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Set big cities free from ‘stifling Whitehall shackles’, says major report

Set big cities free from ‘stifling Whitehall shackles’, says major report

🕔08.Sep 2014

A sweeping devolution programme that would see extensive tax-raising and spending powers pass from Whitehall to major cities and city regions is outlined in a major national report issued today.

The RSA City Growth Commission study into fiscal devolution argues that cities should be set free to make decisions in the best interests of their metro area.

The report warns that economic growth is being stifled by over-centralised decision making and that the political institutions of policy making, regulation and financial management “should be reconfigured away from central government towards metros”.

It says metros, as major drivers of growth, must be actively involved in national decision making particularly those that have a significant local impact such as airports and new rail lines.

According to the Commission, the UK is the most centrally-controlled system of public finance of any major OECD country with a share of only 1.7 percent of taxation attributable to sub-national government.

That limited control over taxation means that compared to their counterparts in other developed nations, UK cities disproportionately rely on central Government funding.

The report calls for a “more strategic, whole-system approach” to capitalise on every additional pound spent on infrastructure, and adds: “Metros need to be at the heart of this new approach, so that they can maximise the social and environmental productivity of their place. City leaders need also to work with one another as part of a connected UK system of cities so that the value of the UK’s system of cities is realised.”

There is also a recognition that cities and city regions need to “step up to the plate” in order to convince the Government that they are capable of dealing with additional powers.

“The reality in the UK is that our major metros lack sufficient city-region governance and  powers to implement policies in the interests of their particular economies.”

The report continues: “The City Growth Commission argues that individual cities need the freedom to operate as whole systems, making decisions in the best interests of their metro, rather than relying upon national government’s inherently centralised decisions on infrastructure investment.

“In turn, cities need to have the freedom to work together, enabling pan-regional investment for a more productive system of cities to facilitate and share in economic growth for the UK as a whole.

“The UK must learn from high-performing international competitors, which typically allow metros much greater flexibility and long-term certainty of funding.”

In its next report the Commission will argue for a broad devolution of revenue-raising powers and substantial risk transfer “to those metros able to shoulder it”.

Metros should be free to develop effective forms of tax increment financing and should have the powers to identify opportunities in the best interest of their economy and find innovative ways of financing these to meet current and future infrastructure needs, according to the Commission.

There is a warning that the cultural shift required in Whitehall and many metro governments for this to happen will be significant.

Ideas proposed by the Commission include:

  • Metros should have the power to convene relevant agencies and make planning decisions across all modes of transport, from traffic orders on local roads, to building a new railway, or closing a pathway to enable major developments to get ahead.
  • They should be free to designate housing zones, make greater use of Compulsory Purchase Order powers, create an open register of public sector land at the metro level and reclassify poor quality Green Belt and promote Green Belt swaps.

Other recommendations include:

  • Private sector swaps between metro officials and private sector experts to learn from and share expertise, especially risk management and finance.
  • Public sector swaps between local and national government officials to build expertise and experience.
  • Greater collaboration between cities, including through sharing services or creating centres of excellence to serve groups of cities in procurement.

Growth Commission chair Jim O’Neill said: “With metros taking a stronger lead, enabled by greater flexibilities and freedoms to deliver, we stand the best chance of delivering city growth for the benefit of the whole UK.

“What is ultimately critical for our metros to thrive is for each to identify what is right for them. Just as it is the case that those in Whitehall are hardly likely to know what is best for the different parts of our country, however well intentioned, it is also the case that our central recommendations may work for some cities and not for others.”

The report was welcomed by Birmingham City Council chief executive Mark Rogers: “If there’s one thing that holds back our great cities more than anything else it is our financial dependency on the Treasury.  While cities in other countries make their own decisions on how to borrow and invest, we must justify every last detail of our plans and have them signed off by Whitehall.

“The case for local freedoms and control of our own resources has been well made.  But the doubters remain in Whitehall and Westminster, so we must also demonstrate in very practical terms that we will use the freedom to deliver better outcomes.

“And there is no better place to look for that demonstration than Birmingham.

“Together with our LEP partners, we have created the largest Enterprise Zone in the country at the heart of the city.  It includes 26 sites in seven clusters capable of providing up to 700,000 square metres of new development.  Using the limited but welcome powers the government has already granted we are using income from the EZ to support key local investments.

“But we could achieve much more and make progress more quickly with stronger powers to borrow and the ability to raise other income locally.  We have demonstrated we have the ambition and the capacity to deliver.  Now is the time to set the cities free and empower them to drive local growth to a whole new level.”

 

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