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ISSUES: Citizenship
Chapter 3: Politics in the UK
Three things that must happen for
devolution to be a success: economic
development, revenue generation and
democracy
If devolution is to be a success, argues Rachel Laurence, thosewho control devolution policy
must ensure that it stimulates the kind of economic development that will improve the
prosperityofall communitieswithinthedevolvedareas,generatesgreater levelsandcontrol
ofrevenueandcapitalforregionalgovernment,andcreatesmeaningfuldemocraticstructures.
T
he leader of Birmingham city
council this week argued for the
creation of a “West Midlands
sovereign wealth fund” – an idea that
would see money raised from local
government pension funds invested in
housing and other local projects.
It’s exciting to see proposals like
this that seek to tackle shortfalls in
public infrastructure and housing
investment, through creative long-
term use of public sector assets. Using
assets as a way to generate long-term
revenue appears to be a much more
efficient use of resources, than selling
them off outright.
It also provides an opportunity for
local communities to have a much
more direct connection, as citizens
represented by local government,
both to how investment is prioritised,
and how revenue is re-spent, than
they do when major infrastructure
investment is led purely by the private
sector.
From our regular engagement with
people working to improve local
economies across the UK, it’s clear
there’s an eagerness to connect
their community focussed strategies
into the regional level of economic
development.
But there’s a recurring problem that
the priorities of local communities –
be it individuals’ prosperity, a more
democratic decision-making process
or the sustainable use of resources
– don’t match up with the regional
pursuit to rapidly increase their
national growth contribution.
It must be possible to not just overlay
regional and city growth strategies
with the kinds of socio-economic
outcomes that matter most to
communities, but to design regional
economic strategies that deliver good
community level economic outcomes
in the first place.
Today we launch a new paper that
argues devolution – done properly
– offers an opportunity to pursue
a new kind of regional economic
development, and a new kind of
economic governance.
But to make good on this promise, it
has to be better equipped to do three
crucial things:
1. Stimulate the kind of economic
development that will improve
the prosperity of all communities
within the devolved areas
Economic strategies that seek primarily
to increase a region’s contribution to
national growth, as measured through
’gross value added’ (GVA) – focus on
the production of goods and services
– usually, high-end growth industries
– and the infrastructure or business
support that facilitates this.
Yet these strategies do not necessarily
help achieve any of the following
objectives: a more equal distribution
of wealth across the population;
greater diversity of small and large
businesses or sectors; high local
investment from money spent in a
local economy; strong flow of local
population through local education
and training into local jobs.
Rather than pursue those aims
separately, through training and skills,
business development or poverty-
reduction programmes, they could be
much more efficiently tackled if they
were treated as an integral part of the
regional economic strategy itself.
2. Generate greater levels and
control of revenue and capital
for regional government
Current devolution agreements see
retention of tight central controls over
the grants paid to new combined local
authorities, as well as over the levels of
borrowing they are permitted.
This undermines the possibility of new,
larger urban authorities being able to
use any expansion of their tax base
– for example through new powers
to retain business rates – as leverage
for ambitious regional development
plans, paid for initially through
borrowing. To fulfil many of the
promises of devolution, some further
relaxation of borrowing requirements,
matched by greater flexibility in
setting local tax rates, is crucial.
3. Create meaningful democratic
structures
Democracy is a missing link in the
new devolution debate. It is essential
that the Department for Communities
and Local Government (DCLG) and
groups of local authorities proposing
devolution
deals
consider
how
to engage citizens and increase
accountability, especially with deals
being made on an ad hoc basis and
the role of elected members at each
level varying from place to place.
Clearer
accountability
structures
would show where responsibility lies
between combined authorities, local
authorities and central government,
and how citizens can hold each set of
