Professor Simon Collinson discusses the need to devolve power in the UK to address the economic imbalance between London and the South East and the rest of the UK. Metro Mayors can potentially be a powerful instrument to promote regional growth which is critical to the long-term social and political stability of the country.
In February, the Mayors of the combined authorities across England met with senior representatives of central government at the University of Birmingham[i]. The fact that they met is as important as what they discussed. Not least because, outside the devolved nations, there are very few decision-making links or channels of communication in the UK for central government to connect with the regions. This over-centralised governance structure is at the heart of a national problem – the on-going imbalance in regional growth across the UK.
In terms of financial decision-making, London is more dominant over the English regions than Paris is over France. Fiscal centralisation, the lack of power to raise or spend resources at the local level, is central to the problem. Local taxes account for 1.6% of GDP in the UK, compared to 16% in Sweden and 13% in Denmark. Over 73% of the revenues for the West Midlands Combined Authority come directly from central government transfers. Compare this figure to the equivalent percentage for Berlin (33%), Madrid (32%), New York City (26%), Paris (16%), Frankfurt (13%) and Tokyo (13%). No money means no power.
Rebalancing the UK economy, by promoting growth in the regions outside London and the South East, is critical to the long-term social and political stability of the country. This is in all of our interests, beyond the media spin about the haves (London and the South East) and the have-nots (everywhere else). There are critical and worsening tensions between centre and periphery. Economic wealth, the ability to create it and access the benefits it brings are hugely unevenly distributed. This imbalance of resource allocation and of access to opportunity underlies disadvantages in health and social welfare and fuels political division.
The metro mayors and the combined authorities are part of the solution, supporting a drive for locally-sensitive economic development in the city-regions. But they can only do this with devolved power and resources from London.
With power comes responsibility – for developing and implementing locally-appropriate growth plans. Regional ‘place-based’ industrial strategies, promoting smart specialisation, need local customisation and coordination to exploit the distinctive assets and capabilities of different regions and compensate for unique local constraints. In the West Midlands and in many areas of the UK, skills shortages, linked to lower levels of innovation, productivity and competitiveness are a major constraint.
However, focusing on productivity and economic growth alone will increase intra-regional imbalances (compare the Black Country to Solihull in the West Midlands, for example), to mirror the national problem. Regional growth needs to be inclusive growth. Market interventions and public sector investments should balance support for improving firm-level performance with schemes to bring the unemployed and the disadvantaged into the work place and upskill the least-skilled. Reducing the burden on public sector services is the other side of the coin to productivity growth in the private sector.
On top of the long-term and growing spatial inequalities, Brexit brings with it a threat to worsen the economic prospects of our disadvantaged regions, relative to London and the South East. But it also offers the opportunity to develop international competitiveness, export-led growth and inward investment across all regions of the UK. This will only happen if central government avoids being sucked further into the political black hole of uncertainty that Brexit is creating. And it will only happen if government has the confidence to follow a more devolved model of governance.
All of these issues were central to the debate between the Metro Mayors and the senior civil servants at the University of Birmingham meeting. It was a useful dialogue, but one which left a wide range of unanswered questions. What is central government doing specifically for the English regions? Will Whitehall hand over control of some resources and some power to the regional authorities? If so, how much, and when? And will the Metro Mayors, Combined Authorities and other regional agencies maintain their coherence and authority to lead this drive if they were given more power and resources?
[i] The meeting was expertly chaired by the Local Government Association. The participants included Andy Street (West Midlands), Steve Rotherham (Liverpool), Andy Burnham (Greater Manchester), Tim Bowles (West of England), and Steve Palmer (Cambridgeshire and Peterborough), with the Chief Executives of the Combined Authorities, met high-level figures (Permanent Secretary and Director-General level) from Whitehall; Business, Energy, Innovation and Skills (BEIS), Ministry of Housing, Communities and Local Government (MHCLG), Department for Transport (DfT), Treasury (HMT), Department for Exiting the European Union (DExEU), Department for Work and Pensions (DWP) and Department for Education (DfE).
By Professor Simon Collinson, Director of City-REDI, Deputy Pro-Vice-Chancellor for Regional Economic Engagement.
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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