England & Wales Communities and society, Democracy, devolution and governance

Viewpoint: What do combined authorities mean for the future of local government?

Photo Credit: Cindee Snider Re via Compfight cc

Angelica Gavin, a solicitor in the Government & Infrastructure Team at Browne Jacobson LLP, looks at some of the implications of local devolution.

Reinvigorated by the Scottish independence referendum, calls for devolution to the English regions have been increasing in recent years. For local authorities, the impetus for greater devolution is the idea that at least some decisions are better made locally, combined with the pressure of increased demand for services and reduced central government funding as a result of the 2008/2009 recession.

One key effect of the pressures upon local government is the rise of regional groups of authorities which are lobbying central government for greater spending powers. The current popularity of combined authorities is a fascinating development in the devolution debate, but the consequences that authorities forming such groupings for the local authority landscape as a whole are not altogether clear.

The combined authority (originally a Labour policy intended to provide a structure for collaboration on joint regeneration and transport projects) is proving to be a powerful vessel for devolution of spending powers. Some are already realising powers far wider than were originally envisaged. The Greater Manchester Combined Authority has been granted control of a £6bn health budget and the opportunity to keep 100% of additional growth in local business rates. Many other authorities are now on the path to becoming combined authorities, with agreements for the Sheffield, Liverpool, North East and West Yorkshire recently being reached; although no combined authority has as yet been granted powers which are as significant as those granted to Greater Manchester.

The vision for those in favour of combined authorities is that they are the path to greater spending powers, greater control over local decision making, and perhaps ultimately a move towards local authorities becoming self-sufficient, using funds raised locally through taxation and other fiscal measures to provide services to a wider regional area.

However, the powers being devolved to combined authorities so far tend be increased abilities to spend budgets allocated by central government rather than powers to raise taxes or borrow. Despite many arguments that merely decentralising budgets will not be sufficient to meet the funding needs of authorities in future, devolution of further powers to raise taxes is politically unpopular and we have not seen evidence from any of the major parties to suggest that further powers of this nature are likely to be granted at any time in the near future.

Devolution to the regions raises issues which are wider than those relating to the funding of local authorities by central government. Many commentators argue that local government should be formed around a regional economy which covers both city and rural areas. Combined authorities are in some ways redrawing the local authority boundaries around a functional economic area which can be used by the authority to draw tax revenues and redistribute funding to those areas which need it most. With the addition of significant new powers to spend and consolidation of local authority functions into the combined authority, they have the potential to form the basis of a rationalised and simplified local government landscape.

Without consolidation of the local government landscape, combined authorities risk becoming an unwieldy additional tier which increases bureaucracy and complicates decision making. Many are in favour of a wholesale reorganisation of the local government landscape, and in some ways this may be attractive for a government looking to rationalise and reduce public spending. However such a radical move would be widely unpopular and would require significant consideration before any steps were taken to implement any strategy of this nature.

Despite their current popularity, combined authorities are unlikely to become the method of choice for all authorities seeking greater spending powers (absent some other imperative to adopt such a structure). The establishment of such an entity may require years of negotiation between authorities, followed by a lengthy process of planning, consultations and ministerial approvals. Even then, a combined authority without an elected mayor is unlikely to be sufficiently democratically accountable to receive significant powers. However, elected mayors have proved unpopular with the electorate where the post has not come with significant spending powers.

Currently, combined authorities seem to be the route to greater powers for local government, but where they may lead is not clear. Certainly it could be argued that they are a step towards a single tier of local government, but that discounts the value that small local authorities with intimate local knowledge bring. The devolution debate throws up a huge array of issues which remain to be addressed. Combined authorities are only one part of a complex web of considerations. However, we believe that the opportunities for both local and central government as a result of devolution are significant.

On 26 February 2015 Browne Jacobson held a round table event to discuss the effects of devolution on local and central government. We invited industry experts, policy influencers and local and central government leaders and got the view from those at the centre of the debate. The conclusions reached at the round table presented a challenging view of the future for both local and central government. You can download a copy of the report here.