DEVOLUTION TO KEY CITIES WILL SAVE £12.5 BILLION FOR THE PUBLIC PURSE
EMBARGOED: 00.01 FRIDAY MAY 1st, 2015
Devolving power to Britain’s group of 26 Key Cities would see their vital contribution to the national economy soar, improve lives and raise billions of pounds for the Treasury.
A report by the independent think tank ResPublica convincingly proves that Key Cities – such as Sunderland, Cambridge and Plymouth – could be transformed into economic powerhouses creating jobs in specialist centres of industry and technology if they managed their own budgets.
‘Power, people and places: A Manifesto for devolution to Britain’s Key Cities’ says their economic potential merits additional powers, equivalent to those currently devolved to larger city-regions.
These include the potential for greater fiscal devolution – the freedom to set and retain local taxes such as council tax, business rates and other concessions such as tax discounts for tourism.
DEVOLUTION GENERATES MONEY
If Key Cities were given this freedom they could save a staggering £12.5 bn* over the course of the next parliament, that’s an annual saving of £2.5 bn*, simply by gaining control of public spending.
In the report independent economic forecasters Oxford Economics say Key Cities could realistically aspire to reducing their combined contribution to the Government’s borrowing requirement by somewhere between one third (down from £8.2bn to £5.6bn) and one half (down from £8.2bn to just £3.4bn) over the long-term. If achieved, this would move cities like Preston and Southampton from being in net receipt to the exchequer to becoming net contributors.
ResPublica argues that the cities must commit to strengthening local governance and accountability with the facility to create directly elected Mayors, or alternative models, and establish Local Public Accounts Committees, where desired.
Report author and director of ResPublica, Phillip Blond, said: “To carry on growing and for that growth to benefit the entire population, Key Cities need greater freedom and flexibility from national policies and centrally driven funding. Our report shows that if Key Cities get devolved powers the whole country will gain as the revenue generated for the Treasury will be staggering.”
ResPublica’s report confirms that giving Key Cities greater control of health, education, housing and transport budgets can generate cash for the Treasury and free the areas from their dependency on centralised money.
DEVOLUTION LEADS TO INVESTMENT
ResPublica is calling on the next Government to agree five-year funding settlements with the Key Cities in its first Comprehensive Spending Review. This would allow the cities to invest in training, infrastructure such as roads and enterprise parks, as well as linking social care and the NHS.
In return for this freedom, which could be devolved further to the different levels of city authorities, Key Cities would report to government departments and agencies on how their devolved settlements are delivering.
DEVOLUTION BUILDS ON GROWTH
The 26 Key Cities are already doing well with a combined GVA of £163 billion, making up 11% of the UK Economy with a population of 7.9 million people. Some Key Cities are growing at such a rate that they’re out performing the national average (on GVA) and are heading towards levels of economic output seen in London – which creates 22% of the UK’s total.
Key Cities are diverse, offering many specialist areas of business:
Regional service economies – Peterborough, Preston, Milton Keynes
Advanced manufacturing economies – Sunderland, Derby, Coventry, Tees Valley
These important sectors need specialist workers and this requirement gives Key Cities an advantage over larger cities.
‘Smart specialisation’, and the diversification of existing expertise, can help Key Cities prioritise investment in local economic development, creating growth. But this can only be done if they can be freed from the mechanisms of a Westminster Government. In turn the fiscal growth would see greater tax receipts for the Treasury.
Dr Dave Smith, Chair of the Key Cities Chief Executive Group, said: “With a more stable financial settlement from central government and new fiscal powers, Key Cities can be an important part of building a new economy based on high skilled jobs and high-value added production. Now is a critical moment to seize this generational opportunity for our cities and our country. The next Government must provide our members with the devolutionary powers needed to support local businesses and communities. Only then will we be able to fully maximise our global competiveness.”
Mr Blond added: “The Government really needs to give Key Cities control over financial policies which affect local economies. If they allowed this to happen, the Treasury would see bigger returns and the economic output of the country would grow as a whole.
“In addition to the national benefit, communities would benefit from stronger local economies. This would allow individuals to prosper without having to rely on welfare payments because of increased job opportunities.”
Elliott is responsible for Events and Communications at ResPublica. He graduated from the University of Southampton with a BSc in Politics and International Relations, having won the Peter G Richards...