The Northern Powerhouse made it into the Queen’s Speech, giving George Osborne a good laugh when Her Majesty mentioned it. The government is pushing ahead with its plans to devolve extensive powers to city regions, starting with Manchester. Devolution to local government, an idea which was loathed by the Thatcher and Major governments, is suddenly the height of fashion and not just in Conservative circles.
The idea gained momentum after the referendum on Scottish independence. It got mixed up with the row about Scottish votes on English laws and became, all at once, an answer to the West Lothian question, a way of stimulating the growth of urban centres outside London, rebalancing the economy, allowing more tax revenues to be raised locally and making services more responsive to local needs. Or something like that. People can project all sorts of things onto what at the moment is still a blank page.
A lot of people seem to think this is a Good Thing but I’m not convinced.
Is it an answer to the West Lothian question?
No. As Vernon Bogdanor says, the only way to get round the problem of Scottish MPs voting at Westminster on things that don’t affect their constituents is to take those things away from Westminster altogether. The cleanest way to do this would be to devolve the powers Scotland has to the English regions but there isn’t much appetite for that.
[A]s long as England rejects federalism, there can be no tidy, symmetrical solution. Asymmetry is the price England pays to keep Scotland within the union.
At the moment, the government is not proposing to give English city regions the same powers as the Scottish Parliament or even the Welsh Assembly, though some people are arguing that it should. If that were to happen, though, it might make the situation worse. For example, if Greater Manchester were to get similar powers to Wales, it would have control of its own health service. What would happen if (or more likely when) a future government decided to reorganise the NHS again? Should Manchester MPs vote on a reorganisation that doesn’t affect their constituents? Devo Manc just replaces the West Lothian Question with the Bury South Question.
Will it give the regions outside London more money?
No. Not unless they raise more tax from their residents and businesses than they do now. There is a lot of talk about regions and cities keeping more of their taxes but if Manchester and Newcastle keep more of their own taxes, then London and the South East will keep more of theirs too. That can only lead to a redistribution of tax away from the poorer regions, unless local taxes are increased to compensate. England tends to get richer the closer you get to London. If these wealthier regions redistribute less of their money, poorer regions will have to make up the shortfall by taxing their residents and businesses at a higher rate.
Source: Regional Gross Value Added (Income Approach), ONS, 10 December 2014
Source: Regional Gross Disposable Household Income (GDHI), 1997 to 2013, ONS, 27 May 2015
Will it rebalance the economy?
Probably not. The UK has a regional imbalance because it has a massive international city in its bottom right hand corner. It is bigger, by some distance, than any other city in western Europe and dwarfs everywhere else in the UK. One of the world’s great financial centres, it attracts global wealth and the global rich. London contains such great wealth and earning power that it is capable of skewing the entire continent’s pay inequality figures.
We add to the problem by keeping our government in the same city.
In some European countries, prosperity is more geographically distributed. How much of this is due to more powerful regional government is difficult to say. Germany and Italy, for example, have never been as strongly dominated by their capitals. Cities like Frankfurt, Munich, Milan and Turin have a long histories as business and financial centres.
The closest the UK ever came to this was during the nineteenth century when the industrial cities in northern England became rich and powerful. But the industrial revolution happened in unincorporated and politically under-represented cities. The business and the prosperity came first and the demands for political power followed.
The northern powerhouses of the past coincided with that brief period when the balance of wealth and population tilted towards the north. The political clout of the great northern cities and the golden age of Victorian municipalism was a result of this industrial power, not the cause of it.
As Mick Moran and Karel Williams of Manchester Business School say, it will take a lot more to fix a regional imbalance that is many decades old.
[T]he problem is historically deep-seated, which means that it is highly unlikely that devolution in its present form will give the city region of Manchester the financial resources, administrative capability and policy imagination to manage these genuinely structural problems. We could argue about what needs to be done. But the fundamental point is that ‘devo Manc’ is not doing enough if it only offers bits of money and devolved authority to an elected mayor whose role will be to manage more cuts and preside over unsolved structural problems. Centralisation has certainly disappointed, but this kind of ‘devo Manc’ decentralisation is bound to fail.
Will it make public services more efficient?
Possibly. A single body responsible for all public services in a given area might be able to direct resources more efficiently. Five years ago, the Total Place pilots found that closer local co-operation between the NHS and local government had the potential to cut costs without reducing service levels. If the new city regions are given control of the health service, they might be able to do something similar.
Or possibly not. Many people have misgivings about the ability of local authorities to run the health service. James Tout, writing in the Health Service Journal, warned:
We could be on the verge of witnessing a further balkanisation of the NHS by region. Tribal politicians will regard their new fiefdoms as playgrounds in which to experiment, while simultaneously slinging mud at their opponents when divergences start to appear, as they surely will.
You may see this as a worthwhile trade off for gaining control over the cash.
But as the Scottish referendum showed us, the NHS lends itself to being scrapped over. Anyone hoping for “no more games” with the health service can kiss that dream goodbye.
Chris Ham, Chief Executive of the King’s Fund, points out that further re-organisation, complication and ambiguity is the last thing either the NHS or local government need right now:
The main risks of the plans are that they will take time and effort away from work to address the growing financial challenges facing local government and the NHS, and that they will result in confused accountabilities. The worst of all outcomes would be further structural changes to the health service that distract public sector leaders from their core task of improving outcomes for the populations they serve.
Merging two leaky buckets does not create a watertight solution.
It is also not clear how far the government expects devolution to go. The non-metropolitan cities, boroughs and rural areas that don’t have their own devolved powerhouses may be left with the rump of nationally provided services. That will almost certainly increase the unit costs of those services. It’s not very fashionable but there is still something to be said for economies of scale. Sacrificing them for, well, we’re not sure what, isn’t something we should do on a whim.
Despite all this, there are still a lot of people, across the political spectrum, who think the government’s devolution proposals are a good idea or, at least, a step in the right direction. I can understand why some people might want it. Devolution is attractive to a government wanting to outsource spending cuts, to ambitious local politicians who fancy being regional minister-presidents rather than plain old council leaders and to wealthy Londoners who want to see less of their tax going elsewhere. Apart from that, though, it’s difficult to see who else would benefit.