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A new Government with an overall majority is now in place for the next five years and already devolution is high up the policy agenda; we can expect an increase in the pace of change. A clear and positive sign that this will be the case is the appointment of Greg Clark as the Secretary of State for Communities and Local Government who has been at the centre of this agenda for the past five years and has demonstrated a strong commitment to devolution to the regions.
This agenda has already gone through a number of phases, from the establishment of city regions and city deals to the creation of combined authorities and Local Enterprise Partnerships (LEPs). But devolution to date has only provided a relatively limited offer and there is still a lot further to go. All the indications are that a greater devolution of powers is imminent, albeit subject to a mayoral governance model.
Devolution offers the opportunity to bring public services closer together across organisational boundaries, and in a way which better meets the needs of local areas. It offers the chance to direct public funds in a bespoke way which suits local circumstances. The devolution of funds needs to be as flexible as possible in order to allow local prioritisation; we should therefore seek to avoid ring-fencing as much as possible.
However the biggest prize must surely be greater local fiscal flexibility. The UK has one of the most centralised economies of our western partners and there is little in the way of local fiscal powers. There are minimal direct financial incentives to encourage local authorities to invest in their local economy. Despite their local democratic mandate councils are heavily constrained in setting local taxes.
Devolution of fiscal powers must surely follow. As a minimum this should mean retention of 100% of Business Rate growth and the removal of the effective “cap” on Council Tax increases. However we need to go further and return to local government the powers to set tax levels, both business and residential, in a responsible way which responds to the needs and wishes of their community. But devolution comes with risks as well as rewards and finance professionals will play a key role in implementing new funding models within new governance arrangements. With greater collaboration and shared accountabilities, devolution may challenge our traditional approaches to financial management.
In these times of continuing austerity, where mainstream local government funding may well continue to decline, devolution offers a degree of optimism which may provide the opportunity for councils to strengthen their position at the heart of communities; but we need to be fully prepared for the challenges which this presents.