Devolution needs to reach all parts of Britain

In his speech this week on economic decentralisation, Nick Clegg said ‘every part of Britain will feel more empowered by 2015’ as a result of the government’s decentralising reforms.

I hope this ambition holds true. The second wave of city deals announced by Nick Clegg this week do herald a commitment to decentralise power to a large number of our cities and regions. The hope is that they mean a greater number of areas look set to benefit from the government’s localism and decentralising programme than simply our largest and strongest cities.

There has always been a danger in practice that this government’s brand of liberal and conservative localism was too comfortable with disparity – happy to see those stronger areas accelerate their growth; leaving behind, or even detrimentally affecting other, less resilient smaller towns and regions.

This has been seen in a number of policies that the localism agenda has brought forward. The decentralisation of business rates, for example, while important in giving areas more control over revenue raising and reducing reliance on central government, risks allowing those areas who start from a position of greater economic strength to move further away, breaking the redistributive element of business rates that saw stronger areas support those of less economic resilience.

The first wave of city deals, whilst a good opportunity to devolve power over some of the most important levers of growth, also had a danger of ‘picking winners’ – the government devolving power and money only to those cities who it felt were most able to respond (and only over policy or financial areas that they were comfortable with).  It’s the same old concept of ‘earned autonomy’ so familiar in battles over the years  in trying to get Whitehall to devolve more power, which fails to ask why Whitehall is the place to hold those powers in the first place. The importance of this week’s announcement is that it recognises the importance of smaller towns and cities and non-urban areas such as Milton Keynes, the Tees Valley and Bournemouth and Poole, in contributing the UK’s growth and puts faith in them to play their part.

Attempts by this government to stimulate growth were in danger of failing to support areas that most need investment and support – are smaller in population or less economically resilient – concentrating on those already in a strong position. For example the Growing Places Fund which was supposed to stimulate growth, allocated funds through a formula of weighting towards areas that already had the highest employment levels and the highest salaries. The Regional Growth Fund (aside from the desperate statistics about how little has actually reached front-line services) is done on a bid basis that judged an area’s ‘growth potential’ and set areas against each other rather than encouraged collaboration. It also meant a sporadic and piecemeal approach to growth instead of a sustainable and strategic plan for supporting places, particularly those that most need investment to catch up and fulfil their potential.

There can also be no doubt that the disproportionate impact of the cuts is also playing a role in creating a sense of disparity between areas. As Newcastle City Council’s heat map has shown, the cuts to local authority budgets are deeply variable across the country and even impacting hardest on the most deprived areas. All this could contribute to widening the equality gap.

The government have made no secret of the fact that its view of localism is ‘unashamedly pro-growth’. This is to be commended, as long as it does not deepen the economic inequality in this country. As our recent Economic Futures Commission report showed, the economic potential of the north could contribute a further £41bn to the UK economy. This will only happen if the devolution of power is widespread and not focused on preferred bidders or predicted winners, or sees city deals as the only tool for decentralisation.

I hope the ambition of ‘more than one jewel in our crown’ is realised. Settling devolutionary deals with 20 areas around the country, covering 67% of the population, has real potential to stimulate growth and economic development. Now for the other 33%!