacturers agree LEPs have this crucial role

  • Over 75% of manufacturers are able to self-identify their LEP

  • They also have the experience of negotiating Deals, such as Local Growth Deals

The Cities and Local Growth Unit (a cross-departmental team of BEIS and DCLG) would then be able to more quickly evaluate and negotiate these initial Deals, as they will also be armed with the common framework.

Fostering-more-industrious-places---how-to-make-it-happen

Author

Head of Business Environment Policy

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