Reflections from a study tour of city region deals in England
In what proved to be interesting timing, just two weeks out from a general election across the United Kingdom, a delegation of kiwis organised by Infrastructure New Zealand visited London and Manchester to find out more about city and region deals. Linda Meade was part of the group. This article summarises six key takeaways, and her reflections on these in a New Zealand context.
1. The history behind city region deals in the UK and England is worth understanding.
It is a history of a series of attempts at decentralisation and devolution, but for different reasons. Devolution to Scotland, Wales and Northern Ireland is well known, but less well known are earlier attempts to replicate something similar across England, to create a kind of federated state model – but this failed as it was seen to be imposed top-down and was not accepted locally.
By comparison, decentralisation is promoted as a means of levelling-up the economic performance – and social wellbeing outcomes – of counties and districts beyond greater London, but still maintaining a strong focus on cities as economic growth engines. City region deals have proved more successful as vehicle to advance both agendas, and seem likely to remain a feature of the UK political landscape, transcending changes in Government.
Reflection: The history provides context for the present. In New Zealand there has been limited appetite by successive Ministers for devolution, or indeed for levelling up the economic performance outside of Auckland. Arguably, the direction of travel has been in the inverse direction. Do we have a Government now, willing to set a bold new direction?
2. Institutional settings are important, but hard to get right.
The first city deal was negotiated by HM Treasury, directly with the [then] Association of Greater Manchester Authorities, strongly supported by the leaders[1] of each of the 10 constituent district councils. This was critical to the success of this first deal, since central government (“Whitehall”) departments exhibit(ed) varying degrees of enthusiasm for the deals.
These days the Department for Levelling Up, Homes and Communities (DLUHC – described as “owning the policy agenda for levelling up and advancing the relationship between central and local government”) takes the lead on advancing further deals, but legislative change is still driven from the centre.
Local government reform more generally is considered to be a work in progress. City region deals are not seen as a substitute. For example, work continues on merging remaining two-tier councils (district and country councils) into unitary authorities. Notwithstanding, the emergence of mayoral combined authorities (MCAs) as a condition imposed by Whitehall to do a “premium” deal, has necessarily led to changes to local government in the 11 regions with new MCAs as some functions previously performed at a district level have moved across to the MCA[2] .
This has widely been viewed as a positive, not least because the mayors of the new MCAs tend to be much more visible, not just to Whitehall, but also nationally and even internationally, as advocates for economic growth and inward investment to their regions. Having a single, accountable (elected) leader is seen as the most effective way to open doors to central government, and a natural participant in UK trade missions.
Reflection: Much greater thought needs to be put into institutional settings in New Zealand if city region deals are to become an embedded part of the landscape, including:
(a) Who should be at the table, from central government, doing the deals?
(b) Do we need an equivalent to DLUHC, charged with owning the devolution and decentralisation policy agenda, and advancing the relationship between central and local government? Perhaps drawing on those parts of existing agencies that focus on local government, infrastructure, urban development and housing?
(c) Should there be a separate stream of activity focused on converting two-tier councils into unitary councils, as there is England?
(d) Is there a potential role for a new “combined authority” type entity in the NZ local government landscape? Would this include elected accountability (like the English MCA model), or operate closer to a CCO model?
(e) What other new forms of institutional arrangement could be agreed as part of a city region deal, for example allowing for urban development authorities to be put in place?
(f) What is needed to drive local support and ownership of changed institutional arrangements? Who will be the sponsor Minister?
3. Embracing an ethos of devolution as a start point.
DLUHC told us there is now a well accepted policy objective which starts from a place-based perspective. Some central government entities continue to express concerns around undermining the ambition for services to be good everywhere (the “post-code lottery” argument), but in general there is acceptance the local decision-making on local issues is not just better for a particular region but also for the country. Despite this, there are some remaining sticking points:
There are now city region deals across almost two thirds of England, covering most of the obvious urban conurbations. It seems likely the bulk of the economic benefits have thus been captured keeping in mind the importance of cities, as the long tail tends to cover less urbanised areas. Nonetheless, there remains a desire to push on, to achieve widespread devolution. This has been the motivation behind recent promulgation of standardised guidance to progress city region deals – to encourage some of the “laggard” councils to progress conversations.
The policy rule of thumb is for a deal to be based around a Functional Economic Area (FEA – largely defined by the workforce catchment) and with population in excess of 800,000 people. Smaller deals can still work though (e.g. a single council deal has the benefit of simplicity), and stitching together infrastructure needs at a place-based level has merit regardless of the scale. DLUHC never tries to force a deal – they are predicated on local consent.
Political and budgetary cycles remain a challenge, notwithstanding general cross-party support in principle. The recent landslide victory for Labour at both central and local government levels is seen as a window of opportunity. History has shown the importance of keeping the “centre” (UK term for central agencies) interested, and that requires a pro-active senior level sponsor minister – ideally a secretary of state[3]. The new Deputy Prime Minister, Rt Hon. Angela Rayner could play that role as she is also Secretary of State for Housing, Communities and Local Government.
Reflection: What is our view of the role of city region deals in NZ? Do we see them as a pathway to devolution and/or decentralisation? In other words, are they one-off, targeted deals – for example, viewed largely as a way to stitch together a range of infrastructure projects to form a coherent whole? Or do we think – as in England – there could be merit in aspiring to have city region deals one day covering most or all of NZ?
Is there a minimum requirement for a city region deal in NZ? A Functional Economic Area makes intuitive sense, but perhaps the minimum population requirement is lower, say 250,000? Is this prescriptive, or only a guide?
4. Single Settlement could be a game changer.
A common refrain across those we met was the need to get the funding model right. A part of that is allowing some of the more mature, larger scale city region deals to retain 100% of business rates collected by the councils to be retained by the region, with the MCA controlling allocation of spend[4].
A more recent innovation being trialled with the Greater Manchester Combined Authority is the “Single Settlement”. This aims to treat the GMCA in a similar way to a government department. The aspiration is to encourage greater innovation, while at the same time holding the mayor fully accountable against a (still under development) outcomes framework. The early thinking was to amalgamate all central government funding provided to the GMCA, regardless or source or stated purpose, into a single pool. Although this has not been achieved (yet), it remains the aspiration.
The Single Settlement would be for an entire Spending Review period (typically 3 years), and cover transport, housing, higher (technical) education, urban regeneration, decarbonisation and economic development. In other words it would take Greater Manchester towards a Scottish and Welsh-style funding model, replacing the current model where the city-region must bid into up to 15 different funding pots, with a new approach where funding is largely formulae driven[5].
Reflection: New Zealand probably doesn’t have as many funding pots for local authorities to bid into, but the idea of a single funding pool, agreed in advance covering a 3 year period (say) has merit. Consideration could be given to not only the Regional Infrastructure Fund, but also to funds administered by Crown entities such as New Zealand Transport Agency, Kainga Ora, and Health New Zealand – i.e. any funding stream where a local authority can currently make a bid, and which could logically fall within the remit of a city region deal.
Requiring an elected mayor to be in charge of this single funding pool in the UK was a clever move, shifting accountability – as measured at the ballot box – away from central government and on to the mayor.
5. Creative thinking around funding and financing.
One additional aspect of the Single Settlement concept is to encourage the MCAs to call out legislative or regulatory blockers or constraints to improved outcomes as part of the negotiation process (an example given was expanded powers to tackle anti-social behaviour on buses).
This is not entirely new – we were told that as part of the Crossrail project, preferential housing approvals were granted to a developer, in return for the developer building the Woolwich station – but the process of doing a deal has proved to be an efficient way to flush out good ideas.
Many of the conversations pointed at interesting details within deals. Overall, the sense was that – because each deal is bespoke – nothing is off the table. They are, after all, deals. Examples of innovative funding mechanisms mentioned included suspensory loans conditional on achieving certain outcomes, low emission charging schemes, business levies, co-funding with the private sector, new urban development corporations, PPPs for EV charging….the key is to ensure the funding mechanism links to the ambition for the deal, maintaining a coherent narrative.
“It was very striking when I had been Chancellor for a few years, the ideas coming from Manchester were very often the best…Ideas about how to finance the metro system or how to get money into the cultural sector or how to support school reform in the city. [6]”
Reflection: Councils in New Zealand should do the work up front to develop good ideas on how to finance or fund the infrastructure or services they want as part of the deal and put these ideas on the table as part of the deal-making process. Some ideas may require central government to remove blockers and this can be part of the deal-making process.
Want to see Crown-owned land pay rates, ask for it as part of the deal!
Want to access Kainga Ora’s UDC powers, put that on the table too!
Want to attract property developers by pooling land holdings owned across government entities, make a proposal!
6. The role of property developers.
Amongst the many tributes made of Sir Howard Bernstein after his death only a few days after the delegation left Manchester was this “[He was] an amazing property developer disguised (not very well) as a town clerk,” [Tweet by Tom Bloxham, himself a property developer] Indeed Sir Howard is on record as saying “…successful cities are really about how you attract people who have got money.”
The delegation had a taste of this when we met with the Development and Project Directors of ID Manchester – charged with transforming The University of Manchester’s (UoM) north campus into a new innovation district through a JV arrangement between UoM and Bruntwood SciTech over 15-20 years.
Reflection: Experience in England clearly shows the economic importance of a city or cities as centres of economic activity for a region (even if the workforce is dispersed widely). Successful cities attract investment from property developers, creating jobs, homes, student accommodation and attractive commercial premises as well as contributing to amenities and the urban realm.
Manchester is a living testament to the importance of working with property investors and developers, leveraging off local competitive advantage, investing in place-making and with real collaboration between private, public sectors and tertiary education sector. What’s getting in the way of us doing this here? What is the disrupter that will make it happen?
Overall reflections for the week. The legacy of Sir Howard Bernstein is hard to ignore. In my conversations with him, I can’t help but recall his primary message “Keep it simple, and just get going”. But that sentiment completely belies his genius. He built the case for devolution by arguing that Manchester had the strategy (the Manchester Independent Economic Review), the governance structures (the AGMA) and the track record (rebuilding after the IRA bombing, the 2002 Commonwealth Games) to deliver growth. All this was done patiently behind the scenes, waiting until the time was right to do the first deal, and the next, and the next – creating a long term political contract cutting across cycles.
I think he would have been very excited to see what comes next, as the UK turns a new leaf, with a new Government. Is the time right for New Zealand to follow suit?
Notes
[1] In England most councils operate what’s called a “leader and cabinet” model. In this respect, council “leaders” are similar to regional council chairs in New Zealand; they are not elected mayors, but rather elected as councillors and the full council then elects a leader who, in turn appoints and chairs the cabinet. In a few areas, an executive mayor is directly elected. 12 councils in England currently use this system (plus 12 mayors of combined authorities, including London).
[2] Worth noting that existing local authority leaders sit on the Boards of the new MCAs (or combined authorities in some cases – where no mayor is elected).
[3] In England, secretaries of state rank higher than ministers of state, who in turn rank higher than under-secretaries. Any of these positions can be appointed by the Prime Minister from the House of Commons or the House of Lords.
[4] In England, by default, councils collect all business rates, but only retain 50% locally with the other 50% remitted to central government. The 50% remitted to the centre is allocated back to local authorities according to perceived need, rather than based on population.
[5] For those interested in technical details: “Following the process to determine the single settlements’ quantum, at the start of each financial year the relevant departments (i.e. the departments that own the funding lines being transferred to the single settlements and devolved) will carry out a budget cover transfer (BCT) to the DLUHC for the single settlements quantum that has been captured in their budgets, as agreed through the Spending Review preceding each Budget. This BCT would be authorised via the Main Estimates process and would mean that the single settlement funding would flow through DLUHC’s Main Estimate. DLUHC will then formally allocate the aggregated single settlements to GMCA through a Section 31 grant.”
https://assets.publishing.service.gov.uk/media/655d0945d03a8d001207fe19/Memorandum_of_Understanding_for_the_Single_Settlements_with_Greater_Manchester_and_West_Midlands_Combined_Authorities_FINAL.pdf
[6] https://manchestermill.co.uk/p/the-opportunist-how-sir-howard-bernstein
