Can Andy Burnham’s devolution plan actually bear fruit?
Is the UK too centralised and will devolution help?
Devolution has long created separate administrations for Scotland, Wales and Northern Ireland, rather creating the illusion that the British state must be a quasi-federal one. But the whole of England – 85% of the UK’s population – remains governed by Whitehall. Westminster decides everything, says The Economist, from the sums that local authorities can charge for planning applications to how long the tinkling of ice-cream vans may go on. Local and regional taxes account for less than 2% of GDP, much lower than in peer nations.
It wasn’t always this way. In the 19th century, the great cities were beacons of civic pride and municipal power. But the post-war centralisation of the state has turned us into a country where the phrase “postcode lottery” is used to describe the supposedly “horrifying prospect” of public services differing from place to place.
Voices from across the political spectrum have long argued that decentralising power would help build a more effective and responsive state, and spur growth. The basic argument is that regional leaders are better placed to understand their economies and public services – and can join up policies across transport, housing, skills and employment.
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What is Labour doing?
The government under Keir Starmer had already made a start on devolution with the English Devolution and Community Empowerment Act, which came into force in April this year. The Act establishes a framework for shifting powers out of Whitehall by creating elected strategic authorities, expanding local mayoral powers and establishing a Community Right to Buy, giving localities a “true right of first refusal” for Assets of Community Value.
The Act also beefs up the Local Audit Office, in charge of monitoring the local council’s finances. The underlying presumption is that devolution will become a default constitutional arrangement, rather than something individual councils negotiate with ministers on a case-by-case basis.
What has Andy Burnham added?
The new prime minister has announced plans to go further. In March, the then chancellor, Rachel Reeves, announced that the Treasury would develop a fiscal devolution road map and consider giving regional leaders control over a share of national taxes. Burnham has now confirmed that this will happen, with mayors (and perhaps also other local authorities) being handed a slice of regional income-tax receipts from 2028, in place of central grants.
Details of the plan will be unveiled in the Budget on 28 October and a new devolution White Paper (draft legislation) will be published this autumn. This will build on a new blueprint called “The New Model of Government”, which takes the existing settlement further, and gives local leaders even “greater power to shape their places through control over local transport, housing, innovation, local energy and cultural investment”.
Is this good news?
Potentially, yes. Burnham’s diagnosis of “the link between centralisation and poor local performance is almost certainly right”, says The Economist, and local and regional governments must be given a better incentive to drive their own growth, rather than beg for bigger handouts. For that, more fiscal devolution is needed – devolution of spending powers, if not, at first, tax-raising powers – and income tax is the obvious choice.
The sums won’t be large at first: the Centre for Cities think tank estimates that around 2% of income tax raised locally is enough, on average, to replace the grants that existing mayors receive. But it’s an important move in the right direction and means that if a place can create more and better-paying jobs, it will directly reap the benefits via higher tax revenues. Burnham’s plans are a welcome first step, agrees Robert Colvile in The Times. Naturally, however, there are some big question marks and caveats.
The challenges to devolution
Most crucially, devolving finance will mean nothing while councils’ budgets are dominated by “the frightful four” spending liabilities of adult social care, temporary accommodation, children’s services and school transport. “These are services that councils are legally obliged to provide, but haven’t been given the money to pay for, meaning they’ve squeezed out everything else.”
Second, there’s no point in devolving power if it’s only the power to do what Labour wants. Burnham’s first policy announcements on capping bus fares across England and offering more favourable tax arrangements to pubs and clubs at the expense of “what he deemed ‘anti-social business’”, such as vape shops, signal a very top-down kind of local politics.
What’s needed is devolution that lets places keep the fruits of their success and allows for competition between regions. Labour’s instincts will be to “enforce equality of outcomes via all the levers available to it”.
Is there any hope of genuine change with devolution?
There’s certainly a risk that devolution is “oversold as the answer to everything”, says Sam Freedman on Substack. In reality, it is likely to be a slow process and there will necessarily be trade-offs and problems along the way. Local authorities have been eviscerated since the 1980s, meaning that devolving too much power too quickly would be unwise; “much of the initial focus will need to be on capacity building”.
Currently, when powers are devolved to mayors, Whitehall retains responsibility for the approximately 50% of England (by population) that does not have one. So there’s much work to do in terms of strengthening local authorities and building new structures.
For devolution to work, many similar trade-offs will “need to be balanced right – between speed and sustainability; autonomy and national consistency; freedom and accountability; neatness and historical identity; equality and incentives to grow”. Devolution promises to be the defining issue of Burnham’s premiership, but there’s a long and hard road ahead.
This article was first published in MoneyWeek’s magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
