The where, what and why of devolution - what it means for infrastructure

The trend to transfer powers to local government has great potential for infrastructure. But there is still a lot of confusion and uncertainty surrounding the process, says Jon Masters.

Why devolution?

A change in regional and local governance is happening all over England. Ever since the September 2014 Scotland referendum went to the No camp, local authorities in England have been queuing up to take advantage of a newly emerging political landscape. Scotland has been granted more powers of control over how it spends funds granted from Whitehall, and the English regions want the same.

“We have heard the voice of Scotland. Now the voices of England must be heard,” prime minister David Cameron said, announcing the referendum result.

Decentralisation policy has developed over the past two years, following on from Michael Heseltine’s report No Stone Unturned in Pursuit of Growth. This called for funding streams to be simplified and amalgamated, and for more responsibility to be given over to local areas. Further reports followed, setting proposals for transferring powers in transport, health and welfare, plus allowance for local control over business rates and the setting up of combined authorities and elected city mayors. 

Heseltine’s report was predicated on the need for economic growth in cities outside London, particularly the North, and initially this is how devolution progressed – along city lines. Greater Manchester, already a combined authority, was ahead of the rest, signing the first deal in November 2014. 

Where is devolution happening? 

Next in line were Sheffield City Region and the West Yorkshire Combined Authority, based around Leeds. Both received devolution deals ahead of the May 2015 election, as did Cornwall – at that time the only rural region to push for greater autonomy. 

Just about every area of England is now touched by the devolution process. After the 2015 election, chancellor George Osborne announced a Cities & Devolution Bill. Government invited proposals from local areas interested in taking advantage of what was on offer, with 38 different bodies responding. 

So far 11 devolution deals have been announced. The latest three, announced in the March Budget, are with the West of England, Greater Lincolnshire and the East of England. These add to Greater Manchester, Sheffield, West Yorkshire, the North East, Cornwall, Tees Valley, the West Midlands and Liverpool. London too has secured further devolution of powers over health, skills and transport.

The Devolution Bill has since resulted in the Cities & Local Government Devolution Act (2016), which also allows for the setting up of statutory regional transport bodies. This legislates for the planning powers given to Transport for the North and the Midlands Connect partnership, and has also been pursued by the England’s Economic Heartland Alliance, which was set up by Northamptonshire, Oxfordshire and Buckinghamshire and now includes Cambridgeshire as well as seven other bodies. Cambridgeshire is also one of 22 councils involved in the East of England devolution deal, indicating that statutory transport body status does not necessarily preclude getting devolved powers as part of a combined authority. 

What does devolution mean to a region exactly? 

While the new deals vary in detail, there are some common transfers of powers, such as responsibility for a consolidated transport budget and devolution of business support services. The new combined authorities will retain growth in revenue from business rates. The Greater Manchester Combined Authority calls this arrangement its “earn-back” deal, which it claims is worth up to £30m a year for 30 years and will be entirely reinvested in infrastructure. In return, the GMCA has agreed to hold a mayoral election in May 2017.

The actual transfer of powers is being done gradually through negotiations between local authorities, the Treasury, and government’s Cities & Local Growth Unit (a joint group from the departments for Communities & Local Government and Business, Innovation & Skills). 

The latest addition to Manchester’s deal, announced in the March Budget, gives the city-region new powers over social support funding, criminal justice and building of social housing. Plus, it will be able to create a single economic investment fund by pooling transport and local growth funding with the £30m earnback money. 

Other combined authorities are further back in the process. Cornwall’s deal is unusual, as the only devolution agreement signed by a single unitary authority. Cornwall has not been asked to introduce an elected mayor, and will not receive such a breadth of new powers as the combined authorities. It will get: 

•devolution of local transport funding and power to franchise bus services; 

•reshaping of further education; intermediate body status for EU structural funds, giving it the power to select projects for funding; 

•a devolved approach to business support services; 

•proposals for a low-carbon enterprise zone, plus joint work with government on energy efficiency; integration of health and social care; 

•enhanced joint working regarding public-sector land and buildings; and 

•establishment of a Cornish Heritage Environment Forum. 

The three most recently announced deals – for West of England, Greater Lincolnshire and East of England – are notable for their similarity. Government has issued virtually the same statement of agreed transfer of powers. Effectively, what these deals seem to say is: yes, you can have these powers, but first you have to form a combined authority, agree to an elected Mayor (which the East of England has not yet done) and join the queue. 

Why do regions want devolution?

Authorities’ official motivation for seeking devolved powers is to drive economic growth, have certainty over spending and attract private investment. But, to some, it all boils down to the fact that local authorities are very hard-up – “anything that promises a bigger budget and pooling of resources is welcomed”, says one commentator – and now that so many authorities have joined in, no one wants to get left behind.

Aecom director and head of government & public sector, John Hicks, says the reasoning is more subtle. “It all started with a drive to rebalance the economy between North and South. Yes, the squeeze on local authorities’ resource spending is getting worse, and combining areas allows better use of existing funds, but there’s also ideological thinking behind all this.

“For example, solving issues of health and social care nationally is proving politically unworkable. Discussions are changing mindsets from ‘save our hospital’ to ‘better healthcare’, from central diktat to local control. And it’s the same with roads and transport.” 

Further, he argues: “All big spending plans are predicated on private finance, and regions are competing with other parts of the world, so they have to make investment attractive. Authorities have to be financially freestanding and they have to think creatively to reduce their cost base. Those that don’t get the timing right may be left behind.” 

What’s in it for the supply chain? 

With transport infrastructure highlighted as key to economic development, devolution deals would appear to promise a lot for industry. The question remains, however, of whether they will make a difference to local growth. 

The local government services director for WSP Parsons Brinckerhoff is Mike Batheram. He says differences are already being seen across the company’s regional client base. “Significant additional capital funding is coming through. We’re supporting further extensions of Greater Manchester’s Metrolink, and it’s a similar story in other areas.” 

But there is no clear evidence that the recent increase in transport spending has come as a direct result of devolution. 

“It’s too early to notice more spades in the ground, but we’re seeing an increase in strategic planning, such as the Birmingham Connected City transport strategy. Authorities and regions need strong plans in place. The scale and ambition of their plans has increased," Batheram says. 

Aecom’s Hicks says consultants may have to invest to help local government with change programmes as they reconfigure services. “Health stakeholders in Manchester are likely to change the way they provide care, but we may not see any bricks being laid for another five to six years. 

Meanwhile, some consultants may need to rethink their business model away from building assets and towards supporting organisational change, says Hicks.

 “As another example, HMRC is slimming down owing to the uptake of online tax returns, which demand computer servers and support centres and building refurbishment projects to reflect a different business model. Opportunity is coming even against the background of spending cuts.”

So what could go wrong? The devolution agenda is already showing signs of unravelling in some areas. Once signed between government and local council leaders, agreements still have to be approved by each constituent council. 


In March, Gateshead voted to reject the North East deal, because, said council leader Mick Henry: “We signed up to the proposed agreement with conditions, and we do not believe those conditions have been satisfied.” 

Likewise, both Cambridge City and Cambridgeshire County Council – key constituents of a proposed East of England authority – have rejected their proposed devolution deal. The sticking point is the elected mayor. This was initially the stumbling block for West Yorkshire, and it’s proving a problem for others who do not welcome an extra layer of administration.

What are the risks of devolution?

A National Audit Office report, published last month, warns of uncertainty over untested governance structures and a lack of clarity on boundaries. The first devolution deals were signed with cities and regions coterminous with local enterprise partnerships. More recently formed authority partnerships have overlapping LEPs. 

Geoff French is chair of the Enterprise M3 LEP, which covers parts of Hampshire and Surrey. “It’s proving a challenge to get a bid together that works,” he says. “Surrey and Hampshire do not have one big city to centre a proposal on. 

"And while there was hope for a combined Hampshire-Solent deal, Solent has backed off and put its own plan together. There is a lot of uncertainty in the process at present. Meanwhile, pursuit of devolution is threatening to sidetrack the more established LEP agenda, diverting attention and resources.”


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