Jane Dudman: Does the new devolution push mean an end to short-term thinking?

There’s plenty more austerity to come – but do plans for city devolution signal a brighter future?

08 Jun 2015

“With most of the easy cuts already made, real pain is in store”. That was the headline on the Guardian’s analysis of the £13bn spending cuts that chancellor George Osborne is forcing on central government over the next five years.

Osborne and chief secretary Greg Hands have been combing through Whitehall to look for extra savings. Of course, these cuts will not be evenly spread. Spending on overseas aid, education and health is protected and if defence spending avoids having to make any real further cuts, as some commentators believe likely, the Institute for Fiscal Studies says spending in all the remaining, unprotected departments could be slashed by up to almost 19% over the next three years. By 2018-19, when the chancellor wants to see a small upturn in public sector spending, that will mean budgets will have been slashed by a third since 2010-11.

IFS deputy director Carl Emmerson says such spending cuts are not impossible to deliver. But even Emmerson acknowledges that all the efficiencies that were easy to identify and deliver have already been made. The Budget in July and the spending review later in the year will give more detail on where the axe will fall. But the £4.5bn in cuts already announced for the present year, on top of the £13bn to come, show just how serious the chancellor is about sticking to his austerity agenda.

And with that search for cuts, cuts and more cuts, attention is turning from one Greg to another – Greg Clark, the new communities and local government secretary. Clark is one of the architects of the government’s newfound enthusiasm for moving powers out of central government departments and into city regions.

The chancellor’s northern powerhouse vision is based on economic impact. He appears to have taken on board years of lobbying by city regions that they will thrive if they have greater autonomy and more power over more local spending. The most important sign of this so far was the Devo Manc deal agreed last November, which gave the 10 councils in greater Manchester control over their transport spending, a £300m housing investment fund and £500m to spend on skills. Even more impressive was the deal in February to move greater Manchester’s entire £6bn health and social care budget under local control.

But will decentralisation actually save money? Probably not, according to Julian McCrae, at the Institute for Government, who says there is little evidence of it so far. The programme, he says, is far more about building new structures to enable public leaders to deliver services in a more sensible way. Existing structures in central government just get in the way of that at the moment, he points out.

It’s also not yet clear what impact the programme will have on staff in central government, partly because it’s not yet clear just how big a project it will be. Other city regions are definitely eyeing up the greater Manchester deal, but McCrae says there are still blockages that could impede the progress of greater devolution of power into local areas. Some of these are being dismantled: powerful backing from the Treasury should help overcome the former perceived reluctance of departments to give up powers. But the structures of Whitehall do not help. This will be a challenge that will require the right type of leaders: those who understand how both central government and local government works and who can create a team to drive through big organisational and cultural changes. Should this be about creating change from the inside, or about parachuting in outsiders? The track record for those from local government coming into Whitehall is not encouraging. Lord Kerslake brought extensive local government expertise to his roles as permanent secretary at the DCLG and as head of the civil service, but he did not find the ways of Whitehall straightforward. It’s no mean feat to pull off the balancing act of working with and appreciating traditional Whitehall skills while seeking to change them and introduce radical new ideas. Ask Lord Browne, or John Manzoni.

One possible template, according to McCrae, could be London Challenge, the eight-year secondary school improvement programme. The project, which invested heavily in school leadership and was rewarded by dramatic improvements in inner city schools, was run by a tight-knit policy team of Grade 7 civil servants headed by Jon Coles.

Getting the right people in place to deliver decentralisation will be crucial, for a programme that is still, for all its high-level political backing in Westminster, fraught with challenges and contradictions.

It is not the most obvious project for a chancellor hell-bent on austerity and rolling back the state, given that there are no short-term savings on offer. Some people were also surprised that Labour-run northern metropolitan councils – councils that have endured years of savage cuts – would want to broker a deal with the chancellor. Oddly enough, amid short-term thinking everywhere else on public sector budgets, it looks like this is one area where politicians and officials alike are taking a long view.