Challenges and opportunities in devo deals

20 Nov 15

After months of negotiations central government has reached agreement with the Liverpool City Region and West Midlands combined authorities for the devolution of powers and funding away from Whitehall. How do these compare with devolution deals already agreed, and what are the challenges to implementation?

The West Midlands’ devolution deal has been labelled ‘the biggest devolution deal to date’ by Chancellor George Osborne. How much truth is there in that? On paper the deal is generous: an annual government funding contribution of £36.5m over 30 years to support an £8bn overall investment package. Gone is the old integrated transport authority, replaced by combined authority powers over strategic transport planning. The new directly-elected mayor will have oversight over the transport budget and bus network and power to introduce a smart ticketing system for use across the whole network. Significant powers have been transferred from the Homes and Communities Agency to allow the mayor to encourage housing development. And the authority as a whole will have powers over adult skills training (although details of what specific powers are yet to be decided), mental health provision and powers to integrate investment, trade and export strategies from constituent authorities. It will also have a greater say over the High Speed 2 project, accompanied by a new enterprise zones and funding streams for Metro extensions to kick-start the growth strategy planned around the new line.

It’s a similar story in the Liverpool City Region, although there are differences. Whereas the West Midlands will receive £36.5m a year from government for growth investment Liverpool can expect £30m, although it is eligible for €220m of European Regional Development and Social Funds that the West Midlands may otherwise miss out on. The mayor will have greater powers over housing, including the power to develop a single statutory city region development framework and form a Development Corporation to act as a planning authority in its own right in growth sites.

How do these compare to the agreements with Greater Manchester, the most established combined authority? There are a number of important differences between the deals that mean that in many respects Greater Manchester is better resourced and empowered. For example, Manchester has an ‘earn-back’ scheme that allows is to retain its share of business rate growth going forward and, significantly, has control over the region’s £6bn NHS budget (with a view to stimulating better integration with social care) and has more control over police, fire and rescue budgets and operations. 

In some ways that’s the point of devolution: there is no blueprint. What a region gets depends on local needs, how convincing a case is made and the level of confidence central government has in the governance arrangements in place. Seen in that way, flexibility is an asset. But, the resilience of a combined authority is a product of its internal coherence, so a lot depends on how well the authority can speak with a common voice and share common goals. Without this there is a risk that internal party-political or identity-based disputes will flare up. Many of the powers devolved in these arrangements are subject to periodic reviews; if the government considers an authority to be underperforming then it may well seek to renegotiate the devo deal. Conversely, though, if it performing well greater devolution of powers and funding seems likely.

The mayors will have an important role to play in fostering this kind of cohesion, but this brings its own challenges. Voters in Birmingham rejected the idea of a directly elected mayor in a 2012 referendum, raising question marks about the level of legitimacy the new mayor for the West Midlands will be able to garner in the city (in terms of electoral turnout, for instance). Although Liverpool City Council already has a directly elected mayor the other constituent local councils in the authority do not, raising similar concerns. In both cases there are issues in terms of how well the new mayors will work with existing council leaders (particularly those from opposing political parties) and chief executives. More importantly, what happens when things go wrong?  It’s likely that the mayor will get the blame, even if it was an issue that was out of his or her hands. If this is the case there is a danger that the stability of the combined authority arrangement will falter. Let’s also not forget that central government does retain ultimate control over combined authorities though funding streams. Whilst it has devolved much power, much of the funding underpinning those powers can be revised both up and down.

Nevertheless, combined authorities present opportunities for local areas to work strategically on the kind of cross-border issues that drive economic growth and prosperity: skills training, transport and infrastructure planning, housing provision and health and social care. At the same time though they are a novel institutional arrangement that has little precedent from which we can draw both inspiration and guidance. The former Metropolitan County Council arrangements give us some direction, but we are dealing with a very different context and different proposed governance arrangements. Given the scope of the ambition underpinning the devolution agenda and the scale of their powers we must think and critically to foresee any pitfalls as best we can or else undermine our city regions' growth prospects.

  • Max Lempriere is a doctoral researcher at the Institute for Local Government Studies
    Max Lempriere
    Max Lempriere is a doctoral researcher at the Institute for Local Government Studies

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