Theresa May should embrace a more grown-up devolution

Anyone who has been involved in policy in the UK will know that the devolution of power, to the regions or cities or counties, has been rising rapidly up the political agenda over the last two decades. Theresa May confirmed in her speech yesterday that it will continue on her watch.

The RSA’s City Growth Commission, the predecessor project to the Inclusive Growth Commission, helped persuade George Osborne to devolve much more power and responsibility to the big cities. But there is clearly more to do.

It remains to be seen exactly what the new government does with the idea. Theresa May has talked about spreading the benefits of devolution more widely and has recently renewed commitment to the Northern Powerhouse, so it clearly hasn’t gone quiet.

But where the City Growth Commission left off, we have carried on, wrestling with the question of how successful economies spread their prosperity and create opportunities for all. We published our emerging findings on 22 September, arguing for a new model for inclusive growth – a model that works for everyone, rather than, as it currently the case, assumes that benefits will trickle down. We know this simply isn’t the case, as our chair, Stephanie Flanders, says clearly in her blog.

If we’re going to achieve this we need to go back to place and the opportunity of devolution. The Commission has come to believe that the causes of the UK’s failure to spread prosperity outside city centres lies, at least partly, in our overt centralisation of power over recent decades.

It has meant that the administrative chasm that lies between economic and social policy at a national level – the great division that splits policies on ‘hard’ economic regeneration on the one hand and ‘soft’ social interventions, such as health, employment support and children’s services, fatally in two – goes right through local government too, like a stick of rock.

It means that there has been (in times of plenty) huge investment in physical capital, in city centre regeneration, or transport infrastructure, which increases property prices but tends to leave whole communities of local people untouched – often simply pricing them out. At the same time, the effort to revitalise our human capital has been fragmented, centralised and somewhat half-hearted. Poverty and inequalities have persisted, undermining productivity and dragging down the economic potential of our towns and cities.

If we’re finally going to tackle this problem we need a new approach and devolving more power to local places is going to be crucial.

There is no doubt that the devolution deals for city regions and other places have been an opportunity to integrate economic and social policy at a local level. But they are also only a beginning, and they have tended to be based on the original Greater Manchester approach – starting there and working backwards; what we might call the ‘Manchester Minus’ template.

There is no doubt also that the city deals, and then the devolution deals, marked a break with the patterns of the past. Neither tried to bypass local government. Both recognised that some local flexibility was important if investment was going to succeed.

But there is a sense in which the devolution deals so far have represented the adolescence of UK devolution, characterised by strong parental control from the centre. As a result, the deals tended to stick to familiar formulae, shunning complex human investment in favour of more conventional property or transport investment. In the case of Glasgow, the political dynamics of Holyrood and Westminster further squeezed local innovation. A more grown up devolution is needed now, bringing together the economic and social, and tailored to the genuine needs of places – in our major metros and beyond.

Grown up devolution has to be clear where the limits are. Some powers and policy levers will have to remain in Whitehall. Even in areas such as health and social care, and skills, where local decision-making should play a larger role, the centre cannot fall out of the equation entirely.

Nor can devolution simply transfer power and resources to a handful of big city regions, leaving smaller towns and cities to fall through cracks. The point is that all tiers of government need to work together to shape a vision for long-term inclusive growth.

Policy swings between devolution and centralisation over the decades haven’t been helpful. There is no binary shift necessary between the two. Instead, devolution might make possible a blending of mutually reinforcing structures, systems and practices.

Without creating economic benefits and reducing demand for services and welfare, the state – whether central or local – just isn’t unsustainable. If we don’t create economic growth which has positive social benefits, we perpetuate the inequality and poverty that we know fails to impact the lives of so many – and it will undermine devo deals by swamping them with the human rewards of economic exclusion.

The objective has to be devolving further to create the right incentives for place-based, inclusive growth. The Commission believes that, in these circumstances, we will be able to see where local leaders are solving problems that have defeated national leaders for decades.

You can find out more about the direction we are charting for inclusive growth by reading our Emerging Findings report, which concludes the need for:

• A road map for inclusive devolution. The government needs to make sure new devolution deals have inclusive growth at their core, and use the forthcoming Autumn Statement to channel additional resources to places.

• Investment in social as well as physical infrastructure. If the government is serious about inclusive growth, it needs to invest - rather than simply accrue cost - in social infrastructure in the same way that it does now in physical infrastructure, assuming the same long-term multiplier effects about the nature and size of economic growth.

• Inclusive industrial strategies. Combined with a continued commitment to place and the process of devolution to city regions, there is potential for the government to drive inclusive, place-sensitive growth.

• More accurate data and measurement of ‘quality GVA’. One of the most obvious reasons why inclusive growth has not been at the heart of policy making before now is that the ubiquitous GVA measures, before and after investment decisions, do not measure it.

As Stephanie Flanders reminded us at the launch of the interim report, ‘what you count, counts’. We need to make inclusive growth our working definition of economic success. More grown up devolution will be central to enabling us to achieve this.

David Boyle is a Research Associate for the RSA Inclusive Growth Commission. You can find him on Twitter @davidboyle1958.