Whitehall told to ramp up devolution efforts – or risk worsening Brexit divide
RSA says power in the UK remains "too centralised" – and urges central government to give more freedom to local authorities to tackle regional imbalances
Whitehall needs to engineer a "fundamental reset" in its relationship with local authorities or run the risk of Britain becoming "more divided outside the EU than it ever was within it", according to a major new report by the RSA think tank.
The RSA's Inclusive Growth Commission – chaired by the JP Morgan economist Stephanie Flanders – was launched last year, and aimed to bring together charities, academics, business figures and policymakers to try and confront major challenges facing the UK economy, including regional imbalances and low productivity.
The final report, published on Tuesday, says that last year's vote for Brexit exposed a "widening chasm" between those who have benefited from the current economic model and those who have been left behind, and urges a radical overhaul of central government's approach to devolution to try and close that gap.
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Backed by former chancellor George Osborne, there has been a renewed push from central government in recent years to hand more power away from Whitehall.
A series of "devolution deals" have been struck by the government and local areas, with new combined authorities including Greater Manchester gaining fresh powers in exchange for bringing in directly-elected mayors.
But while the Commission says recent devolution deals encouraged by central government have been "encouraging", it warns that power in the UK remains "too centralised", and says Whitehall cannot wait for areas to become economically self-sufficient before giving them a meaningful say on policy.
The commission says combined authorities should be given the freedom to pool budgets and commission public services for their local areas, with Whitehall stepping back to set "national standards and entitlements", rather than having a direct say in day-to-day decision-making.
"Inclusive growth needs to be a national agenda, locally designed and implemented," the report says. "To achieve this, the next phase of devolution deals must allow places to integrate social and economic policy.
"This will extend current deals beyond largely economic functions to include social policy, breaking down the ‘red lines’ that have stood in the way of places linking a comprehensive, evidence-based growth strategy with a comprehensive, evidence-based public service reform strategy."
Over the longer term, the RSA says, areas with "mature mayoral combined authority governance" should be given "full responsibility for the economic and social outcomes in their place", with new "social contracts" drawn up between city regions and central government to allow authorities to locally allocate "all public spending".
"In Greater Manchester this would amount to £20.6bn of public resource. For the six mayoral metros coming into effect from May 2017 the total amount of local public spending subject to these social contracts would be over £70bn," the authors note.
The Commission says "a new national placed-based spending review", with the Treasury no longer allocating money to "departmental siloes" but instead apportioning it directly to areas of the UK that have signed up to those social contracts, would help local leaders spend public funds in the most appropriate way.
"Key features of this new approach would be: place based accountability; horizontal service integration; commitment to specific social and economic outcomes; and multi-year finance settlements," it said.
Launching the report, Flanders – the former economics editor of the BBC – said while ministers were "beginning the grasp the seriousness of these issues", the "gap between aspiration and reality" remained wide.
"If we really are going to build a nation that 'works for everyone', then we need a reset in Whitehall and town halls which empowers all levels of government to deliver a more inclusive vision of prosperity across the UK," she said.
"Failing to do so would mean a real risk the country becomes more divided outside the EU than it ever was within it.”
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