Preparing for devolution to England’s city regions - EY report

George Osborne has made the process of handing down more responsibilities to English city regions one of his central priorities as part of his 'Northern Powerhouse' project.

So far eight devolution deals have been agreed, with dozens more submissions made to the Government.

Today’s EY report notes that devolution is not in itself an innovative idea, but argues the UK has “entered a new era” in the wake of the deal agreed with Greater Manchester, which will give the region more power over healthcare, transport and other policy areas currently administered by central government.

From Whitehall to Townhall: Preparing for devolution to England’s city regions outlines the factors that have driven success in winning more powers and speculates on the long-term impact on local government. 

The report also identifies a number of challenges that local and central government must consider as the devolution agenda progresses.

They are:

• Clearly outlining the boundaries of political and administrative competence between different local authorities. “Whether it be Leeds and Bradford in West Yorkshire, or Newcastle, Sunderland and Gateshead in the North East, the absence of a settled understanding of the distribution of power in an area is likely to hinder decision-making,” the report says.

• Ending “traditional rivalries” between neighbouring local authorities to work together in city regions.

• The need for the new city region authorities to represent various interests – including local businesses, universities, public sector organisations – despite having “no direct mandate to represent them”.

• Developing relationships with central government and dealing with the concern that the “civil service itself simply isn’t geared to provide a tailor-made solution” for every city region seeking additional powers. “Different departments have been unable to cope with the sheer volume of work that is needed to respond to all the proposals submitted,” the report argues. It adds, however, that some city regions need to accept that the first deal will be a “stepping-stone to something more coherent and deep-rooted”.

• A greater evidence base from city regions about how certain powers would help their local areas and a “clear sense of the outcomes they want to achieve”.

• Improved governance and transparency to reflect the increased responsibilities of city regions.

• Ensuring authorities’ capabilities increase sufficiently to meet the new demands. “Many authorities will find it challenging to devote sufficient resources to manage devolved funding and responsibilities effectively, particularly given the lack of government funding available to support additional management capacity,” it says.

• “More innovative funding mechanisms” to ensure local authorities and city regions can cope with central government cuts.

The report also highlights the fact that there is a risk of failed devolution resulting in “power taken back by the central government”.

EY suggests councils have more to lose from the plans than the Government. “If it doesn’t work, it will be seen as local government’s failure. If it succeeds, it will not only reflect well on both local and central government, but also provide a historic chance to secure a long-term devolution settlement for English cities.” However, it is clear that the agenda also could have “considerable” value for local government.

“The recent progress is testament to the credibility that local government has established — with both the government and the public — as local leaders with a vision for local economies and wise stewards of public funds,” said Darra Singh, EY’s local public sector leader. 

“The UK is at an early stage of the devolution journey; much work still needs to be done. But the prize could be considerable. If managed well, it could help stimulate local economies to achieve higher levels of job creation and growth; improve public service outcomes through better local coordination of resources and funding; revitalise local democracy through more accountable governance; and improve the sustainability of public finances.”