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25.04.17

Maintaining the momentum for further devolution

Source: PSE Apr/May 17

Ahead of this year’s mayoral elections, Lord Kerslake, the former head of the Civil Service, tells PSE’s David Stevenson why the arguments for devolution remain as compelling as they always have.

In February, Lord Kerslake published his independent review of the Treasury to consider how it should work to promote and manage more sustainable growth in a fairer and more equal society. 

Commissioned by the shadow chancellor, the report’s independent panel stated that the UK would “benefit from much greater devolution of power away from Whitehall”. 

It added that, at times, the Treasury, which is a small department by Whitehall standards but wields immense power, had been the “resolute blocker of such devolution, at others, such as in the city devolution deals, its enabler, albeit within a framework specified by the Treasury”. 

Does the appetite remain for devolution? 

Speaking to PSE after the report’s publication, Lord Kerslake said there were two key recommendations he stands by: that part of Treasury’s mandate should include a specific responsibility to promote greater fiscal devolution to both the devolved nations and within England on the basis of clear goals, and that there is a dedicated team within the Treasury who moves it forward. 

However, in the run-up to this year’s six mayoral elections, he said “there is a question mark about the government’s appetite for further devolution”. 

“The existing deals that were moving along seem to have concluded, with six reaching the point of elections for mayors,” reflected the LGA’s president. 

“That is, in itself, quite an achievement. But one senses that it will be this lot, and perhaps not many more. And still there is the question mark of those that have fallen by the wayside, like Leeds and the north east, and whether they can be resurrected. There is also the question whether any other deals, above and beyond those, will happen.” 

Changing of the guard and Brexit 

A firm advocate of devolution, Lord Kerslake said that when the DCLG was under Greg Clark’s leadership many cities and areas were invited to come forward with devolution proposals.

 “Cities were always going to come first, but I think people had hopes and expectations that others would come after. That doesn’t look so likely now,” he explained.

“My personal view on this is there is a question mark about the government’s appetite for more devolution. Has the deal-based model reached the end of its useful life? Does the next wave of devolution have to look at the issue in a different way, and in particular look at a more comprehensive approach to devolution, particularly including fiscal devolution?” 

While the argument for devolution remains as compelling as it ever has, noted Lord Kerslake, other big priorities, like Brexit, are impinging on government’s time. 

“Brexit is huge,” he reflected. “It is difficult for anyone who isn’t seeing this from government to understand the scale of impact that Brexit is having. It is dominating life in Parliament, dominating life in government and some of the real challenges for government are to find the space to do other things to move other agendas along. That is not just a point about Civil Service capacity, it is also about political capacity as well. 

“There are two risks for government: one is that it doesn’t give enough time to urgent issues that will come back to bite them, and that includes health and social care. The second issue for them is that they are unable to find the space to actively promote their own policy agenda. Both are quite big risks in the light of Brexit at the moment.” 

Looking back over the past 12 months, Lord Kerslake discussed how the changing of the guard in certain departments has slowed devolution down: “You lost [George] Osborne who was a very powerful champion and, who, personally, moved forward the Manchester agenda. You have also lost Jim O’Neill, which is often forgotten, but he was a very powerful advocate of the Northern Powerhouse and, therefore, the devolution deals. 

“You haven’t really replaced either of those two, within the Treasury context, I don’t think. Therefore, the task falls to DCLG. While there is an appetite to move devolution forward, one senses that the big driving ambition that was there before isn’t as strong – that is my sense.”

898 Whitehall, Treasury, Civil Service edit

Fiscal devolution and local government funding 

Fiscal devolution, which was a key issue raised in the recent Treasury review, is a matter that Lord Kerslake believes needs to be debated in much greater detail.

 “There is a risk that the Bill which is coming through, the Local Government Finance Bill 2016-17, is seen in rather technical terms where, really, there needs to be a bigger debate about the future of local government and its funding,” he argued. 

“I was very much a supporter of business rates retention and moving that on, as one step towards the future of fiscal devolution. But I would never see it as the completion of the journey. Partly that is because there are some significant challenges with business rates, which have come to the fore with business rates revaluation.” 

The former CEO of Sheffield City Council added that one of the risks to business rates is that it becomes a tax that is very hard to increase, or stops being a buoyant tax. 

“As part of this bigger picture debate about the role of local government and how it should be funded, there should be a continuing conversation about sources of income. For instance, we should look again at whether sales tax works, and the assigned income model. These all need to be part of a bigger debate,” he stated. 

“The Housing White Paper also had a lot of good things in it, but the bit that was underpowered was the role of local authorities in direct development – that could have been stronger. In particular, lifting the caps on borrowing.” 

Whilst Lord Kerslake’s review concluded that a total break-up of the Treasury would not be necessary, as “such a reorganisation outweighed the benefits”, it argued that “we do not need an overweening” department. 

“I do hope that the Treasury, and others, look at the specific recommendations and move forward on some of them,” he said, adding that the momentum for devolution, especially greater fiscal responsibility, must not be lost as the arguments for it remain as compelling as they always have.

For more information

Lord Kerslake’s Treasury review can be accessed at:

W: www.kerslakereview.co.uk

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