Economic Affairs Committee
Tuesday 7th July 2026
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16:02
Speaker 1
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Speaker 1
I think what really is key in accountability, though, of a new system, is making sure they work. And I'm quite glad that they don't. I think most people are quite glad they don't have to understand how the system works. That there's something concrete that people can see in their area and they. And, and I think this is useful for government to say that thing there that happened because of this devolution arrangement, and it wouldn't have happened otherwise.
16:03
Speaker 2
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Speaker 2
I'm sorry, what I meant to say, um, is, um, I think we're right to be wary of an over complicated tax system. I think that's, that's a criticism of, of lots of parts of our tax system. Um, and I think the best thing that we can do in the roadmap is build off of, um, you know, progress that has already been made in local government reorganisation. So that means existing maturity of mayors, integrated settlements. How can we work off of those instead of creating entirely new systems that we've already kind of thought through?
16:03
Speaker 3
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Speaker 3
Okay. Can I move on to the the question which you raised actually about borrowing powers, and this is really the issue of whether there are any implications in all of this for the UK's fiscal framework. If the powers are to be devolved?I mean, do you envisage that there would be significant increases in borrowing capacity?And what would be the mechanism for controlling this?Would individual authorities be required to have their own fiscal plans?How would that fit in with the governments who would be monitoring it?How would we ensure that this did not become an arrangement which simply, in a sense, made it difficult, more difficult, which was much more difficult for central government to control its own finances?
16:04
Speaker 2
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Speaker 2
Mhm. Um, yeah. So I think in terms, obviously, we've been thinking a lot about about infrastructure delivery. And borrowing is a key part of that. I think borrowing is kind of the a key puzzle piece in the fiscal devolution framework. Um, and I say that with the recognition that there isn't actually that much room for us to borrow currently. You know, we have to, the roadmap has to consider very closely how, um, borrowing from all levels of local government will intersect with fiscal rules.
Um, so I guess the first consideration here, the first question to ask, um, is around how mayoral boring or boring would kind of run up against our current central debt measure of, um, public sector financial liabilities. Um, and so when we consider that most of the projects that we're thinking about mass transit housing, all of those would actually not be counted as financial liabilities because they're too illiquid, which would mean that all these projects that we might have the ambition of mayors to deliver, um, run up against kind of our borrowing abilities.
Um, and so it's an open question of, of, of how can the fiscal devolution roadmap kind of best meet that trade off?Um, and I guess to think about status quo currently, uh, we kind of have two major ways that we can manage borrowing. So one is under the prudential borrowing framework. Um, which obviously applies to combined authorities, but also to local authorities. Um, and so that kind of manages the, the risk and ensures that borrowing has, um, the relevant kind of revenue streams to back it.
Um, but secondly, is, is kind of on combined authorities, there's an additional layer of a capital financing limit. Um, and so this is something that we hear from mayors as, um, being something that they have to negotiate year on year. I think it's also burdensome in Treasury to have to negotiate that cap. Again, we also have to consider how do we limit borrowing. And so all of this to say, I don't have an answer, but I think those are kind of all of the pieces that we'd want to think about and address in the roadmap that I haven't, you know, heard enough conversation about.
Um, but we want mayors to borrow, but we have to open up the space for them to do it.
Um, so I guess the first consideration here, the first question to ask, um, is around how mayoral boring or boring would kind of run up against our current central debt measure of, um, public sector financial liabilities. Um, and so when we consider that most of the projects that we're thinking about mass transit housing, all of those would actually not be counted as financial liabilities because they're too illiquid, which would mean that all these projects that we might have the ambition of mayors to deliver, um, run up against kind of our borrowing abilities.
Um, and so it's an open question of, of, of how can the fiscal devolution roadmap kind of best meet that trade off?Um, and I guess to think about status quo currently, uh, we kind of have two major ways that we can manage borrowing. So one is under the prudential borrowing framework. Um, which obviously applies to combined authorities, but also to local authorities. Um, and so that kind of manages the, the risk and ensures that borrowing has, um, the relevant kind of revenue streams to back it.
Um, but secondly, is, is kind of on combined authorities, there's an additional layer of a capital financing limit. Um, and so this is something that we hear from mayors as, um, being something that they have to negotiate year on year. I think it's also burdensome in Treasury to have to negotiate that cap. Again, we also have to consider how do we limit borrowing. And so all of this to say, I don't have an answer, but I think those are kind of all of the pieces that we'd want to think about and address in the roadmap that I haven't, you know, heard enough conversation about.
Um, but we want mayors to borrow, but we have to open up the space for them to do it.
16:06
16:06
Speaker 1
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Speaker 1
And if you're if you're really trying to expose areas to local changes in local economic circumstances and you're exposing them to national cycles because you're only equalizing between areas, then you are moving some revenue risk from central government to local government. If you're taking though a block grant adjustment approach, that that keeps that national economic cycle risk with central government, which is doing the smoothing. And so then you've not you've not moved risk and volatility to local areas in quite the same way. I think that which taxes and precisely how determines then also how volatile areas might expect their revenues to be if the extra risk and the extra volatility is why they need might ask for more borrowing powers, then how big those fluctuations are influences the amount of borrowing you might want them to be able to do.
16:07
Speaker 4
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Speaker 4
Thank you, Baroness Wheatcroft. I can see why you'd want mayors to have borrowing powers for capital projects. But what about day to day running of services?You talked a bit about services in answer to Lord Russell's question. The bulk of what we've been talking about is devolution of resources and. And I'm really keen to establish where this basic minimum would be in services, how you establish that, how far above that you're prepared to see some areas go before there's a risk of discontent.
I mean, certainly we're already there as far as the health services concerned in London, we have fantastic services. In parts of Kent that I know, people go around with cards in their pocket saying, you've taken ill, please do not take to particular hospital because the hospitals in Kent are pretty dreadful. So there are already inequalities. But how do you establish where the floor should be?
I mean, certainly we're already there as far as the health services concerned in London, we have fantastic services. In parts of Kent that I know, people go around with cards in their pocket saying, you've taken ill, please do not take to particular hospital because the hospitals in Kent are pretty dreadful. So there are already inequalities. But how do you establish where the floor should be?
16:09
Speaker 1
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Speaker 1
Um, I'd expect it to vary by service. I also think reasonable people could disagree about where to set those floors, even for particular services. So, um, I don't have a good answer to the where that should that floor should be apart from to say it's going to vary and people will put it in different places.
16:09
16:09
Speaker 1
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Speaker 1
And I think that's politicians. Um, because I think it's a really, it's a fundamentally political judgement there about what you're willing to accept in terms of divergence across the country and on the resource. I think that's right that we've been talking mostly about resource, um, devolution of resource spending and funding. And therefore it's right to think not only about capital borrowing powers, but about resource borrowing powers. Um, you could restrict that. You could cap them in a similar ways as administratively complex as that gets.
You could, um, if it was about managing year on year volatility in, in revenues from, from new streams, you could think about similar system to Scotland and Wales where they can borrow for these outturn versus forecast errors to do the smoothing. Um, then you'd want the forecast to be independent. So you'd want in the case of Scotland it's the Scottish Fiscal Commission for the Wales. It's the it for Wales it's the OBR. You probably don't want areas doing their own forecasts of what they're going to get.
And then continuously, you know expecting something very optimistic and borrowing to fill that gap that doesn't look like a sustainable system.
You could, um, if it was about managing year on year volatility in, in revenues from, from new streams, you could think about similar system to Scotland and Wales where they can borrow for these outturn versus forecast errors to do the smoothing. Um, then you'd want the forecast to be independent. So you'd want in the case of Scotland it's the Scottish Fiscal Commission for the Wales. It's the it for Wales it's the OBR. You probably don't want areas doing their own forecasts of what they're going to get.
And then continuously, you know expecting something very optimistic and borrowing to fill that gap that doesn't look like a sustainable system.
16:10
16:10
Speaker 2
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Speaker 2
Yeah. I think, um, I think the one piece that I'd add is, um, there's various levels at which we can standardise. And so there's a question of, you know, within the integrated settlements, there's kind of an outcomes framework. And so that kind of outlines, um, exactly what needs to be delivered by the established strategic authority, um, to meet specific goals. And, you know, there's a question of in assigning those specific outcomes, there's a level of central control, um, that runs up against what our goal might be in fiscal devolution.
And so maybe there's a question of how do we, where's the middle between kind of this outcome frameworks that specifies how much CO2 is sequestered into kind of the outcomes that we actually care about, not only about growth, but also around living standards. If we're thinking about mass transit around congestion. And so maybe those are the kinds of things that we would like to see standardised across the country, these kind of higher level, um, macro indicators. And again, I also don't have the answer exactly where we land, but I think that there's a trade off between how much central control we have.
If we specify outcomes too closely and we don't allow local leaders to kind of deliver services and infrastructure in a way that meets local needs.
And so maybe there's a question of how do we, where's the middle between kind of this outcome frameworks that specifies how much CO2 is sequestered into kind of the outcomes that we actually care about, not only about growth, but also around living standards. If we're thinking about mass transit around congestion. And so maybe those are the kinds of things that we would like to see standardised across the country, these kind of higher level, um, macro indicators. And again, I also don't have the answer exactly where we land, but I think that there's a trade off between how much central control we have.
If we specify outcomes too closely and we don't allow local leaders to kind of deliver services and infrastructure in a way that meets local needs.
16:11
16:12
16:12
Speaker 1
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Speaker 1
So so currently we do that in practice through progressive income taxation and a benefit system. So we we do a lot of that nationally at the moment. Um I think there's good reasons for some of that to stay national because as discussed, the kind of national government has the power to equalise between regions in a way you can't achieve. Um, if you move some things down, you can only equalise within regions and not across. So in practice that's how we do some of it.
If you wanted, not just living standards to be more equal, but you wanted um wealth or economic opportunity or income from earnings to be more equalized than I think you'd be looking at a different set of things around skills, transport, the kind of investments D.T. talks about that might bring more growth to certain areas. But I think that's the kind of the sort of living standards. And then there's a separate economic opportunity piece. It's a bit distinct.
If you wanted, not just living standards to be more equal, but you wanted um wealth or economic opportunity or income from earnings to be more equalized than I think you'd be looking at a different set of things around skills, transport, the kind of investments D.T. talks about that might bring more growth to certain areas. But I think that's the kind of the sort of living standards. And then there's a separate economic opportunity piece. It's a bit distinct.
16:13
16:13
Speaker 1
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Speaker 1
So I'm not sure. It totally was without extra money. Um schools in. London used to be worse than the rest of the country. And major pockets of deprivation. And so London actually got more funding per pupil. And it still gets more funding for people than other areas. Um, and I guess when we talk about equalising for need, you could either think about what gets the same teacher quality in front of the same number of kids, or you think about actually this area is really struggling.
So we're going to put more resources in to try and equalize outcomes. Um, on schools we've moved a bit, um, and, and yeah, the improvement in London has been vast.
So we're going to put more resources in to try and equalize outcomes. Um, on schools we've moved a bit, um, and, and yeah, the improvement in London has been vast.
16:14
16:15
Speaker 2
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Speaker 2
So I think I would assume maybe with equalisation there is. There's an idea that um. We kind of all regions might look the same or they're all equal, but equivalence might kind of recognise that um in certain areas there are different needs that need to be delivered and you can have an equivalency without kind of equalising perfectly. And that allows kind of what we were mentioning before of, of allowing local leaders to, um, deliver what they see as best.
16:15
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16:16
16:16
Speaker 6
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Speaker 6
Yes. Thank you. Um, if devolution means anything, it means difference. Presumably. So that one area can decide or the people who live in one area can decide to have a different lifestyle to the people who live in a different area. And if you've got that, you presumably are trying to ensure that the people who live in that particular area have a democratic control over the people who are taking the decision. So. As I understand what you've been talking about is essentially the fiscal devolution would be to, uh.
The, the regional strategic authorities. Um, and if you take London as an example, which I really rather suspect was the model that the recent bill was built upon very largely. Um, you've got a situation where. The residents of London see themselves as living in local boroughs, where they see the responsibility for delivering what happens in that borough, being in their local town hall, not in the City Hall. If all the money goes into the City Hall, they're still going to think that actually their votes should be controlling what goes on in their borough.
How do you overcome that?How do you make sure that the control of the money democratically is actually where the voters think it is?Because we've had a mayor in London now for, I don't know what it is, 25, 30 years, nearly. Um, and it hasn't changed. Londoners don't think the mayor runs anything very much. Um Londoners think. That the mayor is a bit like, as people used to say about Boris Johnson, they'd pick up the Metro on their way into work and have a good laugh at what the mayor had done overnight, and they'd pick up the Evening Standard in the days when there was an Evening Standard and they'd read that and have a good laugh at what the mayor had done on their way home.
They didn't think the mayor did anything except for entertainment. Uh, Sadiq Khan probably doesn't even provide that. But nobody thinks he does anything. How do you actually decide which areas should control the money?Because if it's going to be regional, you're not really achieving anything. But if you're giving the money to the local districts or boroughs in London, you actually are giving such little pockets of money, they're not strategically going to be able to change anything.
The, the regional strategic authorities. Um, and if you take London as an example, which I really rather suspect was the model that the recent bill was built upon very largely. Um, you've got a situation where. The residents of London see themselves as living in local boroughs, where they see the responsibility for delivering what happens in that borough, being in their local town hall, not in the City Hall. If all the money goes into the City Hall, they're still going to think that actually their votes should be controlling what goes on in their borough.
How do you overcome that?How do you make sure that the control of the money democratically is actually where the voters think it is?Because we've had a mayor in London now for, I don't know what it is, 25, 30 years, nearly. Um, and it hasn't changed. Londoners don't think the mayor runs anything very much. Um Londoners think. That the mayor is a bit like, as people used to say about Boris Johnson, they'd pick up the Metro on their way into work and have a good laugh at what the mayor had done overnight, and they'd pick up the Evening Standard in the days when there was an Evening Standard and they'd read that and have a good laugh at what the mayor had done on their way home.
They didn't think the mayor did anything except for entertainment. Uh, Sadiq Khan probably doesn't even provide that. But nobody thinks he does anything. How do you actually decide which areas should control the money?Because if it's going to be regional, you're not really achieving anything. But if you're giving the money to the local districts or boroughs in London, you actually are giving such little pockets of money, they're not strategically going to be able to change anything.
16:18
Speaker 1
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Speaker 1
I think it's. One positive outcome from fiscal devolution or revenue assignment or whatever it ends up being, might be that people no longer think their local mayor is a man with a gold chain who does ceremonial ribbon cutting. And actually, if they have some real power, people will pay more attention to them, I think. On the I distinguish. On powers between where and how the money is raised compared to how it's spent. So you could have quite a lot of devolution over how money is spent in a local area, without necessarily needing to devolve or wanting to devolve tax raising, um, powers on the boroughs, London boroughs versus the city, I really.
Care about local government and I'm very interested in it. I'm not sure I could name a single councillor from my London borough, which is very poor on my part, but I think speaks to a risk that people aren't even. People who care quite a bit aren't that knowledgeable about local politics. Part of what a mayor does is centralize some of that into one person. I agree there's then an issue if where actual power lies is not where people think it lies.
We have that. Issue in Shire County areas now, where districts have power over some things and counties have power over others. And if you ask most people, they won't be able to tell you which. And it varies between areas which has power over which. So I agree there are kind of confused chains of accountability. There's probably a comms piece there. I think if devolution eases that in any way, it's that once an area, once a mayor is more important and has more power and has more real, you know, meat then.
They'll get more attention and they'll get more scrutiny.
Care about local government and I'm very interested in it. I'm not sure I could name a single councillor from my London borough, which is very poor on my part, but I think speaks to a risk that people aren't even. People who care quite a bit aren't that knowledgeable about local politics. Part of what a mayor does is centralize some of that into one person. I agree there's then an issue if where actual power lies is not where people think it lies.
We have that. Issue in Shire County areas now, where districts have power over some things and counties have power over others. And if you ask most people, they won't be able to tell you which. And it varies between areas which has power over which. So I agree there are kind of confused chains of accountability. There's probably a comms piece there. I think if devolution eases that in any way, it's that once an area, once a mayor is more important and has more power and has more real, you know, meat then.
They'll get more attention and they'll get more scrutiny.
16:20
Speaker 2
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Speaker 2
Um, I guess two pieces. So I think something that is really important within the roadmap is to identify very clearly what are, what are the core responsibilities of local government and of strategic or sorry of local authorities and strategic authorities. Um, and so just in broad strokes, you know, you'd imagine that strategic authorities are good at projects that kind of cross local authority boundaries such as mass transit, new towns, um, and local authorities around kind of social care and libraries, parks. Um, and I think, I do think that there's a comms piece there and I think that should be, um, featured within the roadmap because, um, you know, I think a lot of people still think that council tax is for their bins mostly.
Um, you know, there's, there's not a good awareness of, of, um, who does what and you know, what level of government is working on which project. Um, and I think a second piece is to consider within the roadmap, how can local government or local authorities and strategic authorities best, um, engage democratically?Um, I'll give one example. Um, you know, I think in the structure of a regional development corporation, you would have kind of this, this board of directors in which all of the constituent local authorities and strategic authorities could sit and kind of, um, be able to contribute to either, you know, say that this is a new town's regional development corporation.
That is a mechanism through which we can have democratic engagement across local authorities and strategic authorities who are better aware of their roles. Um, and so that they can kind of engage and deliver product projects that, um, kind of meet the needs of their constituents.
Um, you know, there's, there's not a good awareness of, of, um, who does what and you know, what level of government is working on which project. Um, and I think a second piece is to consider within the roadmap, how can local government or local authorities and strategic authorities best, um, engage democratically?Um, I'll give one example. Um, you know, I think in the structure of a regional development corporation, you would have kind of this, this board of directors in which all of the constituent local authorities and strategic authorities could sit and kind of, um, be able to contribute to either, you know, say that this is a new town's regional development corporation.
That is a mechanism through which we can have democratic engagement across local authorities and strategic authorities who are better aware of their roles. Um, and so that they can kind of engage and deliver product projects that, um, kind of meet the needs of their constituents.
16:21
Speaker 6
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Speaker 6
Can I just move on slightly?It's the same problem, but a slightly different aspect of it, which comes down to, um, retain central government control. Because if you've got devolution, what you want presumably is for the devolved powers to be exercised differently to what necessarily the centre would want. But if what you've got is the centre saying, well, you've been very successful, so we're going to take your money away from you and give it to the poorer areas. The centre is actually going to be controlling what everybody does, because it's going to be deciding how much they take from where and where they give it to.
Perhaps a simpler example is borrowing. And if you look at, um infrastructure projects for particularly the tram projects, for instance, where the money is quite substantial, where you could fund it, presumably from the projected revenues that the tram system would earn over 20, 30 years. But you've got to borrow it upfront to do it. If that borrowing is as it undoubtedly would be, unless the local authorities had their own credit ratings, it would be borrowing, which went straight onto the central government borrowing. The central government is going to say.
We are going to control it. In other words, no matter how much revenue they get in, no matter how much devolution they've got, the Treasury says no. How do you get around that?
Perhaps a simpler example is borrowing. And if you look at, um infrastructure projects for particularly the tram projects, for instance, where the money is quite substantial, where you could fund it, presumably from the projected revenues that the tram system would earn over 20, 30 years. But you've got to borrow it upfront to do it. If that borrowing is as it undoubtedly would be, unless the local authorities had their own credit ratings, it would be borrowing, which went straight onto the central government borrowing. The central government is going to say.
We are going to control it. In other words, no matter how much revenue they get in, no matter how much devolution they've got, the Treasury says no. How do you get around that?
16:23
Speaker 2
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Speaker 2
Yeah, it's a difficult question. I think it's something that we keep running into, which is that, um, kind of in our central debt measure, that's, that's, that's how we count debt. We kind of. How all of these projects are classed are not as financial liabilities. And so they would kind of show up on the balance sheet. And I guess there is kind of an open question of what it looks like to, to change the central debt measure. I wouldn't kind of vouch for that because, um, you know, I think there's a lot more questions that we'd have to consider, but I think within the fiscal rules framework, um, that we currently have, um.
I think it's a really difficult question. And I think there might, again, I think there might be a question of how can we crowd in more, um, private investment because I guess if you had um, even kind of majority ownership from private investment, then mayors or kind of regional leaders would be able to borrow. But then again, it is true that the central government would end up being kind of the lender of last resort, even in that case. So, um, I'm sorry, I've just brought up kind of more considerations, but I don't have a good kind of, um, final.
To that.
I think it's a really difficult question. And I think there might, again, I think there might be a question of how can we crowd in more, um, private investment because I guess if you had um, even kind of majority ownership from private investment, then mayors or kind of regional leaders would be able to borrow. But then again, it is true that the central government would end up being kind of the lender of last resort, even in that case. So, um, I'm sorry, I've just brought up kind of more considerations, but I don't have a good kind of, um, final.
To that.
16:24
Speaker 1
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Speaker 1
I think this hits on the fundamental tension around evolution, which is if the centre wants to empower areas and wants to let them do different policies, that might not be what the centre would have designed for them, then it also needs to trust them, make them accountable. And um. Design the centre of government's accountability relationship with mayors in a different way. To the extent that the central government is still ultimately accountable for borrowing, if it all goes wrong or is ultimately held politically responsible for what happens in particular areas, um, I think it's very difficult for central government to let go.
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16:26
Speaker 7
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Speaker 7
Surely the. The the the what?The logic of. Devolution is to try and, uh. Make local authorities, uh, think not so much. How do we squeeze more money out of central government departments?But how do we actually run our services more efficiently?Um, and, um, uh, the question of. Running services efficiently seems to be lost in this discussion. There's quite a lot of variation, uh, in. In quality of services, there's also quite a lot of inequality within, um, a particular local authority.
I was a member of Cumbria County Council. Life expectancy in a ward in Workington 20 years lower than life expectancy in a rural area near Penrith. Um so. Um I think the. So anyway, the question I was going to ask really is um are local government finance is obviously in a terrible mess. I mean what. Uh, again, we had a two tier system which were now trying to make a single tier system in the two tier system.
People related much more to the district council, even though the county council, of which I was a member, uh, spent about 20 times as much as the or 30 times as much as the districts. Um, and the. Fact is that the, the big issue in, in local finance is the escalating costs of social care and children's care and all that, which takes 70% of the budget. Uh, and there's no democratic accountability about how well you do that. So. The general point is, do you do you see the, the argument about fiscal devolution as.
Related to how we have better local government?Or do you think that this what we're basically talking about is, uh. Having strategic authorities that are basically focused on economic growth functions, uh, and that the rest of. And that local government just gets on with the job, um, as best it can. Without much change.
I was a member of Cumbria County Council. Life expectancy in a ward in Workington 20 years lower than life expectancy in a rural area near Penrith. Um so. Um I think the. So anyway, the question I was going to ask really is um are local government finance is obviously in a terrible mess. I mean what. Uh, again, we had a two tier system which were now trying to make a single tier system in the two tier system.
People related much more to the district council, even though the county council, of which I was a member, uh, spent about 20 times as much as the or 30 times as much as the districts. Um, and the. Fact is that the, the big issue in, in local finance is the escalating costs of social care and children's care and all that, which takes 70% of the budget. Uh, and there's no democratic accountability about how well you do that. So. The general point is, do you do you see the, the argument about fiscal devolution as.
Related to how we have better local government?Or do you think that this what we're basically talking about is, uh. Having strategic authorities that are basically focused on economic growth functions, uh, and that the rest of. And that local government just gets on with the job, um, as best it can. Without much change.
16:29
16:29
Speaker 2
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Speaker 2
I think one point there around kind of efficiency of, of, of delivery. Um, you know, something to be said about some of the research that we did into transit. Um, transit is. Is becomes more costly when we lose this kind of institutional knowledge, the skills to do very specific things like tunnel boring. Um, and because we have kind of the stop start funding, we kind of lose this institutional knowledge. And I think you might be, you might see that kind of across all kinds of infrastructure delivery and also, um, like services delivery.
And so I think that the roadmap could do well, kind of in, in, in delivering services efficiently by, um, facilitating this kind of institutional knowledge transfer, um, of, you know, I think we've heard kind of across, um, across local authorities and strategic authorities, um, an interest in having kind of more secondments and more kind of transfers across the country to, to share knowledge. Um, and I guess to kind of on the second bit around whether we should be focusing on strategic authorities. Um, you know, I think that's kind of, that's the angle that we focus on because we're interested kind of in the infrastructure delivery piece.
But I think that, um, we can't overlook within this roadmap kind of the unfairness of, um, kind of the local government finance settlement currently, um, and. I think, you know, one piece on that might be how, again, as I mentioned earlier, what are the exact kind of, um, the baseline level of service provision that we might want out of, out of local authorities. And maybe that's something that we can specify within this roadmap. And then we can work towards kind of, um, what is the funding to actually meet, you know, those baseline services so that local authorities are then unlocked to kind of work on the things that we might want them to, um, over and above those, those services.
And so I think that the roadmap could do well, kind of in, in, in delivering services efficiently by, um, facilitating this kind of institutional knowledge transfer, um, of, you know, I think we've heard kind of across, um, across local authorities and strategic authorities, um, an interest in having kind of more secondments and more kind of transfers across the country to, to share knowledge. Um, and I guess to kind of on the second bit around whether we should be focusing on strategic authorities. Um, you know, I think that's kind of, that's the angle that we focus on because we're interested kind of in the infrastructure delivery piece.
But I think that, um, we can't overlook within this roadmap kind of the unfairness of, um, kind of the local government finance settlement currently, um, and. I think, you know, one piece on that might be how, again, as I mentioned earlier, what are the exact kind of, um, the baseline level of service provision that we might want out of, out of local authorities. And maybe that's something that we can specify within this roadmap. And then we can work towards kind of, um, what is the funding to actually meet, you know, those baseline services so that local authorities are then unlocked to kind of work on the things that we might want them to, um, over and above those, those services.
16:30
Speaker 1
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Speaker 1
To give the government and many, many people Mhclg some credit, the local government finance system is less arbitrary and fairer than it used to be. Um. Which is a good start. Um, I would see strategic authorities as the first step. I think that makes sense. I wouldn't rule out thinking more carefully about local authorities. I don't think though fiscal devolution of any kind is going to be the the panacea that fixes local government finance all makes the the numbers add up.
Um. The the Local Government Association came up with some new projections last week, which I haven't managed to look into in detail, but they're projecting 5% increase above inflation in spending pressures over the next three years each year. Um, I think if that's the scale of the challenge you, you need either substantially more tax revenue, either be that nationally raised or locally, or you need to reduce pressures, managing down demand, improving efficiency, particularly in some areas. We, we think it does vary quite a lot across the country, or reducing the range and quality of services that local authorities are expected and or intend to provide.
Um, so I don't think fiscal devolution is part of the answer. Maybe it helps at the margin.
Um. The the Local Government Association came up with some new projections last week, which I haven't managed to look into in detail, but they're projecting 5% increase above inflation in spending pressures over the next three years each year. Um, I think if that's the scale of the challenge you, you need either substantially more tax revenue, either be that nationally raised or locally, or you need to reduce pressures, managing down demand, improving efficiency, particularly in some areas. We, we think it does vary quite a lot across the country, or reducing the range and quality of services that local authorities are expected and or intend to provide.
Um, so I don't think fiscal devolution is part of the answer. Maybe it helps at the margin.
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Speaker 7
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Speaker 7
We've had a pretty deep discussion. Across a range of issues, but one of the central questions that come up is the incompatibility of passage down to a plethora of organisations, local, regional and so on. Uh, with the ability to borrow on revenue raising powers, the incompatibility with that and the responsibility lying at the centre, um, with the fiscal rules and so on in. Response to that. At one point, I think you, you said, and I admire your optimism on this. Ultimately you have to trust them.
Now, um, I'm all for what Peter Hennessy called the good chap theory of government. Um, it was phrased before the days of, uh. Feminist critic. So would take chap to chap essays as well. Uh, but to be honest, I think that the good chap theory of government, if ever it worked, certainly hasn't worked in recent decades. And, uh, the inability to accept that everyone will act trustworthily. And honourably and sensibly has been met by a whole series of institutions and entities to provide accountability.
On the one hand, and oversight on the other hand. So having set the context, my question is actually quite simple. Given the supposition that that the government goes ahead and passes such powers down, what forms of additional accountability and oversight might be needed?Uh, with regions or other entities with the enhanced powers that we've been speaking about here, particularly fiscal powers.
Now, um, I'm all for what Peter Hennessy called the good chap theory of government. Um, it was phrased before the days of, uh. Feminist critic. So would take chap to chap essays as well. Uh, but to be honest, I think that the good chap theory of government, if ever it worked, certainly hasn't worked in recent decades. And, uh, the inability to accept that everyone will act trustworthily. And honourably and sensibly has been met by a whole series of institutions and entities to provide accountability.
On the one hand, and oversight on the other hand. So having set the context, my question is actually quite simple. Given the supposition that that the government goes ahead and passes such powers down, what forms of additional accountability and oversight might be needed?Uh, with regions or other entities with the enhanced powers that we've been speaking about here, particularly fiscal powers.
16:34
Speaker 1
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Speaker 1
Those entities would be local authorities, and they would still be subject to many of the same, um, legal and professional requirements and standards and many of the same kind of accountability mechanisms that local authorities are already subject to. Um, so you might think about professional standards that bind accounting officers or, um, I guess bigger picture, they are kind of electorally accountable then. So there's a kind of separate, there's a. Doing what they're meant to and behaving in a good way. And then there's, um, an.
A legally compliant way. And then there's, uh. Oversight from the centre or from voters. And most of these authorities do have some electoral accountability. I think we need, we do need to be realistic, probably about the extent to which voting is ever on local issues or local outcomes, as opposed to being kind of referenda on national politics. Yeah. We have seen in a few cases, like in Croydon a few years ago, if there's been very, very significant poor performance locally, then that's bucked the national trend.
Can work in extremis. Um, but, but many of the kind of smaller things that could go wrong, you want to be being picked up by, by other systems that are already.
A legally compliant way. And then there's, uh. Oversight from the centre or from voters. And most of these authorities do have some electoral accountability. I think we need, we do need to be realistic, probably about the extent to which voting is ever on local issues or local outcomes, as opposed to being kind of referenda on national politics. Yeah. We have seen in a few cases, like in Croydon a few years ago, if there's been very, very significant poor performance locally, then that's bucked the national trend.
Can work in extremis. Um, but, but many of the kind of smaller things that could go wrong, you want to be being picked up by, by other systems that are already.
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Speaker 7
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Speaker 7
Just to follow up before we go, if I might, um. Are you saying that we don't need any additional oversight or accountability formats, even though there might be much greater powers, including fiscal powers passed down, that everything that's there at present is sufficient to to deal with that. And we just have to trust it.
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Speaker 1
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Speaker 1
We just have to trust. And that's not what we do now. So I wouldn't call for all the guardrails to go off. And you just have to trust them. Um, I think that was more in relation to how they spend and what policy decisions they make about, um, where you might want to empower them to make different policy decisions. I distinguish between that and kind of good financial management, which they should be doing, and they should still be systems that, that make them manage their finances in a responsible way.
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Speaker 1
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Speaker 1
I think there already are. So there at present there are those systems and I and the need for those gets greater as they um. Get more powers, particularly tax raising powers. That's where I'd be more tax raising or borrowing powers, additional powers than I'd be. Um. Depends what powers you devolving essentially.
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Speaker 1
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Speaker 1
So I'd be less concerned about the accountability of existing strategic authorities. And I'd be more concerned about their capacity because these are new institutions. And if you think of a local authority, it's got an accounting officer, it's got a finance team, it's got all sorts of people with lots of experience. Um, it's operating in a way, not that, you know, even if you gave extra powers, it's used to carrying substantial risk already as opposed to a new strategic authority that hasn't got much staff yet.
And, you know, is kind of new to some of this. So I think I'd be looking at capacity, um, not just accountability.
And, you know, is kind of new to some of this. So I think I'd be looking at capacity, um, not just accountability.
16:38
Speaker 2
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Speaker 2
Um, I think I can kind of build off of that. So as I mentioned before, I think it's important for the roadmap to kind of build off of, of the work that we've already done on devolution. And I think within that, we have, um, these different levels of institutional maturity. Um, and so obviously that's the kind of foundational strategic authority, um, or kind of combined authority formed of, of, um, two or more local authorities. Um, that then becomes mayoral strategic authority when a mayor is elected.
Um, and then mayoral strategic authorities go through a readiness assessment to become an established mayoral, um, establish strategic mayoral strategic authority. Um, and it's at that point that they're able to access integrated settlements. And so kind of in that framework, you already see that we, we have the mechanisms to, to build the capacity needed to deliver projects within integrated settlements. Um, and so I think there's, there's a few key points within that process that, um, the roadmap should specify. So I think, um, you know, at the mayoral strategic authority level, um.
I think that the overnight visitor levy, I think might be applied at that level. Um, and then there's a question of how do you do the institutional knowledge transfer to, to ensure that those mayoral strategic authorities are able to function as, um, you know, there's an administrative question of how they become tax tax collection authorities. Um, but then there's also the question of how do they manage that, those revenues. Um, and so I think that that involves kind of knowledge transfer, um, from treasury, but also between kind of mayoral strategic authorities.
And then, you know, so I think that's kind of one piece. Um, there's another piece around with, with the integrated settlements that establish mayoral strategic authorities are able to access, um, there's an outcomes framework and, you know, that's kind of a level of, of oversight about how, how those integrated settlements are spent. Um, and so I think those are kind of, that's the baseline of, of accountability and oversight that that currently exists. And I think moving on kind of over and above that, I think we would want to see, um, the establishment of kind of improved regional data collection.
I think we'd want to see how we can collect kind of regional data around productivity and around other measures that we would like to see. Um, you know, how they're evolving and, and, you know, how can central government monitor those?Um, and then second, again, I think borrowing and debt management is a very important question. I think, um, once, uh, Mayoralties have kind of the revenue that they're borrowing against, um, they have to, something that we've heard from mayors is that they currently borrow for investing, but they actually have no capacity whatsoever to do the kind of borrowing required to address volatility in tax take.
So that's an example of one of like a very specific way that the Treasury can kind of, um, pass on that knowledge and have kind of institutional knowledge transfer. Um, so I think those are some of the pieces and additional oversight that I would include and address in the roadmap.
Um, and then mayoral strategic authorities go through a readiness assessment to become an established mayoral, um, establish strategic mayoral strategic authority. Um, and it's at that point that they're able to access integrated settlements. And so kind of in that framework, you already see that we, we have the mechanisms to, to build the capacity needed to deliver projects within integrated settlements. Um, and so I think there's, there's a few key points within that process that, um, the roadmap should specify. So I think, um, you know, at the mayoral strategic authority level, um.
I think that the overnight visitor levy, I think might be applied at that level. Um, and then there's a question of how do you do the institutional knowledge transfer to, to ensure that those mayoral strategic authorities are able to function as, um, you know, there's an administrative question of how they become tax tax collection authorities. Um, but then there's also the question of how do they manage that, those revenues. Um, and so I think that that involves kind of knowledge transfer, um, from treasury, but also between kind of mayoral strategic authorities.
And then, you know, so I think that's kind of one piece. Um, there's another piece around with, with the integrated settlements that establish mayoral strategic authorities are able to access, um, there's an outcomes framework and, you know, that's kind of a level of, of oversight about how, how those integrated settlements are spent. Um, and so I think those are kind of, that's the baseline of, of accountability and oversight that that currently exists. And I think moving on kind of over and above that, I think we would want to see, um, the establishment of kind of improved regional data collection.
I think we'd want to see how we can collect kind of regional data around productivity and around other measures that we would like to see. Um, you know, how they're evolving and, and, you know, how can central government monitor those?Um, and then second, again, I think borrowing and debt management is a very important question. I think, um, once, uh, Mayoralties have kind of the revenue that they're borrowing against, um, they have to, something that we've heard from mayors is that they currently borrow for investing, but they actually have no capacity whatsoever to do the kind of borrowing required to address volatility in tax take.
So that's an example of one of like a very specific way that the Treasury can kind of, um, pass on that knowledge and have kind of institutional knowledge transfer. Um, so I think those are some of the pieces and additional oversight that I would include and address in the roadmap.
16:41
Speaker 7
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Speaker 7
I'm not sure that, you know, I'm grateful for that. I'm not sure that answers my question about this incompatibility. Um. It may be that that allowing. Regions of local authorities to borrow doesn't need any additional oversight. I would have thought, if you were. Uh, given the very question that we all struggled with earlier about the incompatibility between central fiscal roles and the power to essentially undermine them, that there was a need for some further oversight.
And I'm not suggesting that you should have the answer, but, uh, I think absent that. All sorts of problems potentially arise. Um, and unless we can answer that question, it's going to be a major impediment to the political, uh, movement for. Forward on devolution.
And I'm not suggesting that you should have the answer, but, uh, I think absent that. All sorts of problems potentially arise. Um, and unless we can answer that question, it's going to be a major impediment to the political, uh, movement for. Forward on devolution.
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16:42
Speaker 9
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Speaker 9
Yeah, it's it's, um, about. Coordination really. And I wondered whether you thought that we need it if we're giving if central governments giving more powers, more funding to regions and subregions, whether there needs to be some kind of enhanced institutional mechanism between central government and the regions. Because at the moment they're told they're getting a settlement if things carry on on that basis, they're just going to be told they're getting a bigger settlement. And given that what both central and regional government is trying to do, and one of the main purposes of devolution is to enhance growth where at least the aims are common, even though the tactics and local strategies may differ.
Can you see any benefit in or mechanism whereby the people in central government engage constructively with with the mayors to try and ensure that policies are working in the same direction to the maximum possible extent?Or do you think you carry on as we do now, which is muddling through, and some mayors will get on with their relevant national government minister and others won't.
Can you see any benefit in or mechanism whereby the people in central government engage constructively with with the mayors to try and ensure that policies are working in the same direction to the maximum possible extent?Or do you think you carry on as we do now, which is muddling through, and some mayors will get on with their relevant national government minister and others won't.
16:43
Speaker 1
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Speaker 1
So they're not even necessarily being promised a bigger settlement, just one that's composed of slightly different things. Um, but do you need so. I think there are two things you could usefully do here. One would be to, and this is something that, um, some mayors have mentioned, instead of them having a relationship with multiple different departments, actually having a bit more coordination on the central government side. So there's one point that they go into rather than many, um, in other places as well.
There is more of a relationship, um, a more formalized relationship between central government and that regional tier where they more regularly sit in a room and have these kinds of discussions. Um, you could look at introducing that some, some kind of mechanism in the middle where the, the layers talk to each other on a more equal footing.
There is more of a relationship, um, a more formalized relationship between central government and that regional tier where they more regularly sit in a room and have these kinds of discussions. Um, you could look at introducing that some, some kind of mechanism in the middle where the, the layers talk to each other on a more equal footing.
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Speaker 5
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Speaker 5
We've kept you a long time. Can I ask you a very quick, uh, two final follow up questions, if you don't mind?Um, one is we've touched on this at various points. How fit. Imagine that the new prime Minister wanted to do a big. Devolution of economic powers, whether it's assignment of national taxes as we've discussed, or new local tax raising powers. How fit a state is local government across England to be the. Receiving party for that devolved power or will we.
Or will there need to be. For all sorts of reasons, reorganization or consolidation or combination in order to have a a. A network of um competent authorities to receive the delegated or devolve powers. That's my first question.
Or will there need to be. For all sorts of reasons, reorganization or consolidation or combination in order to have a a. A network of um competent authorities to receive the delegated or devolve powers. That's my first question.
16:47
Speaker 2
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Speaker 2
So I think that within um the. The established mayoral strategic authorities, there is, you know, from the conversations we've had, there is there is quite significant capacity that has been built up. Um, uh, you know, in greater Manchester, um, in West Midlands. Um, you know, I think that there is capacity in some of those that have gotten fiscal powers earlier and have had the ability to build their teams. And those should be the starting point. Um, but I think again, this is, it's, it's a road map.
And so I think I would err towards the side of kind of incrementalism, um, you know, rather than this kind of immediate devolution of, of, of, um.
And so I think I would err towards the side of kind of incrementalism, um, you know, rather than this kind of immediate devolution of, of, of, um.
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Speaker 5
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Speaker 5
Right. Okay. Thank you. And I guess the very last question, I promise, um, if you had to recommend one thing that we should be urging a new devolution hungry government to do, what would you suggest?And it could be the first in a series of things, the priority. But what would be your 1 or 2 things that you would urge them to take most seriously earlier on in the devolution journey?Fiscal devolution journey.
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Speaker 2
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Speaker 2
I think I would say, um it's the question of borrowing. I think um the trade offs have to be made of how much we are willing to let mayors borrow and then we can get into all kinds of interesting questions of, of how they borrow the mechanisms, how they, we devolve out power. But I think that very specific political question has to be answered of how much are we willing to borrow to kind of, um, meet the ambitions of mayors. Yeah.
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