decentralisation

Municipal Socialism- Lessons from UK Local Government?

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In today’s post Neil Barnett reflects on the theme of his presentation at the Municipal Socialism conference hosted by CURA in June 2018.

Firstly, a note about this intervention/ contribution to the debate. Given the stimulating nature of the debate at the Municipal Socialism conference, what follows focusses little on the actual history of what could perhaps be called ‘municipal socialism’ in the UK. As the italics indicate, the extent to which the programmes of Labour Councils from the ‘gas and water’ municipalism of the late nineteenth and early twentieth century to the ‘New Urban Left’ of the 1980’s should be seen as ‘municipal socialism’ is open to question. I will leave that debate aside for now. In the context of municipal activism occurring around the globe at the present time, in which neo-liberalism and austerity are being contested by a widening variety of forms of protest, contestation and experimentation with alternative organisational forms, it may seem somewhat parochial and introverted to be focussing on Local Government in the UK, and in particular trying to draw lessons from the municipal past. Focussing on state institutions may, to be blunt, appear to be somewhat unexciting in this context. Municipal local government, of course, is not the same as municipalism, nor does it capture the rich variety of municipal politics and its unique position in challenging neo-liberal hegemony. Also, given the new and evolving forms which urban alternatives now offered, what is the point of looking back at what, at first glance, are ‘old fashioned’ state-led interventions?

So, I’d rather focus on quickly considering some responses to the questions posed above and reflect on the usefulness of local government to a progressive project- to what extent does this institution of the state offer any radical potential? Firstly, it is the case that ‘municipal socialism’ has re-appeared as a focus of debate in the UK due to interest in ‘the Preston Model’, that Council’s adoption of Community Wealth Building, and a Corbyn-led Labour Party’s deliberations on local government’s place in delivering a new economic model. Also, globally, from Jacksonville to Barcelona, questions have been posed about how, when and indeed whether, left activism should engage with local state institutions, what happens when they do, and the extent to which they can be used to deliver urban alternatives.  In each case, local or state governments are delivering progressive outcomes.

I would argue that, whilst much of our interest has, quite rightly, been on alternative forms of organisation and their potentialities, we are too often prepared to focus attention anywhere other than some of the obvious places- like local government. There are many reasons for this- its failure to deliver on promise in the past- particularly in the UK; its role as an agent of the centre- a model of state-led, top-down and (arguably) out- dated interventionism; its complicity in delivering austerity. Whilst it is recognised that there are opportunities to work within and against the state via local government, essentially it tends to be viewed as having limited emancipatory potential.

However, we can gain from looking back at municipalism as delivered by local governments in the UK as they bring to the forefront questions and dilemmas concerning the delivery of socialist alternatives; we may now pose these in different language but they remain essentially the same. We (on the left) raise them time after time, but seem reluctant to address in practical terms. These concern, amongst others, the dialectical relationship between prefigurative experimentation and the realism of delivery, how to move ‘beyond the fragments’, and the institutional arrangements and scales should be used to deliver ambitious social and economic change in practice.  We are lead to these dilemmas, but we often stop there, perhaps because they are by their very nature irresolvable, the answers unknown, inevitably evolving, but also, in my view, because addressing them in practice means engaging with the less interesting and mundane reality of administrative/ institutional design for delivery.

The renewed interest in Preston and local government’s role in municipalism is therefore interesting at this time, as it indicates, at least, the potentialities of local government. Previous attempts to offer alternatives from a municipal/ urban base may have ultimately met with defeat, as Jonathan Davies has pointed out, but they achieved things along the way, and left some progressive legacies-including, in the UK, a nascent, National Health Service. Preston Council has itself, of course, implemented the austerity required of it since 2010, doing its best to protect the most vulnerable (a pragmatic, ‘dented shield’ approach), whilst also being radically experimental and progressive. Other Labour Councils have done the same, though not all would accept the ‘municipal socialist’ label.

An incoming Labour government will have to start somewhere. Many areas without vibrant ‘alternative economies’ will need to be helped with state-led equalisation of resources- channelled, presumably via local (or regional?) state institutions. Questions will need to be addressed about democratic accountabilities, scales of operation/ delivery, and central-local divisions of responsibility. If we value local experimentation/ alternatives, what if localities choose to pursue some which are not the ‘right’ ones? Interesting questions, which can be met with a variety of responses- but these are the meat and drink of administrative reform, and inevitably, we bump into them again and again.  These dilemmas do raise historical precedent, of course, in reminding us of the uncertain attitude towards the ‘local’ in UK socialist thought- from the self-governing utopias of Robert Owen to the central administrative designs of the Fabians.

Finally, one lesson which we can take from history is that, of course, place matters. Prefigurative alternatives in Preston will take time to establish themselves as resilient alternatives in Preston, let alone Bolsover, for example. Looking back, the ‘gas and water socialism’ of the early twentieth century was not simply a question of monolithic state intervention, but in each case informed by the unique politics of place, promoted by civil society activists, non-conformist churches, and the co-operative and labour movements in each area- Glasgow being different in emphasis and approach to say, Leeds. Later, amongst the New Urban Left, Liverpool was quite distinct from London. As a Council, the GLC perhaps did more than any to ‘connect the fragments’ in a new, less state-centric way, but London had many unique characteristics which facilitated this. Municipal socialist alternatives will, as ever, depend on the capacities and opportunities offered in each place, and leave questions as to how to engender radical alternatives where such opportunities are less abundant. For these reasons, amongst others, local government within a national framework of priorities remains necessary and we should bring it back in to the centre of any pragmatic consideration of ways forward.

Neil Barnett is a Senior Lecturer in Public Policy in the Faculty of Business at Leeds Beckett University.

Taking Power Back: Response by Simon Parker

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This post is the latest in the series debating Simon Parker’s recent book ‘Taking Power Back‘. The debate began with an outline by Simon of the main argument of his book, followed by a response by Jonathan Davies and Adrian Bua from CURA. In this post Simon highlights areas where our thoughts overlap and diverge. If you are interested in contributing to the debate further please email adrian.bua@dmu.ac.uk.

The striking thing about Jonathan and Adrian’s article is how much we agree on the fundamentals. We are clear that Britain’s mix of the big central state and free market economics has not delivered on its promises. And I think we broadly agree that a politics of commonism – the creation of a vastly expanded realm of self-help, mutual aid and social enterprise – represents a credible and desirable way to secure social progress in new times.

The challenge I have been posed is less about the ‘what’ and more about the ‘how’. Jonathan and Adrian are right to ask how we get from a world where power and assets are overwhelmingly enclosed by the state and market, to one in which commoning becomes, well, commonplace. They argue that far from encouraging mutual aid, the British state is more often engaged in expanding the reach of profitable activity while simultaneously choking off the social sector through austerity. Is my vision of the creative commons not pure idealism without some sort of struggle against the power of capital?

One of the challenges I face in answering this is that I am deeply suspicious of top down, structural change. I do not have some kind of Marxian revolution in my back pocket. They tend to end badly. Instead, I think commonism will emerge from decentralised trial and error in the real world. But I accept the charge that my bottom-up approach runs slap bang into some very big and ugly vested interests in both the state and the business world. The commons is not the strongest force in society, but where I differ from Jonathan and Adrian is that I think this might already be starting to change.

My first reason for hope is that commoning is already starting to grow in the midst of the very neoliberalism Jonathan and Adrian decry. Take, for instance, the 25% boom in the number of co-ops over the three years from 2010, or the 10% growth in community businesses over 2015. These organisations are generally not old-school charities funded by grants, but organisations which use their community roots and freedom from shareholder demands to develop innovative business models in response to local needs and demands.

My second reason for optimism is the fact that the economy is starting to change in ways which might favour commoning. I am hardly the first person to point to the rise of automation, which has the potential to destroy a vast number of jobs without replacing all of them. This reduction in paid labour is a horror for the old Labour movement, but when you think about it a world with fewer of what David Graeber calls ‘bullshit jobs’ is hardly a bad thing.  Imagine more people, with more free time and vastly cheaper goods and services, searching for more meaning in their lives.

My third reason for hope is that I can already see some of the institutional changes that might help to unlock a world of commonism. The first plank in my agenda is a universal basic income, both to manage the economic consequences of automation and to liberate people to pursue more meaning free from the demands of paid labour. This is the key policy change which would turn a dystopian world of mass unemployment into a world where work became more like play (and the commons is the perfect space to play in).

I think we need a new public service architecture which actively encourages commoning. This means city-level social investment funds which can support the early stages of commons-based organisations, governed by the public, private and commons sectors to ensure that the money flows towards their shared priorities. Local authorities and others need to direct their commissioning to spotting and scaling up the parts of the commons that work best.

My response to the question of how we grow the strength of the commons is to transform the role of government into growing and protecting the realm of mutual aid. This will help to grow a strong and independent domain of community ownership. My answer to austerity is that a smaller state might be a good thing as long as we also have a smaller private sector and much more social activity in-between them. Commonism is not a utopian project, but a practical route through which ordinary people can adapt their lives to a changing economic context.

Simon Parker is director of the New Local Government Network and a leading expert in public policy, public services and government.

Taking Power Back: Review by CURA

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Professor Jonathan Davies and Dr Adrian Bua from CURA respond to Simon Parker’s  previous  blog where he explained the argument of his recent book ‘Taking Power Back‘. This blog will be followed over the next few weeks with a reply by Simon.

Taking Power Back is written as a provocation – a manifesto for change – at a moment when the ruthlessly centralising tradition of British politics is under greater critical scrutiny than ever before. As Simon Parker explains in his blog post, current levels of centralisation in British politics are unsustainable and the call for radical decentralisation, driven by the social action of place-based individuals and communities is timely.  Moreover, Simon argues that with the end of austerity nowhere in sight, the halcyon days of the welfare state are in any case well and truly over. Something has to be done.

Simon’s alternative is encapsulated in the idea of ‘commonism’, a new kind of society based on self-help and mutual aid enabled by a more local, relational and supportive state, rather than the over-bearing centralised behemoth developed since the post war era. Simon thinks that we are moving into a conjuncture more favourable to commonism, as experiments proliferate and the state slowly and reluctantly begins to show awareness of its limitations. In his analysis, the push for devolution and localism is more than a mere straw in the wind.   The wave of city deals, with the Greater Manchester Combined Authority at the forefront (which Simon discusses at length) signals an opportunity to develop the ‘commonist’ agenda and forge a path to a more decentralised and democratic polity.  Taking Power Back is at once resolutely pragmatic and visionary.  Commonism is not communism, a system that envisions the entire system of production, distribution and exchange socialised and democratised.  Rather, the practices of commoning sit in a nebulous and uneasy relationship with state and market.  It rests tacitly on re-working the classic state-market-civil society triad.

However, preoccupation with the critique of statism means the triad is never adequately discussed.  For example, Simon is very reticent about markets, corporations and economic crises. Contemporary political economy tells us that states and markets are deeply inter-dependent. Much of what states do in the 21st century is about extending the reach of the profit economy.  Take austerity, a policy regime Simon tends to take for granted: it undermines the resources of localism in ways that seem destined to shrivel the commons.  First, we know that cuts in state funding drive local community organisations to the wall.  Second, government contracts are deeply biased towards corporate contractors and large extra-local civil society organisations (the so-called “primes”), and against local organisations.  Third, austerity welfare and its extraordinarily punitive sanctioning regime so envelops and bureaucratises the lives of millions of unemployed and working poor citizens, that it is hard to envisage them finding the time or cognitive space to do any volunteering or commoning.

These deeply reactionary trends arguably diminish the space for commoning, but perhaps more importantly they point to a huge oversight in Simon’s analysis.  Taking Power Back will not be accomplished by going with the flow, it can only be a deeply conflictual process oriented to reversing malign trends in our society – the expansion of markets and corporations, the boa-constrictor of state regulation and the predatory character of civil society “primes”, all of which conspire to corrode the local and the democratic. Simon’s call for a universal wage (or basic income) to unlock commoning capacity is an acceptance that sharpening inequalities need to be addressed.  Yet, it is hard to see how this can be accomplished without, at the very least, reversing austerity and in the process taking on recalcitrant interests throughout the state, market and corporatised civil society sectors.

Viewed through this lens, the current devolution and localism agendas are deeply problematic, accentuating anti-democratic developments antithetical to ‘commonism’.

Simon acknowledges the anti-democratic manner in which “Devo Manc” was accomplished – a deal struck between local and central state elites. Moreover, greater local responsibility for allocating a shrinking budget presided over by boosterist metro-mayors is no basis for a flourishing municipal commons, particularly under a grossly punitive benefits regime over which the centre exercises an iron grip. This is compounded by declining standards in what researchers at ‘Manchester Capitalism’ have called the ‘foundational economy’. This consists precisely of those businesses and services to meet the basic needs that are the bread and butter of ‘commonism’, yet, the foundational is increasingly beset by casualised work, and operates as a cash cow for big business.

As Simon recognises, under capitalism, technological innovation and productivity do not usher in a world of leisure. They rather concentrate power in the hands of techno-elites and shrink the labour market.  Nowhere is the dystopian character of the digital age clearer than in San Francisco, where the predatory elites of Silicon Valley make the city unliveable for working class people and complain at having to look at the human refuse left in their wake.

We live in a world of confected scarcity (austerity) and ever-rising inequality in a highly precarious global economic conjuncture. Simon is right that a flourishing commons depends on greater equality, in a world of plenty.  But there is a vast gap between our world and the world of the Morrisonian commons.  Taking Power Back offers a welcome stimulus to those thinking about how a better world might come into being. Simon’s wager is that examples of commoning in action can be pedagogic in the sense of showcasing the virtues of “commonism” to all, at a time when elites seem a little more aware of their limitations.  Our concern is that these are not the most powerful trends in our society. It is hard to see the pursuit of social justice as anything other than an elemental struggle in the 21st century, without which new political economies of solidarity will remain confined to the margins.

Professor Jonathan Davies is director and Dr Adrian Bua a core member of the Centre for Urban Research on Austerity

Taking Power Back: Simon Parker

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We are pleased to launch our book debates series with this blog by Simon Parker. Simon sets out the argument of his recent book ‘Taking Power Back’, where he makes the case for ‘commonism’ – a radical form of democratic decentralisation. Following this post, CURA members Professor Jonathan Davies and Dr Adrian Bua will share their thoughts on Simon’s work, after which Simon will publish a reply to our team’s commentary.

The British state stands poised at a moment of profound change. Caught between the demands of an ageing population and a limited public willingness to pay more tax, public services are under pressure as never before. Institutions from local government to the NHS are finding that their existing models of provision cannot cope with the strain. Something has to give.

Despite our self-image as swashbuckling Anglo-Saxon capitalists, the British are actually fairly statist. Until recently we had a large, highly centralised government machine which we expected to deliver the same outcomes to everyone across the country. We tend to see the world in terms of the market and state, without very much in between. The fact that both of these leviathans have let us down very badly in the recent past explains our national distrust of institutions.

And yet there is something in between state and market – a space for social activity that many people call ‘the commons’. Over the past decade or so we have seen this space being steadily filled by a remarkable flourishing of cooperatives and social enterprises. In my book, Taking Power Back, I argue that this vibrant realm of do-it-yourself social justice is vital to the way we should understand the future of government. We can already see examples of it in action. In my book I describe how initiatives in the UK and beyond such as Occupy Sandy, the extraordinary people-powered disaster relief operation in post-hurricane New York, are building on, and organising, people power to meet their needs and improve lives – without relying on the market or state action

The trends which the World Economic Forum bundles together in its concept of the Fourth Industrial Revolution will turbo-charge the commons over the next decade or two. This is partly because new technology is making it easier than ever to start to up small social organisations. The overhead costs of creating a company are falling, while the potential to create innovative networked business models is rising. The increasing automation of our jobs may create a world in which we spend less time working creating increased opportunities to transfer effort out of the realm of paid work and into the creative sphere of the commons.

It seems entirely credible that the space vacated by a retreating state could be filled at least partially by a surge in the creative commons. I the book I make the case for two very big changes that can facilitate this transition. First, we will need to support the commons by introducing a universal basic income, compensating people for the automation of work and giving them the time to contribute. Second, we need to radically devolve political power so it is closer citizens, giving individuals the opportunities and capacity they need to help build the civic commons in the places where they live.

It is a huge challenge, but the prize is a radical renewal of government and democracy, in Britain and beyond.

Simon Parker is director of the New Local Government Network and a leading expert in public policy, public services and government.

Making the most of the devolution revolution

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In his budget statement last week, the Chancellor spoke again of a ‘devolution revolution’. Other areas beyond Greater Manchester will receive new powers and responsibilities previously held in Whitehall. Agreements with Sheffield, Cornwall and Yorkshire are underway, with more to follow. It can be hard to keep abreast of these developments, as each agreement contains a unique pattern of policies to be devolved, resulting in varying degrees of local control. We are supposed to see the agreements as great successes, but with little sense of what it all amounts to.

What is devolution for? New Economics Foundation (NEF) has been working with the Crick Centre at the University of Sheffield to map the arguments made for devolution, in order to address this crucial question.

We recently released the findings of this research which can be found here. A summary is shown in Figure 1 (click on the image to enlarge)

FIG1

Advocates of devolution point to economic growth as the main motivation, above all other concerns. On average, just under half of all arguments for devolution refer to its role in creating economic growth. Improving the effectiveness of public services came second with 23.7% of arguments, and strengthening democracy third at 12.9%.

From the perspective of central government departments, local governments and think-tanks alike the focus is economic growth. Creating growth in parts of the country which have struggled economically is a laudable ambition, and one that merits discussion, but it also matters how growth is discussed and what it is taken to mean.

We found that economic growth arguments are weak on explaining how growth would be achieved and focus primarily on benefits to the national purse. How income-to-cost-of-living ratios, which affect everyone’s day to day economic reality, would be affected by devolution is seldom mentioned. Reducing poverty through economic growth is mentioned only four times in a total of 1,129 arguments. Numbers of jobs created are discussed far more than the quality of jobs.

Devolving economic powers over skills, housing, business rates and enterprise could in theory improve how the local economy works for its residents and local stakeholders. Yet the current focus pays little attention to how devolution would improve the lives of local people.

A s Figure 2 shows (click on the image to enlarge) Creating a more democratic country seems an obvious aim for devolution but in fact is neglected by advocates of devolution, particularly advocates in local government.

Figure-2_devo

On average local governments refer to strengthening democracy in only 9% of the arguments they make for devolving power. They neglect the expanded role citizens could play in decision-making if decisions are made closer to home and rarely discuss the ways in which devolution could increase the accountability of elected leaders to the public. Simply creating elected mayors is not enough to revive an ailing democracy. This is why local governments should also be considering the mechanisms for citizen participation which could make devolution worthwhile.

One change could make all the difference as the devolution revolution progresses. This is to bring the debate into the open for public discussion, locally and nationally, so that everyday economic concerns feature strongly in discussion of economic growth and establish a model for more accountable, deliberative democracy. The debate has so far been conducted in the backrooms of Westminster rather than in public forums.

Several parties in government have proposed a Constitutional Convention, but are yet to act on the proposal. The convention model is a citizen forum bringing together a representative sample of people to discuss changes underway in the governance of the country. In the meantime, a group of academics and civil society groups have piloted this model in Sheffield and Southampton, showing how it would work. Drawing on examples from countries including Iceland, Canada, the Netherlands and Scotland, they show that the direct participation of local people in decision-making improves not only the democratic quality of decisions, but their effectiveness. It’s a match made in heaven for the devolution revolution.

‘The briefing Democracy: the missing link in the devolution debate’ is available for download from New Economics Foundation website here.

This post was originally published on the University of Sheffield’s Crick Centre Webpage

Sarah Lyall is a researcher and policy analyst at the New Economics Foundation. She tweets @sarahglyall and @nefSocialPolicy.

Community Wealth Building in Preston

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By Matthew Brown

It is without doubt that much of Europe is in the grip of an austerity crisis.  However to build a genuine alternative to it we need to think deeper about its causes and ask questions about the fundamental undemocratic nature of our economy to be able to respond to what has also become a systemic crisis.

The 2008 global financial crash emerged from an unregulated financial sector under little form of democratic control.  The harsh austerity we see at present is a payback for the £5500 each family in our country had to contribute to bail out the banking sector.  This money is now being recouped in the form of public spending cuts, benefit and tax credit cuts, tax rises, pay freezes and increased student tuition fees which are increasingly hitting the middle class.

Added to this Richard Murphy calculates up to £120 billion per year is lost in tax avoidance and evasion often by large multinational corporations and rich individuals and Aditya Chakrabortty has produced evidence recently that an additional £93 billion per year is paid in corporate subsidy.  A mere drop in the ocean compared to the estimated £1 to £2 billion a year lost to the wider public purse through benefit fraud.

Despite this vast public wealth injected into the system there is a dearth of investment from corporations. The major banks are not properly lending to individuals and local businesses and reliance on “inward investment” over the last 30 years has produced an economy in which a fifth of what was once paid in wages has disappeared. As a result, the UK has become one of the most unequal countries in Europe.

We must look to produce a response in our communities to this systemic crisis.  To do this we should examine how wealth is produced and then capture and democratise the wealth at source.  Much can be done locally and regionally but a national government with an understanding of this system problem would fully complete the picture.

In Preston and Lancashire we are experimenting with part of the alternative.  It is inspired by regions and cities that have built a culture of economic democracy like Mondragon, Spain and emerging progressive thinking in parts of the USA.  What is significant is the economic crash of 2008 onwards had little effect in terms of unemployment and poverty in Mondragon but also in North Dakota with its sophisticated network of devolved public banking.

This new democratic local economy in the UK will have at it’s heart procurement with Councils and other placed based institutions like Universities, Colleges, Hospitals and Housing Associations spending hundreds of billions on goods and services every year but not always considering where they are buying goods and services from and what social and economic benefit that wealth can bring.

The Preston City Council led Community Wealth Building initiative has now identified over £1 billion per annum in spend on goods and services by participating “anchor institutions” in Lancashire.  The long term aim is to shift more of this wealth to local businesses and if there are gaps in provision, to fill them with new worker cooperatives.  The consultancy we are working with, the Centre for Local Economic Strategies (CLES) has begun to change procurement culture of Manchester City Council, increasing their purchasing to over 65% from the Manchester economy adding more than 5000 jobs.  What is unique in Lancashire is the public sector institutions involved are collectively adopting this ‘quasi planning’ strategy to maximise the social and economic impact of this collective pool of wealth to the local economy.

There are also vast swathes of wealth within communities in local authority pension funds.  Lancashire’s County Pension Fund has investments of over £5.5 billion which in reality is the deferred incomes of tens of thousands of local public sector workers.  The Preston, South Ribble and Lancashire City Deal has earmarked £100 million of pension money to be invested in commercial development in the local economy producing a sustainable return for fund members and creating a social dividend in the communities they live.  Elsewhere in the UK other creative uses of pension monies are emerging most notably in Islington who earmarked a massive 15% of its entire fund for social housing.  These investments have support from many unions who know access to affordable housing is a problem for many public sector workers as much as for anyone else.

At the heart of a democratic local economy has to be new social forms of ownership and support for local businesses.  In Preston, we are working with the Chamber of Commerce to encourage retiring business owners to sell their companies to their employees.  We have a number of new democratic firms including an artists cooperative of over 60 independent local artists, an educational psychologists worker cooperative, an employee owned transport consultancy with 25 employee owners and plans are underway to bring a “Unicorn” style grocery to the city.  This is complimented by Preston City Council earmarking a city centre investment of at least £5 million in its outdoor markets to support independently owned businesses to further capture wealth in the local economy.

Municipal enterprise can also play a key role and Preston City Council has a long term objective to generate energy from wind and solar power in municipal ownership to break the stranglehold of the Big 6 energy giants though this is under considerable threat from the cuts in renewable energy subsidy from Government.  However it is something we will look to do when it becomes viable.  Other Councils such as Nottingham have already ventured into the energy market recently having a positive impact on their local economy.

Credit unions and community development financial institutions (CDFI’s) are gradually expanding in Preston’s economy mirroring the growth of credit unions across the country.  The Labour administration recently fulfilled a long term commitment to establish a new city wide credit union “Guild Money” that has had over 150 members join in a very short period of time.  This is complemented by Lancashire Moneyline, a smaller credit union in Moor Nook, a number of workplace credit unions and trade unions promoting their own credit unions to members building a culture of democracy and financial inclusion.

Finally, we have insisted on quotas for affordable housing and health infrastructure as part of Preston’s Local Plan to capture community benefit from conventional development including a 30% affordable housing requirement and we have expanded the living wage by encouraging local employers to pay it through Preston City Council and its living wage partners procurement strategies.  This has seen Preston as a traditionally deprived community outperform more prosperous areas in Lancashire in terms of people receiving the living wage with a positive effect particularly on women.

With any debate about austerity and its causes we need to look to nurture creative responses and consider how we can best defend communities against it in future by making them more resilient, democratic and self-reliant.  Maybe just maybe with this new thinking emerging from Preston and elsewhere both here and abroad we are finding the answers to this system problem and uncovering the beginnings of what could become a truly democratic economy.  Time to watch this space.

Councillor Matthew Brown is Cabinet Member for Justice, Social Inclusion and Policy at Preston City Council

Devolution deals: three risks

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Devolution to city regions is a central pillar of the conservative government’s industrial strategy. The ‘Northern Powerhouse’ model developed in the Greater Manchester Combined Authority (GMCA) is being rolled out through ‘Devolution Deals’ and the Cities and Local Government Devolution Bill. Advocates of devolution argue that it can close regional disparities in economic output by boosting growth in city regions. It is also argued that closer proximity of devolved administrations allows policy to be tailored to local needs; that devolution contributes to increased dynamism by creating opportunities for local innovation and increases local participation and accountability. As recently summarised by the Local Government Association these are points of consensus in British policy circles.

However, the evidence of devolution as a driver of economic growth, convergence in social and regional inequalities and is pretty thin.  For example, one analysis of devolution concluded that the evidence in favour of such links is very weak and another found a moderately negative relationship. It seems that this evidence is overlooked by the general consensus in favour of devolution amongst policy makers.  In this blog, I will set out three key ‘risks’ that explain failure to deliver on the ‘economic dividend’ argued for by so many proponents of devolution.

The balance between the transfer of resource and responsibility

It is often argued that the ‘litmus test’ of devolution is the balance between the transfer of policy responsibility and resource capacity. On this test, it can be said devolution in the UK has been non-existent in recent history – the purse strings have remained under tight Whitehall control. Research on the coalition government’s devolution reforms found that the scale of devolved functions heavily outweigh the devolution of resources to carry these out effectively. In order for local units to exercise devolved responsibilities effectively, resources and resource raising powers need to be commensurate with responsibilities. The Conservative government’s devolution deals are being pursued in a context of even harsher projected public spending cuts. It is therefore difficult to avoid the cynical conclusion that devolution forms part of a broader agenda to transfer the responsibilities of managing cuts to lower government tiers, rather than a genuine attempt to construct a more decentralised political economy.

Exacerbating inequality

‘Devolution deals’ seem to involve a more fundamental shift of power away from central government than previous attempts at devolution. However, these deals are struck on a case by case basis. Some resource raising powers are on the table, but some regions receive more powers that others – leading to an asymmetric distribution of powers that could exacerbate existing inequalities. Even if these were uniformly devolved, the ability to capitalise upon these is likely to differ across city-regions.  It is also noteworthy that many of the policies that previously distributed the proceeds of the UK’s London and finance-centric economic model are being discontinued by the austerity agenda. Recent research by the Institute for Fiscal Studies makes it clear that measures such as the ‘Living Wage’, which is presented as mitigating these impacts, will do little to compensate for those at the cutting edge of these reforms. Compounded by the imbalance between the devolution of functions and resources noted above, heed should be taken of the possibility devolution to city regions serves as a model for the shrinking the welfare state.

Collaboration and co-ordination between regions and governance tiers

Devolution deals are concerned with arrangements for individual cities and city-regions. Beyond the aspiration for a larger collective contribution to national economic output, there is little focus on the relationships between regions and the impact on devolution deals upon the overall functioning of the economy. Because of this, analysts of devolution have raised the possibility that rather than leading to an “effective and coherent yet more locally autonomous system of government”, devolution policy in the UK might deliver “a disconnected set of governance fiefdoms pursuing more or less strategic ends with varying degrees of competence”.  A related likelihood is the devolution deal model will encourage competition over collaboration between city-regions. As economist James Meadway argues “by granting large cities more powers on the allocation of spending, but leaving the level of taxation, spending and borrowing under tight Treasury control, regions will be forced into competitions with each other to attract business expenditure and therefore extra tax revenues”. This could lead to a regulatory ‘race to the bottom’ that would substantially undermine the collective potential of city-regions to deliver improved economic and social outcomes.

In conclusion, a viable model for a more decentralised political economy should:

  • transfer ‘effective’ policy autonomy by providing adequate resourcing opportunities for devolved units;
  • reduce inequality within and between regions and social groups;
  • provide effective co-ordination between regions and governance tiers.

Although devolution deals are an emergent approach whose outcomes are not yet evident, the ad-hoc and case by case nature of the devolution deals, and the context of harsh public spending cuts within which they are taking place, are likely to lead to negative outcomes regarding the three areas above. It is therefore quite doubtful that devolution deals can constitute a viably generalisable model to deliver a more decentralised and effective political economy.

Adrian Bua is Research Assistant at the Centre for Urban Research on Austerity, as well as at the New Economics Foundation