How England’s Devolution Catch-22 Stands in the Way of Balanced Growth

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Charlotte Hoole, Jack Newman and Simon Collinson discuss their recent paper that shows a lack of decentralisation is limiting the capacity and capability of local institutions to devise and implement growth and development strategies important for locally-driven ‘levelling-up’ in England.

In recent years, the UK has experienced increased economic and social inequalities. Of particular concern for the country’s future economic fortunes, there has been a marked growth in interregional imbalances, with rising geographical inequalities in both the capacity for wealth-creation and the distribution of the benefits of economic activity.

The Pandemic

The Covid-19 pandemic accelerated these inequalities and revealed strengths and weaknesses in the resilience of existing institutional and decision-making structures. Agile responses to the health and economic impacts of such crises are seen partly to rely on targeted interventions at the local level. Devolved funding and decision-making and strengthening local institutions should therefore be a key focus of attention for policymakers. This can help the rebalancing or ‘levelling-up’ the economy, and more immediately improve resilience in the face of economic shocks.

However, there are particularities of the UK’s governance system, especially within England, that have significantly limited the devolution process and by extension the capacity for targeted local interventions. Our analysis of the existing data shows that the UK is highly centralised by international standards, and is regionally unequal in terms of pay, productivity, and deprivation. We then go a step further, using qualitative interview analysis to identify the hurdles faced by local institutions as they attempt to develop their local economy and petition central government for more powers and funding.

We consider devolution in relation to three specific components of governance:

  1. Distribution: the distribution of public investment (such as in infrastructure, research and development (R&D) and other endowments which underpin regional growth).
  2. Decision-making: the allocation of decision-making power over resource appropriation (e.g. tax-raising) and resource allocation (spending and investment) as central indicators of devolution.
  3. Institutional quality: the level of investment and resources to support the capacity and capability of local institutions to develop locally appropriate growth strategies and to target and deliver effective interventions.

Crucially, the lack of decentralisation of these three components in England creates a Catch-22 for local institutions. That is, a set of circumstances whereby English regions need to evidence capacity and capability to gain devolved resources and powers, but without devolved resources and powers, they cannot develop the required capacity and capability to develop their strategies and demonstrate their ability to manage devolved funding and increased responsibility.

 Catch 22

This Catch-22 is a cyclical, path-dependent, legacy problem which is undermining attempts to reduce regional inequalities across England, with significant socio-economic and political implications. It is a problem that arises because of two features of the UK’s political system.

Firstly, because subnational institutions lack constitutional protection within the UK’s uncodified system of parliamentary sovereignty, their powers and responsibilities are the product of perennial central-local negotiation. This includes primary and secondary legislation and official negotiations over ‘devolution deals’ but also the informal negotiation of a range of other relationships and power balances.

Secondly, because the UK generally, and England specifically, has an asymmetric model of devolution, it contains a patchwork of different institutions with different interests and different relations with the centre. This limits the capacity of subnational governments to act as a single bloc in their attempts to secure investment and decision-making powers from the centre. While some collaborative petitioning of central government does occur, the variation between institutions inhibits the emergence of any constitutional norms or conventions protecting the rights of England’s subnational institutions.

Our Paper

In our paper on England’s Catch-22, we consider the context, functioning, and implications of the Catch-22 in the English context, but also highlight this as a potential problem for other countries that pursue an ad hoc asymmetric approach to devolution. These issues sit at an increasingly important nexus between institutions, powers and competency, on the one hand, and the regional competitiveness agenda and ‘levelling-up’, on the other.

Delivering on the levelling up agenda – reducing regional economic and social inequalities – is dependent on local and regional interventions in ‘left-behind’ places. This, in turn, depends on an integrated, systemic approach to understanding regional disadvantage, which requires subnational institutions with the capacities and capabilities to intervene strategically in their local economies. However, we argue that barriers to developing quality institutions include the lack of decentralisation of the three components of governance listed above in relation to ‘distribution’, ‘decision-making’ and ‘institutional quality’ for promoting long-term capacity-building in regions. These barriers affect the capacity and capability of local institutions to devise and implement strategies for growth and development, thus severely restricting the levelling up agenda.

The full paper is published in Contemporary Social Science: England’s catch-22: institutional limitations to achieving balanced growth through devolution.

The work was carried out as part of the LIPSIT project that aimed to identify institutional and organisational arrangements at the regional level that tend to lead to the ‘good’ management of policy trade-offs associated with increased productivity.

This blog was written by Dr Charlotte Hoole, Research Fellow at City-REDI, University of Birmingham.

The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI or the University of Birmingham.

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