London’s unfinished devolution

 [Published by Centre for London, 3 July 2020]

Twenty years ago today, Ken Livingstone formally took on his powers as London’s first directly-elected mayor. His election had been a moment of high political drama rare in municipal government. Having legislated for a mayor and assembly in London, Tony Blair’s New Labour government had watched in horror as Livingstone – in their eyes a throwback to the 1980s ‘loony left’ – swerved all attempts to prevent his election, eventually running and winning as an independent against Labour’s Frank Dobson and the Conservatives’ Steven Norris.

The transfer of powers (unlike his successors, he had a two-month running-in period) was a much quieter event, despite the new Mayor declaring that it would be celebrated as “London’s independence day”, the occasion of the UK’s capital seizing back control of its affairs from the “most centralised state outside North Korea” (a favourite comparator).

Livingstone is no stranger to hyperbole, and his claim was probably not intended entirely seriously. The powers that he took on were limited and had been hard-fought by civil servants as the idea of a mayoralty took shape after the 1997 general election. Furthermore, London’s first mayor was denied control of London Underground while government struggled to finalise its disastrous ‘public private partnership’ scheme through 2000 and 2001.

But the powers were nonetheless significant: oversight of London’s police and fire services, a veto on major planning decisions, control of traffic lights, major roads, buses and (in due course) London Underground, and a new agency to manage European and domestic economic development projects. And all were drawn down from central government, rather than seized from London’s 33 local authorities who had repeatedly clashed with the Greater London Council, precursor to the mayor and assembly, in the 1980s.

Since 2000, London’s three mayors have shown themselves to be able advocates for the capital, leaders at times of crisis, and promoters of projects and policies that would have been impossible in the 1990s – from congestion charging, to London 2012, to cycle hire schemes. Their powers have been extended too, with affordable housing programmes, more extensive planning powers and stronger police oversight introduced through reforms in 2007 and 2011.

However, despite the extension of the mayoral model to other English cities in recent years and promises of a white paper, the advance of devolution appears to have stalled in the nation’s capital. The government’s recent interventions on transport and planning could even be seen as a rollback, as a former Mayor of London seeking to exert remote control over his successor.

But these interventions also highlight the flaws of the current system. Transport for London’s revenue base is so dependent on fares that government bailouts become inevitable during a shock like COVID-19, and a government that blocks mayoral plans to accommodate growth, without supporting any form of regional planning, is simply incoherent.

Recovering from the current crisis cannot be directed from Cabinet Office briefing rooms, or by despatching civil servants across the country to implement centrally determined policy. It will require agile and locally-appropriate measures across the country, from training programmes to targeted tax breaks. There are a thousand daily issues pressing on government right now, from infection monitoring to trade talks, so ministers do not have the time to micromanage planning policy and transport services, any more than they have the competence to do so.

Completing this unfinished devolution should begin with a discussion about money. The Mayor of London has extremely limited powers to vary council tax, and no powers over business rates or other property taxes. London’s shops and other commercial premises are taxed heavily while its richest householders pay some of the lowest property taxes in the world. This dysfunctional set up might be sustainable in boom times, but it could hobble the capital’s recovery in the tougher times that lie ahead. Responsibility for services without the power to set taxes makes for inefficient government and fudged accountability.

London’s mayoralty has proven itself to be a success over its first 20 years; it is time to take the next steps in loosening Whitehall’s grip on the capital and its finances.

Centre for London and LSE’s Professor Tony Travers are working on a book to mark the 20th anniversary of London’s mayor and assembly, investigating the relative successes and challenges of the mayoralty to date, before asking what comes next for London. The book will be published in winter 2020.

Centralised localism won’t control the virus

[Published by OnLondon, 16 May 2020]

Coronavirus is a global pandemic formed of myriad localised outbreaks. In the UK it hit London first and hardest, but is now spreading much faster in some other English regions.

The Prime Minister’s speech last Sunday acknowledged this in talking of “monitoring our progress locally, regionally, and nationally”. In a press conference the following day, he elaborated: “You’ve got to respect local issues, local flare-ups, local problems and part of the solution is responding in a particular part of the country, which we detect with our Covid Alert system, then we will be firefighting, doing whack-a-mole as that issue arises.” And by the end of the week, there seemed to be some consideration within government that different infection speeds in different places might mean relaxation of lockdown at different rates.

But all this mole-whacking and unlocking seems to be entirely centralised. References to local councils in the detailed recovery plan were to an auxiliary role – in supporting care homes, ensuring the distribution of supplies to vulnerable people, in widening pavements, and in playing a part in contact tracing.

In the first phase of the epidemic, when a blanket nationwide lockdown was introduced, it was natural for this to be led from Westminster. But as spats with the Welsh and Scottish government last weekend indicate, the UK government is happy with devolution as long as devolved administrations fall in behind Downing Street’s strictures. So even as a more localised approach is taken, there is no suggestion it will be led from anywhere beyond SW1.

Other European countries are already taking a more devolved approach. As France and Italy have emerged from lockdown, decision-making on local restrictions has been devolved, with boundaries set centrally. In France, the Mayors of individual départements have different rights to open and close schools, beaches and so on, depending on whether their region has been coded as “red” or “green” by the national government (and in consultation with the local “prefects” who represent central government). In the capital city region of Ile de France, for example, the regional administration has required mask-wearing on public transport, and has stipulated that those travelling at rush hour have an authorisation signed by their employer.

In Italy, a deal brokered between ministers and local politicians has allowed each of the country’s 20 regions to set their own course out of lockdown, leading to an accelerated re-opening of bars and restaurants in some regions.

Whether a more responsive localised approach is worth some erosion of national solidarity and clarity can be debated. I think it is, but there are plenty who would disagree – the differing approaches adopted in Scotland and Wales have already been controversial.

However, it does seem blinkered to have a localised system of monitoring, clamping down on outbreaks and easing restrictions without a role for local or regional government. England’s metro mayors have expressed concern about a lack of engagement from government, and have asked for representation, alongside the Mayor of London and Scottish and Welsh leaders, at Cobra meetings, but to date the planning of England’s more locally sensitised strategy to “control the virus” seems to be something done to rather than with local leaders.

Could the pandemic revitalise devolution debates

 [Published by Centre for London, 27 April 2020]

Days during the pandemic have a certain rhythm, whether mid-week or during what we used to call ‘the weekend’. After the daily roll call of cases and fatalities, a government minister appears at a press conference to give the same virtual answers to the same virtual questions. Have we reached a peak? Is there enough personal protective equipment? How do we get out of this?

The charts and graphs tame the horror of deaths with a sense of rationality, and a wood panelled conference room can for a moment look like the command and control centre of a clearly-directed ‘war effort’ battle against an unseen enemy.

It is an illusion – a necessary and comforting illusion perhaps, but no more real for that, despite the wide range of powers granted to the government by the Coronavirus Act. And we should not be clinging to that illusion when we seek to learn lessons from the crisis.

While ministers pronounce targets and exhort compliance, hundreds of public sector workers across the country are making decisions and joining forces to respond to surges of infection as the spread across the country.

Again and again in recent weeks, I have heard similar stories – that measures that used to take months can now be achieved in days or hours, that proceduralism and protectiveness have gone out of the window, that public servants are taking action on the basis that “asking forgiveness is easier than asking permission.”

Officials talk of the value of a sense of shared endeavour and objectives, and health service managers distinguish centralised strategy and allocation of resources from localised decision-making and leadership.

This breathless rush of innovation and adaptation has lessons for how we think about public services coming out of the crisis. In particular, it should revitalise longer-term debates on devolution, and the new constitutional settlement that the country will need when both Brexit and COVID-19 are under control.

Creating tailored local services

Advocates of devolution sometimes make the case in the abstract, simply asserting but local is better. At one level this is surely true: power and decisions should be made as close to citizens and communities as is compatible with national fairness. This is what the European Union refers to the ‘principle of subsidiarity’ (though one that the European Commission is often accused of abusing).

But there’s more to it than that. A second argument for devolution is the argument for particularity – for enabling local services to be tailored to local circumstances. In London, local authorities have worked together to help hospitals clear space in critical care wards, to identify and find hotel rooms for homeless and other vulnerable people, to get food and PPE where they are most needed, and to coordinate volunteer services. All these tasks have depended on detailed local knowledge – of communities and resources, assets and risks – that could never be found in Whitehall.

Allied to this is an argument for integration – enabling local services to complement rather than conflict with each other. Citizens may need support from housing, social care, health services, education, probation, policing, and any number of other services. If these can be brought together, the results should not just be more efficient, but also more responsive to the needs of people and communities. This is never more true than at a time of crisis, when the commitment to deliver results can overcome organisational boundaries. But there is a risk of retreat when the crisis passes.

There is a flipside to all these arguments. Some point out that the centralised direction of the NHS has helped it cope better than Italy’s more fragmented health care system. Locally tailored services can easily look like a ‘postcode lottery’, and incompetently run localised services are no more accountable or efficient than their national counterparts. Even federalised countries like Germany have seen some controversy over regionally-varying lockdown regulations, though the country’s dispersed public health lab capacity has been seen as one of its success factors.

But the crisis has shown what can be done, and in its aftermath, we need a more rational debate about the balance between national standards and local innovation, between centralised strategy and operational autonomy, and between the myths of control and the reality of adaptation.

Cuts back

[First published on Municipal Journal blog, 26 November 2015]

Yesterday\’s Autumn Statement came at a challenging time for London. The capital\’s growing population is facing spiralling house prices, and putting pressure on infrastructure and services – from homelessness and social care to transport.

The Chancellor’s housing announcements took centre stage. The London Help-To-Buy scheme will raise the equity loan available for new homes from 20 to 40 per cent, reflecting the limited impact of the scheme in London to date. But the long-term impact on affordability is more questionable.  If the scheme does not stimulate extra supply it will merely inflate a house price bubble. 

The Chancellor also extended eligibility for shared ownership.  Applicants will no longer have to meet locally-set criteria of living or working in a particular area or profession, and the income cap will be raised to £90,000 in London. But as Centre for London’s recent report Fair to Middling observed, the model doesn’t work for everyone; social rent, affordable rent and other forms of low-cost housing are also an essential part of the mix.

We don’t yet know the detailed allocations for local government in London, but the cuts appear to have been a lot less severe than many feared.  The Chancellor boasted that cash expenditure by local authorities would be as high in 2019/20 as it is in 2015/16, but real terms spending will nonetheless fall by seven per cent over the four years, and will drop sharply over the next two years before recovering. 

It could have been a lot worse – many were forecasting real terms cuts of 30 per cent or more, but the continued squeeze will not be easy, especially coming on top of the five lean years that saw London boroughs\’ spending falling by around 28 per cent in real terms.  As Centre for London\’s analysis of the last round of cuts Running on Fumes showed, London boroughs have been resilient in coping with austerity to date.  Over the next four years, the quest for efficiency savings will continue, and front-line services are unlikely to escape unscathed.

But the headline figures mask a quiet revolution.  Revenue support from central government will fall from £11.5 billion to £5.4 billion over four years.  The balance will be made up by retained business rates and council tax, forecast to rise from £29 billion to £35 billion over the same period (the figures do not take account of plans for full business rate retention).  Many will welcome this devolution of fiscal responsibility, but questions of distribution and fairness will loom ever larger, as poorer boroughs, facing greater demands on services, struggle to grow their business tax base, and hesitate to impose permitted council tax rises to support social services. 

Major London capital projects receive a boost: funding for the \’Olympicopolis\’ cultural and educational complex in Stratford has been announced (again), and the Government will bring land at Old Oak Common under single control.  Further east, the extension of London Overground to Barking Riverside will enable higher quality development of one of London\’s longest-delayed sites, and investment in Ebbsfleet infrastructure should support the realisation of the new \’garden city\’ recommended by Centre for London.

One of the most dramatic changes is to Transport for London’s funding.  Alongside pledges of an £11 billion in capital investment, the revenue grant that makes up 6 per cent of TfL’s annual costs will be phased out, saving £700 million by 2019/20.  TfL will be expected to make up the shortfall through efficiency savings, through increasing fares (another blow to London\’s modest earners), or by generating revenue from the land it owns across London.  This land has long been eyed as a potential source of housing; with TfL’s budget under pressure, the incentive will be to maximise value.  Expect some fiery discussions about tenure mix and commercial value.

Bringing it all back home

[First published on CityMetric, 7 October 2010]

The pathway to local government devolution is rocky, with surprises waiting round every corner. Just when we had got used to the asymmetric \”city deal\” model, and to a deafening silence on fiscal devolution, the chancellor unveils another surprise – full devolution of business rates to local authorities.

This measure, recommended by the London Finance Commission in their 2013 report, is good news for London and other local authorities, a tentative first step away from the centralised funding model that came in with Council Tax. There are still details to follow, and there will doubtless be all sorts of devils lurking in them, but the starting point will be each local authority retaining all the business rates it collects, with a corresponding reduction in central government grants.

Grants will then be frozen, so any increase in business rates from local growth will be retained by the local authority; any reduction will hit budgets. This creates an incentive to promote business growth (though it would be hard to find a councillor who didn’t already want more businesses on his or her patch).

Councils will not have unfettered power to vary the level of business rates charged locally. They will be able to give discounts as an incentive to attract or retain businesses, but will only be allowed to increase the rate charged locally in limited circumstances (essentially, for infrastructure investment, in consultation with local businesses, and in places where there is an elected mayor – the approach that part-funded Crossrail).

Commentators have observed that, if London continues to grow faster than other UK cities, further measures will be needed to rebalance taxes between the regions (which risks undermining the incentives). But London also presents a microcosm of this challenge in itself, as a result of its pronounced split between central business districts and residential suburbs, many of which have significant proportions of poor people.

London has some of the biggest tax generators in the country but also some of the areas with biggest concentrations of need. If there was no equalisation in place, some London boroughs would be able to fund their services with huge surpluses to spare, while others would be among the most underfunded in the country. Research by Local Government Chronicle suggests that City of London, Westminster, Hillingdon, Camden, and Kensington and Chelsea would be the five best-funded councils in the country; Lewisham, Waltham Forest and Haringey would be among the worst-funded.

While the equalised starting point would level the playing field on day one, the mayor’s infrastructure plan suggests that growth will continue to be spread unevenly between boroughs, with central London gaining most ground. All other things being equal, therefore, outer London councils would gradually lose funding while inner London councils would gain.

Outer London councils might try to remedy this by aggressively cutting local business rates to attract more businesses. But even assuming it was successful, this \”race to the bottom\” would quickly create conflicts with the assumptions of the London Plan and Transport for London’s strategy, which assume a hierarchy of business districts.

The end point of this approach, making London into 33 self-sufficient local economies would not just go against decades of policy, but would fly in the face of London’s status as a world city. To paraphrase Engels, you cannot have capitalism in one borough.

Alternatively, and as suggested by the Finance Commission, London boroughs and the GLA will need to find a new way to allocate funding, so that the boroughs with most businesses share the proceeds of growth with the boroughs that house their workforce. The GLA and London boroughs have strengthened their ties in a number of ways already; perhaps fiscal devolution will push them to take their relationship a step further, and open a joint account.