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Devolve powers to cities to stimulate growth - report

Words: Laura Edgar

UK cities should have the power to set council tax bands, as well as having more control over how public money is spent, according to a new report by the City Growth Commission.

Launched today (Tuesday), Powers to Grow: City Finance and Governance [pdf] argues that lack of financial control in the UK’s ‘metros’ is inhibiting economic growth in and around the UK’s city regions.

The UK, it points out, has the most centralised system of public finance of any major OECD country. Despite this, UK city regions – or ‘metros’ – still account for  61 per cent of the nation’s growth.

But this could be further enhanced if metros had more freedom to drive investment, job creation and public service growth. This would enable them to tackle issues such as long-term welfare dependence and regional contributions to servicing the national debt.

The wider result would be a more sustainable national economy

The report proposes “significant devolution” of finance away from central government to cities with leadership, financial management and accountability structures robust enough to administer a devolved city region. It identifies 15 cities where devolution would be desirable.

“Enabling the leaders of these major urban areas to decide what is right for them, and with it, for them to carry the responsibility for those decisions is crucial,” said City Growth Commission chairman Jim O’Neill.

“Crucially and as clearly suggested by the chancellor in early August, it is only sensible to devolve this fiscal responsibility to those urban areas who can demonstrate they can succeed with this greater autonomy.”

Other city regions will have to wait until their structures are in a position to cope with “the difficult storms of decentralisation,” says the report.

However, the Commission also anticipates resistance from central government where a “Whitehall knows best” mentality prevails.

Writing ahead of the launch, Alexandra Jones, chief executive of the Centre for Cities [www.centreforcities.org] said: “Many national officials and politicians remain to be convinced that the most effective response to the UK’s largest cities punching below their weight is giving them greater control over their finances.”

The report concludes that an independent City Region Devolution Committee should be established to evaluate metro applications for devolved status.

Those metros independently assessed as meeting the economic and governance conditions should then be allowed to:

- pool revenue streams and leverage assets
- raise and retain funding through new and existing taxes
- borrow more freely in open capital markets
- integrate public service reform and economic development with a new power to convene other public and quasi-public-sector bodies
- contribute to national policy making.

Download the Powers to Grow report [pdf].