Osborne shows devolution is work in progress

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This article first appeared on Public Finance website, 18 March.

The Budget announcements on greater powers for local authorities demonstrate that the Chancellor and the Treasury are serious about fiscal devolution.

As predicted this was very much an election budget with giveaways for motorists, drinkers, and first time buyers and tax cuts for low and middle earners.

But it also served as concise restatement of the Chancellor’s view of what economic reform is for: to achieve ‘a state neither smaller than we need nor bigger than we can afford’ – and of the central macroeconomic judgement both of this Budget and his chancellorship that reducing the deficit is the key to growth. This is also, of course, the point on which his critics most vehemently disagree with him.

The debate over national growth will no doubt dominate discussion, but a large proportion of the speech was actually given over to local issues.

For the North there were announcements on transport infrastructure and tech hubs, for the south more housing zones and investment to increase housing supply.

We also had the unveiling of the much anticipated West Yorkshire combined authority and, perhaps most significantly of all, the announcement that Greater Manchester, Cheshire East and Cambridgeshire will be able to keep 100% of business rate growth, something we at LGiU have long called for and which our research shows nearly 80 per cent of councils want.

Overall, this budget seemed to offer further evidence of a welcome momentum towards devolution and takes us one step nearer to a localist tipping point from which future governments will be unable to row back. The devolution deals we have seen so far are the result of a dynamic Treasury negotiating directly with local authorities (often on a cross party basis): the first time in a generation this has happened.

The onus is now on local government to come up with compelling proposals for how to make devolution work for their area. For central government the challenge is to adopt sufficient flexibility so that we do not end up with a sort of Henry Ford localism in which you can have any sort of devolution you want as long as it’s a combined authority with an elected mayor. That flexibility is likely to be particularly important for the big Tory counties who do not see combined authorities as the the way forward for them.

Overall though, the Chancellor’s localist stock remains high. When the initial Greater Manchester deal was announced in November we wondered whether he thought he had now ‘done devolution’ or whether this was the beginning of an ongoing process. The later devolution of £6bn health funding, the announcements in this Budget and his open door commitment to future negotiation with councils all make it clear that for George Osborne this is work in progress that he intends to continue. In that respect, at least, it was a supremely confident budget.

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