Devolution will create losers too

Devolution is a laudable endeavour, but it will widen the gap between thriving and struggling areas as much as closing it, writes Sanjay Raja Andy Burnham’s pitch for devolution was laudable. An economic mission centred around bottom-up, place-based policy could kick-start national growth and productivity – especially given the overly centralised and sometimes lethargic national policy engine.  That said, devolution shouldn’t be seen as a panacea for lagging regional productivity and living standards. The UK has spent a decade experimenting with various place-based policies from City Deals, Growth Deals, Enterprise Zones, Trail Blazer Deals, political devolution, to the more recent levelling-up agenda. So far, the results have been ambiguous.  While policymakers’ intentions on devolution policy may have been well placed, they have mainly relied upon pinpoint initiatives rather than laying the foundation for long-term growth. Devolution policy requires a wide range of ingredients to deliver its full potential. So how to do devolution right? How to do devolution well First, building institutional capacity. This is important as it’s easier said than done: powers are only as useful as the organisations wielding them. Greater Manchester succeeded because it had built delivery capability over years via Transport for Greater Manchester. Fulfilling devolution to its maximum potential would require a big downpayment from central government, including installing paid commissioners/experts and secondments from Whitehall to build institutional capacity. Local government should also draw on the expertise of universities and academics to strengthen regional strategies, creating a network of local stakeholders to help guide decision-making. Second, building political capital among regional institutions. Devolution is a coalition exercise. Mayors do not govern alone; they chair combined authorities and depend on council leaders voting with them on funding and major decisions. More fragmentation means more negotiation, more coalition-building and potentially slower decisions. Where leaders trust one another to put “place before politics”, devolution moves. Political capital cannot be legislated into existence. It is built over repeated, successful collaboration and ultimately requires the buy-in of the electorate, from both households and businesses. Then there is staged fiscal autonomy. The Treasury still controls all core funding, and authorities largely spend allocated and ring-fenced money as opposed to monies they raise themselves. Too often, devolution has been shaped by a competition for Treasury funding rather than local need. More fiscal autonomy, albeit via a staged process, would help regions successfully build their own bottom-up growth strategies, creating the right incentives to grow and build institutional capacity.  The path to delivering good devolution is sequential, not simultaneous.