Further cuts to local government spending to reduce the deficit are still to come, given the commitment by all parties to protect the NHS.
That is a core election battleground. And, debates about devolution both to – and within – England will intensify as Scotland’s devo max settlement is agreed.
But, while all the parties talked warmly about devolution of powers and funding to cities and sometimes regions, a big question remains around what kind of devolution it will be and whether spending cuts will in practice leave cities toothless, with more powers in name than in practice.
Much of this is about control and flexibility – or the lack of it. The last few years demonstrate the point. Over the past three years, more and more of cities’ money has come from local sources of funding, up from an average of 33% in 2011-12, to 40% in 2013-14. This has come as a result of budget cuts, declining revenues and higher retention of business rates.
At the same time, Whitehall has kept strict control over how this money is spent. This is not only through ring-fencing and various regulations but also, as the infamous ‘graph of doom’ showed, because a higher share of local budgets has to be spent on statutory services, leaving little money for anything else.
Yet all too often discussions about control or flexibility in cities’ finances can feel far removed from a debate about more powers over economic development. This is a mistake.
It will be far harder for cities – individually and collectively – to make the most of any devolved economic powers if there is too little money in the local budget to make any significant investments in the long-term health of the local economy.
Without investment to grow their economy, and as a result increase their budgets, cities will be unable to provide the public services that their residents, particularly the more vulnerable ones, rely on. These are not separate issues, but two sides of the same coin.
So as 2015 approaches, the two discussions about budget cuts and devolution need to be brought together.
If any government is to achieve the scale of cuts that all political parties have committed to, radical transformation of the way in which budgets are allocated, controlled and spent is required.
Giving cities greater freedom over how funding is used, while they are also held strongly to account about achieving national outcomes, is the only way to do this.
If the UK’s economic recovery is to be sustained, and more jobs are to be created to help families around the UK, cities – which are driving economic growth around the world but under-perform in the UK – need greater capacity to make investments in the local economy.
Without fundamentally rethinking the way in which cities both deliver services and make growth-related investments, there is a danger that government cannot reduce its public expenditure and that cities will not deliver on their economic potential.
Alexandra Jones is chief executive of Centre for Cities
