Number 10 North’s new conundrum: Ensuring fiscal devolution is delivered fairly and for all

Having lived through an eventful era of devolution in Greater Manchester, fiscal devolution is one of the things that most excited me in a relatively uneventful Autumn Budget.

It means that local areas will keep some of the rates and taxes raised in their locality and spend that money how they see fit, subject to agreed outcomes and obligations.

Greater Manchester and other mayoral authorities had already managed to grapple some autonomy away from Westminster, with budget allocations evolving from those with direct purposes, including transport and health, to integrated settlements.

Integrated settlements mean strategic authorities can spend the money they receive from government on local priorities. In Greater Manchester, some of that money is still being spent on transport, housing, health, skills and education, but there is much more flexibility.

There had been significant lobbying from organisations, including the Northern Powerhouse Partnership, for further fiscal devolution that would enable regions to retain a significant share of the returns they help to generate having taken risks and attracted investment. The Chancellor’s Autumn Budget confirmed that will now happen.

Mayoral Strategic Authorities will receive a share of income tax beginning in 2028, shifting regional funding toward locally linked revenues rather than central grants.

Mayors will receive a 20% share of locally retained business rates starting next year, with local and regional government combined targeted to retain 100% of business rates by the end of the decade.

However, the conundrum now facing a government newly focused on the mantra of good growth in every postcode is how fiscal devolution can be delivered in a way which is both fair and equitable, given the very different capabilities and levels of preparedness across the country. 

The clear risk is a patchwork quilt of capable areas with ambitious plans and the money to deliver them, and other areas unable to benefit.

Much of Greater Manchester’s success dates back to the formation of the Association of Greater Manchester Authorities, bringing together its 10 local authorities, which in turn helped to shape the mayoral-led Greater Manchester Combined Authority. 

This meant that the city region was ready to run with the opportunities and responsibilities of having an accountable elected mayor back in 2017.

An increasing number of areas have, or are working towards, becoming a strategic authority. But local government reorganisation is slower than hoped. 

Front and centre in the minds of the people ‘Rewiring the State’ from within Number 10 North are the practicalities of delivering what in principle should be welcomed.

There are many questions to answer. How can every area in the country be given equal opportunities to benefit from fiscal devolution when local capability will differ so dramatically? How do we guard against differing local tax regimes or incentives for inward investors, with the potential to create regional advantage and disadvantages?

With some local authorities teetering on the edge of financial collapse, what safeguards are needed to ensure that taxpayer revenues are used responsibly? 

Alongside these practicalities lies the essential role for partnership between the public and private sector in seizing the opportunities that fiscal devolution should present. Private and public sector knowledge transfer and secondment is already underway.

Some might suggest that fiscal devolution will require the return to something akin to the Local Enterprise Partnerships (LEP) scrapped by the previous Conservative government.

A successor to the GM LEP, the Greater Manchester Business Alliance was launched only recently by GM Mayor Bev Craig to strengthen partnerships between the private sector, local council leaders, the Mayor, and the Greater Manchester Combined Authority. 

Should something similar happen in other areas to provide the level of scrutiny, partnership and creativity that fiscal devolution will demand?

Whatever happens, fiscal devolution looks set to be a brilliant but bumpy ride. Supporting local expertise in every area will be key to ensuring that fiscal devolution succeeds in delivering good growth in every postcode.