The Devolution Parliament

The next parliament will find itself once again dominated by Brexit – whatever the result of the General Election. The main risk is that, in doing so, Westminster will yet again be incapable of addressing the over-centralisation and regional inequalities that have created such a divided country. Devolution can provide a solution to these major issues: now is the time for central government to let the regions, towns and cities of England step forward. That’s why England needs a Devolution Parliament now more than ever.

Centralised governance has divided the country

The UK is a uniquely centralised country: both political and economic power are hoarded in London to a disproportionate extent. Despite recent efforts to decentralise power through ‘devolution deals’, England – a nation of 55 million people living in diverse towns, cities and villages – is still mostly governed from the capital in the corner. Our analysis shows that centralisation of spending has increased in the last five years, with local government in England forced to cut spending by £9.5 billion since 2014/15 (in real terms 2018/19 prices).[i] No comparable country endures such an imbalance of power.  

This centralisation has enabled regional inequalities to deepen across the country. For decades, successive governments have focused on London and the South East as if it’s the ‘economic engine’ of the country and the golden goose for public finances – this region is treated like Treasury’s business investment, where spending is justified on the promise of short-term GDP growth and tax returns.[ii]

Most obviously this deprives other regions across England of essential investment, and makes it difficult for them to become productive and inclusive economies.[iii] But London’s dominance affects Londoners too – the capital’s housing crisis has helped create the highest levels of poverty in the country.[iv]

This is a persistent issue that must be addressed urgently. For many, Brexit was an outcry against Westminster’s way of doing politics, as well as discontent with the EU. It came not only from parts of the North, as is sometimes assumed, but from almost all corners of country. While there were many reasons people voted to leave the EU, much of the support to leave came from people living in post-industrial suburbs and towns - ‘places that don’t matter’ to many politicians, and especially to the Treasury’s all-powerful cost-benefit calculator.[v] [vi] Reconnecting with these places should have been Parliament’s top priority for decades and especially since the referendum result expressed their overwhelming discontent.

We need a Devolution Parliament

But instead of acting on the outcry of places held back by over-centralisation, Parliament has found itself incapacitated. For the past three years the debate on our future relationship with the EU has been the primary focus of their attention. People across the country have been left looking on as Westminster sought to accommodate the referendum result into their established forms of decision making. Clearly, they have failed to do so.

This obstinate focus on Brexit has left Parliament with no time or energy to address the root causes of the very disaffection towards ‘traditional politics’ exposed by the referendum result. But while we see politicians of all hues appropriating the rhetoric of ‘left behind’ and ’take back control’- beyond ‘Towns Fund’ tokenism there is little willpower to bring left behind places forward, and give back control to regions, towns and cities across England.

Brexit’s grip on our politics is set to continue for the foreseeable future. Despite the pledge to ’get Brexit done’ the next Parliament will inevitably be dominated by the UK’s relationship with the EU. The main risk therefore is that the economic and social policy measures needed to address regional inequalities will continue to be deprioritised.

That’s why now, more than ever, it is time to devolve real power. Devolution is vital in order to address the economic, environmental and democratic challenges that divide the country. The evidence shows devolution helps boost economies – driving up investment, jobs and productivity by putting powers into the hands of those who know their area, and who directly benefit from seeing it thrive.[vii] A new wave of devolution could also enable local government to take bold and radical steps to tackle the major challenges of the 21^st century, including climate breakdown and rising inequality of wealth and income. Finally, in an era of increasing frustration at how the country is run, devolution could help to re-establish trust in politics by bringing decision-making much closer to citizens.

Unlike recent patchwork attempts, devolution must be taken forward in a consistent and sensible way. People’s views and identities must be respected in this process. But no longer can policy makers get away with the kind of nit-picking and wilful ignorance that has marred devolution’s progress to date: concerns about ’postcode lotteries’ and fiscal devolution can be resolved – as they are, indeed, in a lot of countries comparable to the UK.

We can reasonably expect both parties to make significant devolution offers to the electorate, either in their manifestos or in their inaugural Queen’s Speech. With their proposed devolution White Paper, and other measures announced before the election, the Conservative Party has signalled their intention to continue with the deal-making process that was started by George Osborne, but with little enthusiasm for a fundamental rethink of where power lies. Meanwhile the Labour Party launched their election campaign with proposals to develop a regional tier, locally led and inclusive of both trade unions and businesses – in line with IPPR North recommendations[viii] – but have said little on what powers over tax and spending they would seek to devolve to local and combined authorities. Clearly, both parties have much more to do.

The next Parliament will need to spend considerable time resolving Brexit, but this should not be the single issue that dominates Westminster: the next Parliament must also be a ’Devolution Parliament’. It must bring to life real, permanent constitutional change so as to address deep-seated inequalities that are the root cause of the divisions in our country, and unleash local and regional government to play a leadership role in tackling the major challenges of the 21^st century.

Delivering a Devolution Parliament

Delivering a 'Devolution Parliament is crucial, and requires bold reforms at all level of government – from the national, to the regional, sub-regional and local tiers.

To achieve this, a future government must act on five priorities:

1. Reverse austerity, redistribute funding fairly and devolve fiscal powers

• Fiscal centralisation has enabled devastating local government austerity. Because of the power central government has over tax and spend, they’ve passed on the most difficult cuts to councils across the country, leaving them with no choice but to cut services they know are vital to their residents. Fiscal centralisation is also one of the main reasons why the tax base is so low in the first place – other countries have local and regional taxes as well as central taxes, and can invest more sustainably in public services and infrastructure.[ix] Fiscal devolution can enable more equal and productive economies.
• The next government must fundamentally change how public funding is raised and spent across the country and address the severe imbalance of power that creates this situation. To achieve this, they should:
  • Fund local government fairly and replace EU regional funding based on a combination of need, population and potential with no strings attached.[x]
  • Investigate a ‘solidarity surcharge’ that could fund a long-term pipeline worth hundreds of billions in new infrastructure investment in the regions.[xi]
  • Roll out fiscal devolution – in the short term by developing additional local taxes, such as the tourism levy and business rate supplement; and in the long term by setting up a Fiscal Devolution Commission to implement fair local and regional redistribution within a new constitutional settlement.

2. Introduce an ‘inclusive devolution’ process, available to all sub-national levels

• The current process of devolution is flawed. It consists of a series of ad-hoc deals struck at the whim of central government and is held back by partisan lobbying of government ministers.
• The next government must delegate devolution to a fair decision-making process, and introduce complete transparency and coherence. To achieve this, they should:
  • Set out a comprehensive ‘Devolution Framework’ outlining clearly the principles of the process, and the powers and funding on offer to allow flexibility. It should be open to metropolitan and non-metropolitan areas based on the needs and ambitions of each place.[xii]
  • Set up a ‘Joint Devolution Panel’ – a transparent and inclusive decision-making process for devolution, with equal representation of local and central government. This would oversee the creation of the ‘Devolution Framework’.

3. Develop a locally-led regional tier of government

• The evolution of the regional tier keeps getting held back by central government – the RDAs and the Northern Way were wiped out in 2010 at the flick of Eric Pickles’ pen, but the Northern Powerhouse and Midlands Engine initiatives have seen this larger tier of government re-emerge, albeit slowly, and with clear limitations.[xiii]
• The next government must bridge current gaps and support the regional tier to develop in a way that’s sustainable for the long term, that’s integrated with and accountable to local government, and that includes the necessary stakeholders in economic policy making. To achieve this they should:
  • As part of the ‘Devolution Framework’ present options for devolution to a locally-led regional tier over strategic policy areas such as transport, trade and investment, innovation and supply chains. This should allow the development of coordinated approaches on key policy issues, building on the success of bodies such as Transport for the North and Midlands Connect.[xiv]
  • Make regional government accountable to council leaders and metro mayors, and bring trade unions and businesses into a ‘tripartite’ social partnership to set strategic economic policy at the regional tier.

4. Devolve economic powers to city regions and counties

• City regions and counties are the building block of devolved policy in England, but even where there is some devolution, they are still too weak. These areas are usually the best geography for important economic powers such as intra-city transport, skills, education and housing. But even the most powerful mayoral combined authorities don’t have the power and funding they need. Meanwhile, non-metropolitan areas have been left at the margins of the process.
• The next government must build on devolution to date, by devolving large swathes of economic policy to city regions and counties. To achieve this, they should:
  • As part of the ‘Devolution Framework’ present a series of flexible options for powers and funding arrangements for city regions and counties, so that all areas can benefit from devolution.[xv]
  • Enable a range of governance options, and bring trade unions and businesses into ‘tripartite’ social partnerships to set strategic economic policy at the sub-regional tier.
  • Allow places to forge ahead with more devolution while letting others move at a slower pace should they desire it – this ‘asymmetry’ is a common feature overseas and should be embraced.

5. Permanently reform central-local relationships with a new constitution

The relationship between central and local government is one of the many flaws with our current constitution. It has allowed central government to push local government around, and force austerity on some of the poorest parts of the country.

The next government must fundamentally address the relationship between central and local government. To achieve this, they should:

• Undertake a time limited, inclusive Convention on English Devolution, that resolves the issues of identity and geography/scale of devolution by bringing citizens into the process.
• Reform central government’s economic policy making in the short term, with a National Economic Council that includes representatives from the regions in economic decision making alongside trade unions, businesses and civil society to set out an inclusive national economic plan for the country and coordinate economic policy between central, regional and devolved government.
• Reform the Constitution to make Westminster representative of all parts of the country and to ensure a coherent constitutional settlement.  

First steps for a new government

A new government will inherit significant challenges – not just with Brexit, but the usual range of foreign and domestic policy challenges that overwhelm governments at the best of times.

Some might see devolution as just one of many new competing priorities, but in fact it is an opportunity to solve many of the major problems central government struggles with, from regional inequality to climate change. If the centre gives real control and power to regions, towns and cities of England, they will be enabled and empowered to tackle many of the challenges that centralised government struggles with, allowing Westminster to concentrate on its other priorities. This would be a crucial step to rebalance our national economy – creating a country that works for everyone.

That’s why one of the first actions of the new government should be to announce the next parliament will be the Devolution Parliament and accelerate devolution from the outset – making space in their first Queen’s Speech for the required legislation and instituting a sustained and irreversible programme to shift power out of Westminster.