Devolution in England is turning into one of the biggest challenges for Whitehall as well as for local authorities. For the past half century, central government, and particularly the Treasury, has mainly been taking powers back from, or limiting the financial freedom of, local government. There has often been talk of localism, even the dread phase “earned autonomy”, but both the scale and complexity of the latest initiatives are different, at least in intention.
For the last 18 months we have seen an outpouring of proposals under the devolution umbrella – though they might more accurately be described as decentralisation, since they are unlike the devolution of law-making powers to Scotland, Wales and Northern Ireland. The Northern Powerhouse title showed that the initial focus was on the big industrial cities of northern England with the aim of stimulating growth to tackle the north-south divide. This has broadened out since last year’s general election to an offer of devolution deals to cities willing to adopt directly elected mayors, including non-metropolitan areas – with Cornwall in the lead. The Treasury has also announced proposals to abolish the uniform business rate and phase in total business rate retention to local authorities by the end of the parliament.
The process is not straightforward, as my Institute for Government colleagues Joe Randall and Jo Casebourne have pointed out in a recent paper, Making devolution deals work. They have identified a number of challenges.
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First, the current procedures are opaque. Many local areas have not understood what they could and couldn’t bid for. This is one result of ministers’ view of a deal-making process that should start with what local areas want. Yet there are unspoken expectations and limits on the scope for flexibility.
Second, the timelines for the post-election devolution deals have been very compressed and there is uncertainty about future timing.
Third, historically weak centre-local relations have put sustainable devolution at risk. As is true in a UK-wide context, Whitehall is not always adept at understanding what is happening on the ground, or how to deal with asymmetric distributions of power and authority. The devolution deals will inevitably lead to greater asymmetry, substantially reducing central government’s authority and involvement in many areas, though not others. It is likely to be a patchwork.
Fourth, it is not clear who in Whitehall will lead the devolution programme in the medium and long term. The political lead of George Osborne, the chancellor, and the involvement of the Treasury has been essential in achieving the devolution deals to date. But the Spending Review settlements are the start of the process, not the end, and the Treasury needs to stay involved in the implementation phase, or else there is the risk that agreements will become watered down and ineffective. The Department for Communities and Local Government obviously has a crucial role, but the Treasury has the clout to unblock difficulties within Whitehall.
The report set out a guide to making deals effective, turning on the need for greater clarity and understanding at both a central and local level at each stage. It is never going to be simple, but the variable geometry of English devolution with each package being negotiated separately has both pluses and minuses. For ministers this avoids the top-down approach of Labour’s various regional government initiatives. But it may make it much harder to ensure coherence of public services between areas.
More broadly, the Randall-Casebourne report identifies the need for civil servants themselves to adapt their ways of thinking and working. Whitehall should have enhanced capacity and clear structures to manage central-local relations, offsetting the reduction in direct channels resulting from the abolition of the government regional offices. Civil servants will also need to have a better understanding of how policy differentially impacts upon areas with varying devolution settlements. There are positive examples from devolution within the UK: for instance HMRC is helping Revenue Scotland develop the capacity needed to administer Scotland-only property and similar taxes.
English devolution is a journey without a clear destination – producing a long overdue rebalancing of power, but within continuing tight financial constraints.
The much-discussed English dimension is still being considered in Whitehall separately from what is happening elsewhere in the UK. Officials in central government dealing with Scotland and Wales, and constitutional policy generally, now work together in a UK Governance Group in the Cabinet Office, but England is left out. But as Philip Rycroft, now second permanent secretary in charge of this group, recently wrote in a blog, there is an urgent, and increasing, need across the civil service to “get” devolution, since the changes now under way are having far-reaching effects on how Whitehall works.