The fiscal powers of English local authorities are extremely limited. In recent years there have been many proposals for significant fiscal devolution to take place, but little progress has been made on this agenda. In this post Mark Sandford argues that there are three fundamental reasons for this: the nature of the UK state, the complexity involved and equity considerations.
The mid-2010s have seen an unprecedented number of proposals for devolution of fiscal powers to local authorities in England. The coalition government’s ‘devolution deal’ policy, together with the substantial fiscal devolution granted to Scotland in the wake of the 2014 independence referendum, have encouraged many stakeholders to believe that English local government is on the cusp of a breakthrough in the balance of revenue-raising power between local and central government (Morrin and Blond 2015; Centre for Cities 2015). Some have produced reports containing substantial proposals for fiscal devolution to English local authorities (Centre for Cities 2015; ICLGF 2015; ICLGFW 2016; London Finance Commission 2017; EEF 2017). Associated concepts such as place-based budgets, raising borrowing caps, commercial councils and local government restructuring have also attracted attention as potential solutions to English local government’s financial challenges.
I suggest that these hopes and plans arise from an over-optimistic reading of the political landscape. Most of the key drivers of the apparent ‘devolutionary turn’ in England are ephemeral and highly dependent on ‘constitutional entrepreneurs’ and windows of opportunity. Developments in Scotland, Northern Ireland and Wales are matters of high politics. English devolution deals and the retention of business rates by local authorities were largely driven by former Chancellor George Osborne. Inertia and Brexit will drag hugely on all policy innovations in the 2017–22 parliament. The confusion of local administrative boundaries, public bodies and contested local identities have long frustrated strategic approaches to local governance in England.
But this type of political headwind is priced in by commentators. There are three more fundamental reasons why fiscal devolution in England was always likely to face insurmountable obstacles, which relate to the nature of the UK state, the complexity of the change implied, and to local equity. These have been largely lost in the warm glow of consensual causes such as inclusive growth and regional prosperity. They run beneath the day-to-day debate on policy solutions, and offer a more cultural account of the critical relationships at issue.
The Constitution Unit Blog 