Cities are poised to benefit from a new devolution deal that could see a raft of powers over economic development, transport and regeneration handed down from Whitehall after amendments to the Localism Bill received cross-party support in the House of Lords.
But the potential fillip to cities was tempered by disappointment over the details of ministers’ flagship plan to localise business rates - described as “barking mad” by one senior figure.
The devolution deal, first floated by the Core Cities Group - which represents England’s eight largest city economies outside London - was set out in a series of amendments to the Localism Bill tabled by Lord McKenzie (Labour), Lord Shipley (Lib Dem) and junior communities minister Baroness Hanham (Con) (pictured).
The measures, due to be debated in the House of Lords this week, would enable ministers to devolve powers to cities, on a case by case basis, over time, without the need to pass further primary legislation.
Core Cities director Chris Murray (left) said the amendments would enable cities to make the case for greater autonomy over key areas such as transport, housing, skills and regeneration, similar to that enjoyed by the mayor of London.
But he said the powers would only be devolved if cities met key “competency tests”, such as robust governance arrangements, evidence of a functioning economic area, and private sector buy-in, which would be set out in subsequent guidance.
“It’s about earned autonomy - not wholesale devolution - and could result in different places enjoying different powers over different timescales. In that sense it’s real localism.”
Mr Murray said that while the amendments opened the devolution deal to any single authority, in practice, the powers were only likely to be handed down to local enterprise partnerships that take on the legal form of a combined authority, such as Greater Manchester, or an economic prosperity board – a legal vehicle created in the Local Democracy, Economic Development & Construction Act 2009.
“This is about empowering real economic areas,” he said.
But this positive development for the sector was marred by an overwhelmingly negative reaction to the detail of the Department for Communities & Local Government’s plans for councils to retain business rates.
As revealed by LGC last month, the LGA fears that under the plans councils would only benefit if the amount of business rates collected exceeds the government’s growth forecast, with the Treasury also keeping a share of the uplift.
Birmingham City Council chief executive Stephen Hughes (left), a long-time advocate of a localised model, and who sits on one of the government’s advisory groups, said the Treasury clawback was “effectively a tax on local government to fund other government priorities” and risked “diluting [the incentives] to the point that they are unlikely to work”.
Another senior local government figure said: “If they set the proposals up so that to retain growth [in business rates] we have to beat the Treasury’s growth forecast, that is barking mad: if they’re taking that growth for themselves, that’s not giving us any incentive.”
The Special Interest Group of Municipal Authorities, which represents northern metropolitan councils and has been largely opposed to the plans, said the proposals appeared “to get worse, the more we hear”.
Sigoma chair Stephen Houghton (Lab) said: “The complexity has gone beyond all understanding and you have to beat the government’s growth forecast to keep anything; these proposals will damage areas with weak economies.”
The plans were also criticised by shadow communities secretary Caroline Flint, who said they were funding cuts dressed up as localism and would leave the sector facing a funding black hole of billions of pounds.
But communities secretary Eric Pickles dismissed claims that Whitehall would be top-slicing cash that should remain under councils’ control. “The only top-slicing that will take place is with regard to disproportionate gains [of business rates],” he said.
A DCLG spokewoman said: “Under our reforms councils that promote growth and support local firms and increase their business rates revenues above forecast levels, will be able to keep that increase. For the first time local councils will have a direct financial incentive to support local firms.
“The money set aside will be directed straight back to local government through other grants … so the country’s deficit reduction plans remain on track.”