England is an unbalanced country, with London's economic and political power serving to distort the potential for local prosperity. The big question is: ‘Is the problem fixable?'

If it is, the answer must surely be contained in the latest report from the Localis think-tank. Hitting Reset – a case for local leadership puts forward a clear route for delivering a strong local state able to achieve a rebalanced national economy.

The research for the report, which includes an extensive series of interviews with a regionally representative set of council leaders and seminar discussions with groups and individuals from both Westminster and Whitehall, brings to the fore the perceptions and personal feelings that have led to the central-local relationship breakdown.

Respect is pinpointed as the key issue at the heart of the difficulties. Localis chief executive Jonathan Werran told The MJ: ‘We have capable dynamic leaders at local level, but those local leaders feel disrespected and marginalised.'

One frequent theme is that central-local relations are being hindered by ministerial reshuffle. The report says that for long-serving council leaders such as Sir Richard Leese, the numbers can be ‘stark'. He has seen 17 housing ministers and eight local government ministers since becoming Manchester City Council leader in 1996.

So local leaders are adamant the centre has a problem – and this report believes the answer lies in radical, bold localism that allows local areas the freedom to resource and fund local government, and create a local state that's cohesive and responsive.

To achieve that, the report's recommendations cover restoring regional productivity, creating the capacity for local leadership and extending local state capacity in health and care, welfare and skills.

Among the key recommendations, Localis calls for a UK Investment Bank that enables regional productivity to be democratically accountable, and for loans in England to be ‘handled and managed by local enterprise partnerships (LEPS) and strategic upper tier authorities or consortia in consensus'.

The UK 2070 commission on regional inequality should ‘make a major focus of their inquiry how such a bank could avoid a political conflict with public sector debt, through either open market borrowing or reformulating debt calculations'.

To create time and space for fiscal devolution, Localis also calls for a 10-year spending review window for local government. A Royal Commission should be set up to establish the relevant criteria and develop a resource based baseline funding formula.

From this, central government should establish a self-sustaining financial system for local authorities so local areas have the flexibility to plan for the long-term ‘without relying on ad-hoc and politically-motivated grants and funding streams'.

This could include ‘trials of tourism levies, income, sales, road or corporation taxes and would be designed to eventually replace most of the revenue grants from central government'.

Councillors should also be elected with longer-term horizons in mind too: ‘To support this long-term financial planning, councillors should be elected for a minimum of five years to match the parliamentary term and local government elections should take place as a single election campaign.'

In the short term, and by the time of the next Spending Review, Government should provide details of the Shared Prosperity Fund replacement to EU funding including how much will be distributed by the end of 2020 and the framework for 2025.

It also calls for universal freedoms to set council tax levels locally and keep full business rates revenues.

There should be a support offer for councils and regions such as Cornwall, who heavily rely on EU funding, to help them plan for the long-term, according to Localis.

The NHS long-term plan should be reformulated to ensure parity of numbers between clinical commissioning group (CCG) leaders and those in local government – with a view to further integration once parity is reached. At that point they ‘should be combined so that CCGs become an accountable arm of the local state'.

On welfare, local authorities should employ a dedicated liaison officer to maintain ongoing dialogue with the Department for Work and Pensions (DWP). The Job Centre Plus's Flexible Support Fund should be expanded and devolved to give greater flexibility to local officers and the DWP should implement compensatory measures to sanctioning, where in the event of unjust sanctioning the claimant gets awarded a dividend the following month. The aim is to stop indiscriminate sanctioning and pay more attention to individual cases.

On skills, each educational authority without a Further Education Board should set one up with major providers and employers, and the collection and management of the apprenticeship levy should be devolved to these boards to be used for local strategic aims.

Responding to the report, Paul Dossett, head of local government at Grant Thornton UK LLP said: ‘The relationship between central and local government needs to be reset. For the sector to be sustainable, we need to move to a basis where councils are able to own their own future, support their communities and have the power to raise more income locally.

‘Accountability and responsibility for local services needs to ultimately rest with town halls, but for this to be possible we need to create a culture where local government is trusted to act in the interests of its residents and businesses and own its risk appetite.'

Director of Core Cities UK Chris Murray said his organisation has ‘argued for decades that the relationship between the central and local state needs to be completely re-thought'. He added: ‘Only by doing this can we reinvigorate our economy and make a massive difference to millions of lives. We welcome Hitting Reset as an important contribution to the great debate about Britain's post-Brexit economic future.'

Mr Werran believes that on our current trajectory we are ‘sleepwalking into a second lost decade by default'. What difference would implementing these recommendations make? He told The MJ: ‘If we can create a strong local state people will feel proud about their place and feel politically represented, with a stake in their future and their children's future. We need that security of funding and the respect that we can make strategic decisions.'

Hitting Reset – a case for local leadership by Joe Fayans, Bethanie Roughly and Zayn Qureshi; localis.org.uk

Views on central-local relations

Labour council leader:

‘Central government has bludgeoned local government financially and (local government) has been treated disrespectfully – the relationship is at an all-time low.'

Former minister:

‘Local and central government have been going in opposite directions and I can totally understand why – less contact, less respect, less belief in what they're doing. In words it does [believe in local government], but not in practice – there is no seat at the table for these people.'

Labour council leader:

‘I don't think central government really respects or understands the importance and power of local government. They need to address that because we have the keys to move the country forward.'

Whitehall official:

‘We can tell the difference where someone is quite a powerful leader through their profile and visibility, if they network. All those things actually matter.'

Senior Whitehall policy maker:

‘Ministers are acutely aware of the politics of England…that understanding of what's happening across the country is really important.'

Former Government minister:

‘[Ministers mainly want to] make their mark and [achieve] short-term wins because they won't be in the job long enough…you want something to happen before you leave office.'