Devolution: The structural and economic challenges

A white paper on devolution and the potential reconfiguration of local government in England is on the way. Paul Dossett explores the risks and opportunities.

While the local government sector continues to manage a myriad of challenges, heightened by the ongoing impact of COVID-19, we have been told that the pandemic will not thwart the government’s renewed plans for devolution in England, as part of its wider “levelling up” agenda. The pandemic has shown that, while the initial emergency response required national oversight, local insight and capacity led by local government has a vital role to play in relation to public health and economic recovery.

When reconfirming the government’s plans to publish a white paper in the autumn on devolution and local recovery, local government minister, Simon Clarke, stated that the white paper will align local recovery to levelling up the country’s local economies.

Bad timing

Clarke’s speech at the Local Government Association’s (LGA) annual conference last month, strongly suggested that devolution will come with reorganisation strings attached, indicating that there will be “many more elected mayors and more unitary councils following in the footsteps of Dorset, Buckinghamshire and Northamptonshire”, and there will be a reduction in “the complexity of governance”. Costs will also be reduced.

Some may think that re-igniting the devolution and reorganisation debate while councils are still dealing with the consequences of a global pandemic is bad timing, given the time, energy and cost that will be required to respond effectively to the agenda. But for councils in localities in England which don’t yet have a devolution deal, the white paper will be impossible to ignore.

While there may be different views on the appropriateness of the timing, many are likely to agree that a place-based, rather than centralised, national response to economic recovery has to be the right approach now, and for any future pandemics.

Covid-19 has affected all parts of the country and our latest research found that the impact plays out very differently across different demographics and geographies. Inequality—particularly spatial—has become a central tenet of the debate around the impact of Covid-19, as well as how the country recovers from it. How particular vulnerabilities are managed and mitigated, and economic opportunities maximized, will look very different across the country.

Models

We do not yet know the detail of what will be included in the white paper, but this hasn’t stopped planning in many places; in some cases dusting off plans that were shelved when English devolution was at its former high point, in the era of chancellor George Osborne in 2015-2016.

There has been a broad spectrum of devolution and local government reorganisation models implemented across England, providing critical learning behind what works and what has been less effective, making it clear that there cannot be a “one-size-fits-all” approach.

Previous examples have demonstrated that economies of scale can be achieved through reorganisation, where original business cases have been successfully implemented.

Such savings and efficiencies could be even more critical given the impact of Covid-19 on many councils’ financial sustainability. However, there are also potential diseconomies of scale to consider, such as county-wide services being shared to more than one new council, and the creation of a new tier of local government in a combined authority.

There will be much debate on population sizes, the need for democratically elected mayors and combined authorities, and the shape, form and governance of councils within devolution geographies.

It’s critical that the government clarifies these issues, in particular whether there will be an upper population size limit for a workable model for a unitary council. The white paper should also clarify what level of local consensus is required for a devolution proposal to be accepted by government. Recent history indicates that there may be areas with entrenched differences or contested geographies that could inhibit devolution deals being made.

Strategic

Thought also needs to be given to both the scale and nature of any new authorities. If they do not have the right scale in relation to economic geography it will be challenging for them to act strategically, and their capacity and capability to drive place-based growth will be limited.

The challenge will be to ensure that any new administrative boundaries do not concentrate economic challenges or opportunities, nor introduce additional complexity that will impact the authorities’ ability to deliver structural reform and support the immediate economic recovery at pace.

Without careful consideration and analysis of this issue, place-based inequalities could actually increase, and the recovery be slowed. Therefore, reorganisation to the right economic scale is essential

Ultimately, devolution will only progress—assuming change is not centrally imposed—if there is a collaborative mindset, the sector builds on the collaboration that undoubtedly already exists, open lines of communication between leaders, and a willingness to invest time and effort in building a shared vision for the success of places.

Paul Dossett is head of local government at Grant Thornton.