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22.10.14

Devolving powers to cities will boost UK growth

Devolution of tax, planning and transport powers from Whitehall to the 15 largest UK cities could boost economic output by £79bn a year, according to a new report from the City Growth Commission.

The report says that ‘Devo Met’ should run parallel to ‘Devo Max’ for Scotland and calls for draft legislation to be in place by January.

Ben Lucas, chair of public services at RSA and a member of the City Growth Commission, said: “With Devo Max being negotiated for Scotland, we need to see Devo Met for our British cities on a similar timescale. In a world in which cities are the new drivers of growth, decentralising our political economy will boost GDP and enable our major metros to achieve their social and economic potential.”

Published today, the City Growth Commission report – ‘Unleashing Metro Growth’ – encourages metropolitan areas to collaborate to form regional powerhouses in the midlands, north and north east and suggests the introduction of an ‘Oyster card for the north’ to encourage greater connectivity.

It concludes that by 2030, devolution has the potential to boost economic output in the UK’s 15 largest metros by £79bn per year – worth approximately 5% of current GDP.

“There needs to be a radical reshaping of the UK’s political economy, with our metros given sufficient decision-making powers and financial flexibilities in order to become financially self-sustainable,” it said.

The commission, chaired by economist Jim O’Neill, also concluded that the current national approach to both skills training and immigration is failing cities across the UK that struggle to find highly-skilled talent. They call for skills funding to be the responsibility of city-regions, enabling metros to target skills training with the jobs they aim to create. Metros should administer Adult Skills Budgets with advice provided by Local Economic Partnerships, the report concluded.

It suggests metros take on strategic planning authority powers, aggregating up decision-making to Combined Authorities to coordinate investment across the city-region. This should allow for cities to align housing and transport development across their travel to work area and would follow a similar model to that between London Boroughs and the Greater London Authority.

It also says planning at the metro level will allow authorities to make it easier to reclassify poor quality Green Belt and promote Green Belt swaps, engaging with local people to create buy-in for more flexible arrangements for enhancing economic, social and environmental value.

Local government minister Kris Hopkins agreed with the idea of devolving power to the lowest appropriate level but was critical of many proposals in the report.

“Many of these proposals in this report are poorly thought out – such as local immigration policies, which would clearly not work given councils don’t have their own border patrols,” he said. “We have no plans to undermine national Green Belt protection, which continues to play an important role in protecting against urban sprawl.”

When considering who should get devolved powers the report suggests that the metros with the most robust governance structures, which have a track record of delivery and risk management, should be considered for ‘Devolved City Status’. This would grant the same consultation rights as the Devolved Administrations within Whitehall decision-making and UK government structure.

It says the powers and responsibilities it receives should be negotiated between the city-region and the government but examples of what they might include are greater flexibility of capital reserves and borrowing; the freedom to raise and retain a suite of taxes and the freedom to spend grants without ring-fencing.

O’Neill said: “The ambitious goal of the Commission was to think of specific recommendations to boost the trend growth rate of the UK economy. We conclude that bolder efforts to improve our infrastructure, both digitally but especially physically, are crucial for creating agglomeration. As I have become fond of saying, greater connectivity between ‘ManSheffLeedsPool’ and this seven million person region could start to see the level of scale we need for change.

“We argue all 15 metro areas should be able to take on different packages of devolved powers over time, and there’s no reason why other places could not come together to take on policy and budget flexibilities too. The current five metro areas that have Combined Authorities seem to be the best placed, along with London for warranting earlier steps towards full ‘Devolved Status’.”

Jeremy Blackburn, head of policy and parliamentary affairs at the Royal Institution of Chartered Surveyors agreed with the need for devolution to metro areas in the north.

“Creating a strong and globally competitive ‘system of cities’, particularly across the North and Midlands, is essential to rebalancing the economy. Transport and communications connectivity is what will help us do that, so cities need genuine control of priority setting for this, not a national infrastructure plan which puts them on a wishlist,” he said.

The Local Government Association welcomed the report, saying it confirmed that the benefits of devolving powers to local areas in England are too big to ignore.

LGA chair Cllr David Sparks said: "Our current over-centralised system, which has Whitehall holding the public purse strings, is no longer fit for purpose in the 21st century. This report highlights the extent to which some of our great cities are being held back by being denied the sort of autonomy enjoyed by equivalent European cities.

"The huge economic benefits of devolution identified by the Cities Growth Commission are likely to be just the tip of the iceberg. Devolution to cities should be the start of a much bigger and wider process of devolution for the whole of England.”

Chancellor George Osborne said: “I warmly welcome the overall report. It makes a strong contribution to delivering the northern powerhouse I am determined to build.

“The commission recognises that, for cities to be successful, they need directly elected mayors, combined with real power and to be better connected both physically and digitally.”

(Image: Liverpool skyline c. First Name Last Name)

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