This Parliament, mayoral combined authorities will finally come of age as a strategic economic tier of government. We have taken several, significant steps forward since the 2009 legislation that first enabled them, and the King's Speech included a raft of new Bills that will further enhance their role – on devolution itself, but also on buses and planning.
We will see the clarifying and standardising of devolution, making it harder to obstruct from the centre, and enabling both a ‘deepening' and a ‘widening' across the country. A lot is familiar, but this is a significant new phase. The sub-region is beefing up, and the onward march of devolution is becoming impossible to resist.
The mayoral combined authority (MCA) is now firmly established as the pre-eminent tier of government within England. Its task is to make functional economic areas function. To take the population of an area, and make it work as an economy, by connecting people from homes to jobs across council boundaries. To bridge towns and cities within city-regions. To bring together a diversity of places, industries and people and galvanise them into a coherent whole, greater than the sum of its parts.
That is why transport, above all, must remain the MCA's priority, with complementary areas such as strategic planning and housing, skills and employment support close behind. It might be tempting to task them with more. However, councils are often in a better position. And sometimes, central government should simply work to the geography of a combined authority and collaborate or co-commission, rather than devolve.
Some immediate and obvious challenges need to be addressed this year. The top priority must be to rescue council finances and rebuild their planning and development capacity – without which, the growth mission will remain noble words on a page, not tangible results on the ground.
Then, spending reviews and trailblazer deals will need to be co-ordinated. Regions must be represented at the centre – from the Council of the Nations and Regions to the Industrial Strategy Council – and in the governance of the UK Infrastructure Bank, British Business Bank and National Wealth Fund.
Anything requiring primary legislation should be fleshed out urgently, ahead of the Bill. The Government will need to back bus franchising with capacity and subsidy for it to fulfil its enormous potential.
And economic development funds, like the shared prosperity fund, will need to be allocated more fairly and more effectively.
Beyond that, to take devolution even further, there are bigger questions that will need answered during this Parliament.
The final question on fiscal devolution is: what will actually work and when?
The first question is how will accountability work? This has been a major sticking point. The meaning of accountability seems to vary dramatically, ranging from financial audit, to the role of local media and local councillors, all the way to MPs who simply want to grandstand. The trailblazers have a workable solution. But to go beyond trailblazers, MCAs will need to draw on the devolved nations and the existing English frameworks, including London's. This might be one area where understanding council finance and accountability might be more fruitful than more exotic options.
The second question is on pan-regional partnerships. What function should these have, if any? Other countries often have a regional tier of government, but that doesn't mean we should too – German and French regional governments have a complex and patchy history. But pan-regional transport is vital, especially for the North and the Midlands. There is some value in collaborating on economic strategy and on policy areas like inward investment, energy and innovation. It will be vital to keep these organisations focused and accountable to their constituent leaders.
The final question on fiscal devolution is: what will actually work and when?
We are the most fiscally centralised major economy, with only 5% raised locally, compared to 13% in France and 31% in Germany. As a result, UK investment in local economic development is half the rate of those countries. This is a major reason why we are the most regionally unequal major economy.
But the solutions are not easy. There are some important small-scale quick wins, like encouraging and enabling workplace parking levies, visitor levies and land value capture. Beyond that, there are roadblocks that cannot be wished away.
The argument that places should be ‘incentivised' toward growth by retaining some national taxes quickly falls apart in practice.
While MCAs and councils can intervene to grow their economies, the link between development projects and aggregate economic growth, let alone income tax, VAT and national insurance is tenuous and contingent – as veterans of ‘earn back' and ‘gain share' know all too well.
Other countries have very complex redistributive systems that we would need to develop. Alternatively, we could take a shortcut and focus on securing non-ringfenced, long-term revenue and capital funding for MCAs to spend flexibly on economic development – which is, ultimately, not far off where fiscal devolution would end up in practice.
These big questions already have some potential answers. But there is work to do. As we celebrate the evolution of this vital tier of government, we need to do that work to ensure devolution can continue its onward march.
Luke Raikes is deputy general secretary at the Fabian Society, formerly a Manchester City councillor and economic analyst at the Greater Manchester Combined Authority
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