If Andy Burnham becomes Prime Minister, devolution will be at the centre of the Government’s domestic policy agenda. In his speech last week, Burnham set out how greater local responsibility in England should improve both public services and national economic performance.
One challenge that has been raised is the the experience of devolution in Scotland, Wales, and Northern Ireland. If devolution is so good for growth, so the argument goes, then surely each of these countries would have grown faster and enjoy better public services than anywhere in England.
The problem with this argument is that mayoral devolution to cities is the not the same as national devolution. Despite sharing the same term, the powers and rationale of devolution between England’s big cities and the nations differ substantially.
As a result, there are at least three big reasons we should expect devolution to the mayors to do more to improve growth.
Mayoral devolution is about economics; national devolution is not
Ultimately, the argument for the devolution to Scotland, Wales, and Northern Ireland is not about economic growth. The argument for autonomy rests on differences in political culture and sentiment towards Westminster and the Union more generally. This is a perfectly valid argument for devolution – Cornwall is making similar arguments too.
But the case for devolution that Burnham has set out is not just criticism of Westminster. The core idea is that addressing centralisation is good economics and good for public services.
Fiscal devolution has not advanced far in the devolved nations
All of this is compounded by the historically unbalanced nature of devolution in the UK. Whitehall has until recently preferred devolving powers and responsibilities over fiscal autonomy, even though it’s the latter which the evidence suggests makes the most difference for growth.
There is a long precedent for this. Northern Ireland – which first received devolved powers in 1920 – was given a sweeping range of competencies, but only inheritance tax, and stamp, vehicle and entertainment duties as a taxbase.
In the case of devolution to Scotland and Wales since the 1990s, fiscal devolution has proceeded gingerly, even when powers were granted. The Scottish variable rate of income tax was never used until its replacement in 2016, and the Welsh rate of Income Tax remains the same as that in England. And similarly, the Barnett Formula – which guarantees boosts to spending in the devolved nations if spending in England increases – undermines fiscal autonomy.
More recently, Whitehall’s attitude has started to change. The fiscal devolution roadmap announced by the Chancellor earlier this year will set out a programme for greater fiscal autonomy, on the basis that the centralisation of taxation damages local incentives and thereby national growth.
The mayors are at the core of this thinking. A buoyant, broad taxbase that rewards places for pursuing growth – especially if introduced on a tax sharing basis – should be expected to improve economic performance by changing local government’s incentives and behaviour.
The devolved nations are themselves highly centralised
The core of the argument for devolution is improving local economic performance. Most people experience the national economy through the opportunities available within a few miles of where they live and work, and most of these people live and work in cities. We should expect changes in the governance of cities and other local economies to make a much bigger difference than devolution to other very varied tiers of Government.
While devolution to cities has been justified on this basis in England, the devolved nations are further behind. For example, neither Glasgow, nor Cardiff have a metro mayor. As a result, bus franchising – already a big success story in England – has not yet come into force in Scotland and Wales. Scottish and Welsh local government also have no more significant fiscal devolution than that of English local authorities, and retain discretionary planning systems similar to England.
There are areas where Scotland and Wales are leading the way – both countries passed a law introducing a visitor levy before the Government accepted the case for one in England last year. But many of the issues which hamper local economic growth are the same on every side of the borders.
The foundation of Burnham’s plans for devolution has to be a strong economic logic if it is to reconnect local growth to improvements in public services in every part of the UK. Whether Burnham achieves this is how he – and devolution – should be judged.