By Richard Johnstone | 11 February 2014
Fundamental changes are needed to the funding of local government to allow cities across the UK to reach their growth potential, a commission examining the future of urban areas has said.
The first report of the Royal Society of Arts’ City Growth Commission, which was established last October, stated that cities are now at the centre of economic growth prospects across the world.
Its Metro growth report concluded UK cities have the potential to raise economic productivity and boost the long-term growth of the national economy if they are given greater freedoms.
Increased devolution to city regions would also lead to greater fiscal sustainability at a local and national level, the report highlighted, as rising demand for services like social care, health, and education can be better managed.
After holding its first evidence session in Manchester today, the commission – chaired by Jim O’Neill, retiring chair of Goldman Sachs Asset Management – set out the three areas it will examine in its final report in October 2014. These are: skills and labour markets; infrastructure; and fiscal and policy devolution, including what is needed to give city-based governance ‘tangible, democratically sustainable authority’.
Moves by the government towards local decision-making and investment through Local Enterprise Partnerships and City Deals represent only a small step forward, the report stated.
‘In enabling cities to have more fiscal and political autonomy, there is a need to ask what role if any central government plays in directing strategic investment and redistributing wealth,’ the report added. ‘Structural changes to the UK’s political economy and fiscal settlement are needed at three scales: within metros, between metros, and between regions.’
The commission will consider how decentralisation of funding, functions and economic development powers would allow local policies and investment to be more sensitive to local economies and communities.
‘This would involve a transformation of Whitehall, Westminster, local government and the range of associated organisations, including LEPs, public service providers, universities and civil society organisations,’ the report highlighted.
‘Devolution to metros is ultimately designed to allow places to become more economically and financially sustainable. With increased fiscal autonomy cities will need to accept that the risk of exceeding budget constraints would need to be met locally rather than by central government.’
