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Commission says ‘Set the Cities Free’, but West Mids unlikely to head devolution queue

Commission says ‘Set the Cities Free’, but West Mids unlikely to head devolution queue

🕔22.Oct 2014

Powerful city regions run by elected mayors with tax-raising and spending powers must be at the forefront of a drive for devolution and economic growth, an influential independent think tank reports today.

The City Growth Commission puts the case for turning back decades of Westminster centralisation by empowering England’s 15 largest metro areas.

However, the report suggests that Birmingham the West Midlands is not yet ready to take on the responsibility of devolved powers and budgets.

The Commission proposes giving priority to the five Combined Authorities – Greater Manchester, Sheffield, North-east, Liverpool and South Yorkshire.

And of these, only Manchester and South Yorkshire are said to be ready to move immediately to the metro mayor model, along with London.

Metros, or super-city regions, would be able to raise local taxes and be given powers over skills and local transport as well as business rates and council tax.

Commission chairman Jim O’Neill, an economist, said he hoped devolved powers would be available to all 15 metros “through time” but it was clear that the combined authorities were best placed to be in the first phase.

The report comes at a time when council leaders across the West Midlands are grappling with the prospect of applying for combined authority status. It is widely anticipated that arrangements for a metro-style authority based on the Greater Birmingham and Solihull LEP area and the Black Country will be published before Christmas.

The City Growth Commission is urging the Government to establish an independent devolution committee from next January which would hear evidence from city regions demanding devolved powers and issue recommendations.

However, the criteria proposed for deciding which regions get devolution appears to rule out Birmingham and the West Midlands for the time being.

Successful applicants must answer these questions:

  • Has the metro an effective geography, defined by its wider functional economic area?
  • Does the metro have a strong track record of collaboration between its constituent local authorities?
  • Does the metro have a robust system of governance, enabling effective decision-making and accountable leadership and management?
  • Does the metro have a rigorous approach to risk management and has it clearly demonstrated its risk capability?
  • Has the metro demonstrated capacity to work with other metros and central government to devise and deliver regional or national projects?

As things stand the West Midlands does not have a metro authority based on its wider functional area, nor does it have a strong track record of collaboration between constituent local authorities.

Questions are bound to be asked about effective decision making. The quality of Birmingham’s governance arrangements is currently the subject of a review by a Government-appointed commissioner, Sir Bob Kerslake.

The Commission report notes: “We should be clear that the process of devolution we have described will require cities to have more robust governance, policy making and economic delivery functions in place.

“Even those who appear to be most in the vanguard will need to address these challenges to demonstrate that they are ready for substantial devolution. Critically, they will need to be prepared to share more risk with central government if they are to benefit from substantial fiscal and funding devolution.

“It seems to a majority, but not all, of commissioners that at the outset only London, Manchester and West Yorkshire may be ready to manage these risks and therefore to apply for devolved status. But this is a fast developing process, and other city metros – such as the North East – may well be ready for this very soon.”

The prizes at stake for successful city region applicants could be substantial.

It’s proposed that devolved metros would have control of a suite of tax-raising powers as well as the freedom to spend central government grants without ring fencing. This raises the prospect of areas like the West Midlands pooling all public sector budgets, creating a multi-million pound war chest.

But the Commission also sounds a warning shot: “In addition to central government devolving powers, all metros will need to raise their game, building governance, policymaking and evaluation capacity and developing their own vision for city-led growth.

“As well as ensuring robust governance structures are in place, metros will also need to improve their capacity for data analysis, working with the Office for National Statistics (ONS), local LEPs and other academic partners. They will also have to collaborate effectively within and beyond their boundaries.”

The Commission’s report begins with a reminder of the importance to the UK economy of city regions: “A new global picture of growth is taking shape. This is not about a transfer of economic power from North to South, or West to East. It is about the rise of cities, the concentration of productivity, innovation and creativity that will drive our economic future.

“Internationally, growth is increasingly driven by cities. But very few in the UK are at the forefront of the nation’s economy and all are overly dependent on top-down funding. It is clear that our centralised political economy is not fit for purpose.

“City Deals, Growth Deals and Lord Heseltine’s No Stone Unturned, report have set the course, but the challenge is to now a achieve a step change in devolution.”

Mr O’Neill said: “We didn’t expect that, significantly before our 12 months were over, all the major political parties would accept our case for bold efforts to help diverse urban areas boost their growth rates, including the devolution of some decision making powers to them.

“But as we have approached this final report, having hosted events at each of the major political parties’ annual conferences, this appears to be the case.

“Now, we hope with this report to give a further nudge towards action. As the saying goes, action speaks louder than words.”

The report states that metro mayors would be different “because they would be new types of office, with new powers, across a whole Combined Authority area”.

It adds: “In recognising devolved status for metros, the key is ensuring the quality and scale of governance is sufficient to manage the associated financial and policy risks.”

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