Fiscal Devolution: Complexity and Contradiction

This week I have been mostly... reading about fiscal devolution.

The narrative of centralization appears to have had its day. Of course the benefits of collective buying power, influence and singular leadership are being drowned out by cries for decentralization. Yet despite these conversations having happened for many years now there continues to be little understanding on how it will work.

There is hope - lessons can be learned from decentralisation of one of the largest organisations in the world, the NHS. There is much work available on this process  and it is indicative of how important the question is as to how detailed much of the work is. Although now ten years old, Scott Greer's study remains illustrative of some of the problems, and importantly the solutions, to the difficulties of transition. His work looks at how the then four national health care systems (Scotland, Wales, England and Northern Ireland) functioned differently after a significant move towards decentralisation in 1999.  Much of this was often about  how to make rational decisions on the distribution of resources (itself a highly complex problem for many similar organisations 

How to make rational decisions on the distribution of resources (itself a highly complex problem for many similar organisations)

Scotland, for instance put the process largely in the hands of the professionals hoping that their decisions would lead to the greatest impact for those in most need. Greer highlights that Wales, in attempting to be the most decentralised system of them all by integrating health and local government towards a national health system rather than a national sickness service. Unfortunately it ended up being the most centralised as the system proved to lack capacity for such a large scale change at the national assembly level.

Greer's work also highlights one of the key issues in the devolution debate - namely that people will often focus on the target of devolved powers, blinkered to some of the complexity. We can see this in the resounding calls for firm indicators of capability and sound governance. Is the city capable of taking on the responsibility of devolved powers? How can we prove that local choices will lead to increase in development and, therefore, revenue? These are, indeed, important questions that the City Growth Commission will work to address. But also, as Greer highlights, there is a need to understand how the HMT might relinquish control (or ‘disengage’ as Greer puts it). An interesting example of this is the Greater Manchester Earn Back Scheme - under this project local revenue can be gained back from the HMT under fairly tight conditions of successful local development. Pump-primed by prudential borrowing, this scheme appears more bureaucratic, rather than actually decentralisation 

Pump-primed by prudential borrowing, this scheme appears more bureaucratic, rather than actually decentralisation

 - meaning that the power, the control, is kept firmly in Whitehall?

This is, of course, not me suggesting that control should be distributed quickly and without monitoring. As suggested before, not all areas have the capability to deal with the increased income. That said there is likely to be a base-line that we could work with and combined with an ongoing process towards increased devolved powers, (through proved impact) we might begin to take some important steps. In many ways this is a perfect example of a 'wicked complex problem' and for me this is not more true than when I start to think about what this means 'on the ground' - will devolution lead to more (local) privatization?

Whilst to some the idea of local privatisation may be worrying it must remain a part of the process of decentralisation; namely that the freedom to make suitable, rational, agile choices must be made at a local level.  That said, whilst decentralisation works when we understand such interactions as part of operations of complex adaptable systems, decisions based purely on increasing efficiency and reducing redundancy should be replaced with a focus on adaptability, agility and, therefore, resilience. 

Decisions based purely on increasing efficiency and reducing redundancy should be replaced with a focus on adaptability, agility and, therefore, resilience

 At another level, similar localism occurs when there is more money than is needed it will stay 'local' rather than being distributed out. We see this in the growth of London, but also within London Boroughs.

For me, this debate brings me back to understanding the process: let’s take real steps towards decentralisation of fiscal power and responsibility. Let’s see local, agile, responses to local needs with iterative feedback and one that develops, and is adaptable, over time. Let’s see transparent, and therefore accountable, responses that bring local and national benefits. This should not be sold as a singular solution narrative, but the start of a divestment of powers, for some, and an uptake for others.