We must redefine the terms of the devolution revolution

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

The writer is a visiting professor in practice at the London School of Economics and was a member of RSA’s UK Urban Futures Commission 

Over the past 20 years, I’ve had the chance to observe a remarkable experiment in urban governance reform: England’s efforts to devolve more power to local decision makers through metro mayors, creating, in essence, a new layer of government.

The rationale for English devolution remains as strong as ever. England remains one of the most centralised nations in the OECD, with regional and local taxes amounting to 1.7 per cent of GDP, compared with 9.4 per cent in the US and 16.2 per cent in Canada. The result of this imbalance is to concentrate an extraordinary degree of power in the hands of a small number of government ministers around policies as disparate as policing, education and regeneration, and as specific as the performance of a specific school or the removal of chewing gum from pavements.

This model of governance simply doesn’t work in a complex and rapidly changing global economy. It distances decision makers from the complexities of community challenges and opportunities, which differ from one region to another. It thus leads to rigid policies that fail to unlock fully the assets of disparate places and prevents the formation of a robust democracy that engages citizens not just at the voting booth but in active problem solving.  

The unappreciated power of mayors is their ability to convene networks of leaders who would otherwise be divided by jurisdiction or sector. Cities are not mirror images of national governments; they are networks of institutions capable of moving horizontally to deliver collective responses to difficult challenges. If unleashed fully, this power to co-ordinate across borders and cultivate ecosystems can contribute to national aims to drive growth and reduce the gaps in performance between London and the rest of the country.  

Talk of a “devolution revolution” is both encouraging and worrisome. National leaders have defined this in exceedingly narrow terms, focusing on the delivery of objectives set by national government and funding divided by departmental area. This is a truncated vision that makes localities just another arm of national agencies.

True devolution must go further in three ways. First, the devolution of fiscal powers needs to accompany the direct election of mayors. It is only then that metro mayors can be given full agency and autonomy to unlock local assets. Financing investment requires predictable (“bankable”) future revenue streams, but this is impossible in a world in which all taxes are collected nationally, and all local expenditure is subject to the sequestration of national spending reviews. Whitehall should remember that the expansion of water, gas and electricity networks was financed through local taxes — a repetition of which has not been delivered by centralisation and deregulation.

Second, devolution must involve metro mayors as central players in the design and delivery of industrial policy. To this end, devolution policies forged in the 2000s and 2010s must align with the radically changed economic situation of the 2020s. Strained relations with Russia and China have renewed focus on the safety of supply chains, making the reshoring of critical military and civilian manufacturing capacity an issue of national security. 

Third, metro mayors must be empowered to compete on the global stage. Local growth plans cannot just be part of domestically oriented government programmes; the trading and investment realities of a radically changed world order must serve as context.

Devolution has established metro mayors as an important part of a largely centralised governmental system. But that is only partial devolution. To grow the nation, English cities must be empowered to engage with the policymaking process. Therein lies the true revolution.