CBI warns ‘devolution by deadline’ could hurt economy

19 Feb 15

The government will risk damaging the UK’s economic growth if it rushes to meet ‘arbitrary deadlines’ for devolution, the head of the CBI has warned.

John Cridland, the director general of the employer group, said in a speech at an IPPR North event today that businesses believed devolution to be a real opportunity, but were concerned the speed of reform and ‘rushed backroom deals’ could undermine the economic gains.

‘Our members are most interested in the point at which devolution comes into contact with business,’ Cridland said.

‘It’s important that where promises of further devolution have already been made – be that the Smith Commission in Scotland or the devolution of Corporation Tax in Northern Ireland – that these powers are delivered in order to give businesses in the devolved nations the certainty they need.’

But the precedent set for ‘devolution by deadline’ is a cause for concern, he said.

The CBI chief added that any devolution of powers such as the local authorities, as was recommended by yesterday’s Independent Commission on Local Government Finance report and the City Growth Commission, must be done in a careful, considered and transparent manner. ‘And not through rushed backroom deals between politicians and civil servants,’ he said.

The alternative, he said, would be uncertainty, complexity and increased costs for the economy.

‘Our members stressed that further devolution must be built on strong economic foundations,’ Cridland said.

He said businesses fundamentally wanted the next government to ask ‘how does devolution fit into our plans for growth’ rather than ‘how does growth fit into our plans for devolution?’

‘Business wants to see evidence that further powers will complement – not constrict – growth, jobs and investment,’ he said.

Commenting on the speech, Ed Cox, director of IPPR North, said devolving powers away from Whitehall would allow cities and regions to invest in the infrastructure, housing, skills and transport connections they need to flourish.

‘It will create a business-friendly environment which means the private sector can create more and better jobs in sectors which offer security and prosperity to all areas, not just core cities,’ Cox said.

‘The main stumbling block will be a lack of ambition and commitment from the main political parties, who must spell out in their manifestos the details of a new devolution settlement and timetable for the whole of England.’

LGA chair David Sparks added that the economic benefits of devolving powers to local areas in England were too big to ignore.

'Our current over-centralised system, which has Whitehall holding the public purse strings, is no longer fit for purpose in the 21st century,' he added.

'We can't ignore the evidence that some of our great cities and regions are being held back by being denied the sort of autonomy enjoyed by their equivalents in Europe.

'This week's report from the Independent Commission on Local Government Finance sets out a sensible and workable approach to devolution. It should be essential reading for this and the next government.'

  • Judith Ugwumadu

    Judith Ugwumadu joined Public Finance International and Public Finance online as a reporter after stints at Financial Adviser, Global Security Finance and The Sunday Express. Currently, she writes about public finance, public services and economics.

    Follow her on @JudithUgwumadu_

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