The limits of localism

In the absence of any concrete proposals from the new Prime Minister himself, it is up to us to try and think through what he might actually be considering doing. The one area he has given us reasonable cause to expect some activity is in terms of the powers of local government, and the relationship between different tiers of the state. Mr Burnham is the first prime minister to have had any significant background in local government other than a brief stint as a councilor as a stepping stone to becoming an MP — he is certainly the first to have come almost directly from a senior regional to Number 10. 

At the outset, it is important to recognise that however sceptical one might be of Andy Burnham’s capabilities, Britain’s status quo on the distribution of powers and duties between different layers of government is an incoherent, financially precarious mess. It is also a massive international outlier. Part of the reason that the British state is so dysfunctional is that ministers in Westminster are responsible for decision-making at an unusually granular level of detail — a phenomenon that they have dealt with by hiving off responsibility to arms-length Quangos lacking real democratic scrutiny. But in most comparable countries, a great deal of this technical level of governance would happen on a regional, provincial or municipal level. 

Furthermore, as Britain’s social welfare spending has ballooned in recent years, and as national finances have tightened, central government has off-loaded onerous spending obligations onto local authorities. This has been done in a highly prescriptive manner, with local authorities given very little leeway either in terms of the manner of service provision, or over how revenue is raised. In practice, Westminster has acted like a conglomerate loading its subsidiaries up with debt. In some cases, this has induced local authorities to invest in what they hoped would be long-term revenue generating projects, often with disastrous results such as Nottingham City Council’s Robin Hood Energy, and a smaller solar energy scheme by Thurrock council. Others have dabbled unhappily in commercial property. 

The entire topography of government in Britain is due a substantial and imaginative rethink. But there are clear risks as well, primarily financial. Whilst the financial position of your average local authority in England & Wales is parlous, the total level of debt held by sub-national government in the UK is relatively low by European standards; around £150bn (€180bn) or 5 per cent of GDP, compared with €400-500bn in Germany, €300-350bn in Spain, and €250-300bn in France. These are figures of between 20-30 per cent of GDP for Spain and Germany. 

And whereas British local authority debt is owed primarily to the UK Debt Management Office of HM Treasury (mainly via its Public Works Loan Board), the lion’s share of the sub-national debt of continental countries is owed to private financial institutions and bondholders. In many cases, there have been concerns about debt crises relating to sub-national entities, particularly when these have threatened the solvency of regional public savings institutions which are highly exposed to local government debt.

So, what exactly is it that Andy Burnham has got in mind — does he envisage a Britain in which regional tier governments can make serious financial decisions on their own books, as sub-national entities in Spain or Germany do? The main difference between Britain and countries like Spain and Germany is that the latter are divided into big regional blocs, many of which have populations of several million and regional economies of hundreds of billions of euros. The German region of Nordrhein-Westfalen has 18 million people and a total economic output of over €900bn — far bigger than many EU countries. Based on Burnham’s rhetoric, I think we can glean that he likes the sound of re-organising Britain into bigger regional units. But on what basis? 

During the last push for decentralisation under the coalition in the early 2010s, the format of “city regions” was devised with the intention of creating economic redevelopment plans that enhanced the role of larger provincial cities as the economic hubs for their outlying regions. The second most famous output of that era was the “Northern Powerhouse”, which was an agglomeration of the main city regions in the north of England; Manchester, Liverpool, Leeds-Bradford and Sheffield. But the most famous creation, or re-creation, of the Pickles-Osborne era of local government reform is now undoubtedly Mr Burnham himself, who transcended his previous incarnation as a moderately unsuccessful Brownite cabinet minister, to be reborn as the King of the North. He did so as Mayor of Greater Manchester, atop the Osbornite behemoth that is the Greater Manchester Combined Authority. 

The GMCA is undoubtedly the most successful of the new city regions. The extended city transport system is the most integrated outside of London, tying the nine other metropolitan boroughs into the core of Manchester itself. But not only that — Greater Manchester has become a champion at attracting investment, encouraging private sector businesses to set up shop in the area and establishing sector “hubs” like Salford’s Media City. Greater Manchester positioned itself as a winner that was worth backing. However, it is not clear how easily replicable this model of success is anywhere else; certainly, none of the other city regions have come anywhere near close. The reasons for this are twofold. 

Firstly, it is because of the very particular human and economic geography of that part of the Northwest, which has a clear metropolitan core in Manchester, surrounded by a ring of big towns, each with their own circle of outlying settlements. There were obvious agglomeration effects to be taken advantage of once local government was organised with that in mind. This isn’t really the case anywhere else in the country; the only area that comes close is the West Midlands conurbation, which has already been governed as a single region for decades and yet which remains generally dysfunctional. Most of the rest of the country is defined by traditional urban type settlements which fade relatively evenly into suburbs and then countryside; there are very few places where we can see the concentration of multiple towns with populations of more than 100,000 in such a defined area as we do in what used to be the southwest of Lancashire. Many towns are not within the sphere of influence of an obvious urban core at all. 

The second way in which Greater Manchester was a stand-out case was in the degree of work and planning that had been put in over many years prior to Burnham’s accession as Greater Manchester Mayor. Sir Howard Bernstein, along with city council leaders Graham Stringer and Sir Richard Leese, had been working on both the physical and institutional infrastructure that would form the basis of the Greater Manchester model since the 1980s, including the Metrolink light rail system opened in the early 1990s. If that degree of planning were begun now in other areas, it would be unlikely to bear fruit for many years — and in any case it isn’t clear to what extent Mr Burnham is animated by that kind of foundational work. 

The previous borough council leadership, most notably Bernstein as CEO of Manchester council, were persuaded to accept the new position of metro mayor which Burnham would go on to occupy, in return for local authority ownership of the regional bus system and a chunk of treasury cash. This demonstrates the degree of scepticism around the necessity of the post among those who had actually developed modern Manchester’s successful economic model. The job description of the role was to do what George Osborne was trying to do himself by creating it — to make eye-catching announcements and to take credit for dispensing central government largesse in an important regional hub. It did not entail what Osborne actually made his name in, which was the calculated and occasionally ruthless navigation of the politics of scarcity. And it is that to which Andy Burnham will now have to turn his hand, after years spent cheerfully opening things built with money allocated from elsewhere. 

Does Burnham really want regions to make their own decisions and then stand by them, sink or swim?

There doesn’t seem to be much more road left to run on in terms of creating more “metro mayors”, unless Burnham is planning on trying to carve the entire country into one “city region” or another. It might make sense for Oldham or Wigan to be connected firmly to Manchester, but it’s less clear that somewhere like Yeovil is going to be supercharged by forcing it to choose between becoming part of either the Exeter or the Portsmouth/Southampton extended universes. And in truth, this would not represent real devolution or localism, any more that whan was done in Manchester did — it was instead a top-down consolidation of power in a regional hub, organised by central government and agreed to by the locals on the promise of funding from Westminster. The extension of this to other places would be done on the basis that what worked in Manchester must be made to work elsewhere — one size fits all. 

There is not a cat in hell’s chance that the new regional authorities are going to be allowed to issue bonds and borrow from the financial markets as the governments of Bavaria or Catalonia do. To be honest, I will sleep easier in my bed knowing that they’re not. Neither the local authorities themselves, nor the financial markets in those places, have evolved anything like the sophistication or the institutional culture that would allow that to be undertaken responsibly. Even the national devolved administrations in Scotland and Wales don’t yet really borrow in that way.

He can’t talk about sharing the proceeds of growth as he would like to, because there aren’t any

Does Burnham really want regions to make their own decisions and then stand by them, sink or swim? He has already embraced the slogan of “power in every postcode”, but the British public are still viscerally opposed to the concept of the “postcode lottery”, and they will continue to regard different outcomes in different places as evidence of unfairness. Overcoming that axiomatic resistance to variation would be a noble political challenge, but I don’t think anything could be further from Burnham’s natural political inclinations.

The new prime minister has put “localism” at the centre of his pitch for two reasons. Firstly, he has just come from a nominally devolved job at which he appeared to be pretty successful, and it makes sense to talk about that. Secondly, he can’t talk about sharing the proceeds of growth as he would like to, because there aren’t any. He won’t talk about supply side reforms to get the economy going again because he and his party aren’t interested in that. Devolution here is a transcendental rainbow that allows him to wish away the constraints of a growthless, debt-laden economic landscape, with no opportunity for him to buy his way out of Labour’s moribund electoral position at national level. The best he can probably do is throw as much cash as he can at the current crop of Labour metro mayors between now and 2029, in the hope that they hold on to enough seats in the “city regions” to remain relevant.