Devolution – it’s what we make of it: coins and piggy banks

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Inside Government held their event – ‘The next steps for devolution: Delivering growth across the Midlands’ – in Birmingham on 19th October 2016. City-REDI’s Professor Simon Collinson was there chairing the event along with Tasos Kitsos who has shared his reflections from the day.

A lot of very interesting speakers and a vibrant list of high profile attendees contributed to a very informative event overall. This is a wrap up of the day which tries to capture the key points to shape future discussions about devolution for the West Midlands Combined Authority (WMCA). A few of the presenters talked about the opportunities and challenges of this process as the two sides of a coin. This post will build on this parallelism with a format that looks a lot like a Strengths Weaknesses Opportunities and Threats (SWOT) analysis.

The first coin for the WMCA devolution had productivity growth on one side and public sector reform on the other. For increasing productivity, the WMCA and Midlands Engine are well positioned with significant opportunities to grow. A strong manufacturing sector focused on advanced, high value production processes; the largest share of developable land in the country and the focus on upgrading skills; coupled with the construction of HS2 and an integrated strategy for connectivity in the network are the foundations of optimism for productivity growth in the region.

However, the other side of the coin reveals both a weakness and a challenge. The phrase “public sector reform” is a very gentle way of describing the £3.5-4 billion gap between the revenues and expenditure that local authorities need to deliver services in the area. At the same time though, public sector reform appears to be part of the solution. A lot of careful and joined-up thinking as well as partnership working will be needed to tackle this issue if the combined authority is to deliver balanced books and remove this drag from the productivity-growth link.

Continuing our SWOT analysis, opportunity is on the face of our second coin. The devolution process is a field of opportunity to change how we do things. The challenge of devolution requires us to leap forward in our partnership working. I was surprised not just by the number of new partnerships but also by their effectiveness in driving things forward at such a short time. It is not every day you see stakeholders putting aside short-term wins for the long-term betterment of the area and this is very refreshing.

Turning our coin around reveals the threats of this process. Devolution is a sea of uncharted waters filled with confusion and uncertainty, especially in relation to Brexit and its impact, as well as the devo 2 and 3 deals in the future. Among the forum speakers, there was a lack of clarity for the future of fiscal devolution and what the next steps look like. Good will, a step by step approach and mutual understanding will go a long way in mitigating uncertainty but are unlikely to address the main culprit which is the lack of data and research.

It was clear during the event that we have little understanding of both the available data and more importantly on the relationship between them. There seems to be a distinct need for a comprehensive database with information for the WMCA, going from the neighbourhood to the regional level. Once this is in place, research is needed on the relationships between them which will lead to a better understanding of how the region operates. What is the relationship between productivity and employment growth? What sort of skills will increase the region’s output the most? Which taxes are the most appropriate to devolve to the WMCA? There is a need to get these questions right and our research here @CityREDI contributes exactly to this cause.

Now that we have our coins, we need a piggy bank. The piggy bank is inclusivity. What I missed in the event was an explicit discussion on addressing inequalities. Understandably, most of the speakers involved spoke about the burning issues on how to increase wealth in the area and close our productivity gap with the rest of the country. The Land Commission, Productivity and Skills Commission and Mental Health Commission are all good and in place. However, unless we address inclusivity concerns from the beginning, our piggy bank will remain small. And you can’t significantly improve lives when growth is not inclusive. My opinion is that we need to signal the intention to reduce inequalities and better distribute the benefits of growth, and this must be addressed by the Productivity Commission and not carried out in isolation. Inclusivity will also decrease the demand for care and health services and help bridge the £3.5-4bn gap in finances.

To sum up, there are a lot of challenges involved in devolution, a lot to be done and a lot that has been done. There is an abundance of opportunities and energy to do things better and work together in a new way. It’s a treacherous path but the reward is definitely worth it. The outcome of this process depends on us and how we will manage these processes. This is why devolution is what we make of it – and it should include all of us.

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