Ringing the changes

By Jonathan Werran | 16 December 2019

After triumphing in the Brexit election, the principal domestic challenge for the Johnson government is one of refashioning political economy – especially in the Conservative’s newly won friends in the north and midlands.  Since the election was won here, the government’s urgent domestic duty is to reinvigorate these places economically and culturally, through their infrastructure and public services.

This means getting to grips with the baffling regional failures and paradoxes of the post-war economy and adroitly rebalancing where growth happens and how prosperity is created in different parts of the country.  Solving the hitherto insolvable productivity crisis – ‘levelling up’ Ashfield to Ascot and Workington to Woking -  will be a game played on many levels – central, regional and local. 

From the centre will come an attempt to drive radical reform of Whitehall.  In effect modernising and transforming the mandarin mindset and how central government functions.  In the view of Number 10 policy supremo Dominic Cummings, the civil service remains ossified in the mid-Victorian mould set by the Northcote-Trevelyan reforms of the mid-nineteenth century. 

This sense of permanency, generalism and impartiality is, in his world view, a poor cover for excusing the amateuristic and mediocre.  It renders central government completely unsuited for the delivery of meaningful change programmes of the sort the new administration’s mandate will demand over the next parliament.

The Whitehall reform programme will be big on external expertise and big-data driven analysis for policy and implementation.  In theory there’s nothing new under the sun here.  Lloyd George’s post-war administration was stacked with former industrialists, ‘men of push and go’ who could get big things done.

One can expect the senior civil service establishment and its allies to resist and fight back.  There’s a chance this might come to naught.  One only has to think of David Cameron’s much parodied barefoot philosopher Steve Hilton’s failures to break the system.  But there’s a sense that this time, emboldened by dominance and a glut of political capital afforded by a strong majority, it might be different.

What this might mean for the conduct of central/local relations is anyone’s guess.  With a major ministerial reshuffle planned in February to drive home the change in focus, the role of the Ministry of Housing, Communities and Local Government is up for grabs.  As a man in favour, communities secretary Robert Jenrick might be lined up for a new role, putting pressure on a department that has undergone great recent churn of senior personnel let alone the expected departure of its permanent secretary  Melanie Dawes.

Whitehall influence in economic rebalancing might naturally cede to a greater set of expectations and powers being vested in the growth bodies such as the Northern Powerhouse, Midlands Engine and Western Gateway.  This might well come at the expense of Local Enterprise Partnerships.  We will have to wait and see just how urgent decisions on investment and infrastructure are to be decided and how the rules of HM Treasury’s game have to be changed to enable rapid spending in areas with longer odds of economic return.

As another case in point, the doubling of government research and development funding, an announcement which didn’t receive a great amount of pick up during the campaign, will be jealously guarded.  Who will have responsibility for picking the winners?  Clues to thinking here can be found in a paper endorsed by Cummings during the election ‘A Resurgence of the Regions: rebuilding innovation capacity across the whole UK’ by Professor Richard Jones of Sheffield University.

The key battle will be to attract investment in parts of England that lack a track record in high end research and development and building capacity. 

The looming conscious uncoupling of the Energy and Climate Change portfolio from the Department for Business Energy and Industrial Strategy will also have great significance for how local areas make good on climate emergency declarations and prepare areas for clean growth and decarbonisation.  Will this machinery of government change prove detrimental to putting clean local growth to the fore of industrial strategy and securing investment needed to drive innovation to increase the scale and reduce the costs of low carbon energy?

However, when considering direction, eyes should also be turned to next year’s combined authority mayoral contests which now assume a greater piquancy.  Ben Houchen’s surprise gain of the Tees Valley in 2017 mayoralty opened up the path to parliamentary gains in the general election.  Andy Street’s chances of retaining the top spot at the West Midlands Combined Authority will similarly be reinforced.

Despite the ironic tributes paid in language, style and tone to New Labour’s 1997 victory, regionalism won’t involve a resurrection of Regional Development Agencies for the oversight of sub-national economic policy.  Nor given the fact Cummings cut his campaigning teeth against the North East assembly does a federal model of devolved governance seem likely.

So if we can expect no more tiers, this raises issues of just how the tectonic plates might shift and the ability of local areas to have their say in where transport, infrastructure and investment funding is directed.  In this context, attention must be paid to the formation and mission underlying the UK Shared Prosperity Fund and how it might be structured to give every area, in Johnson’s phrase, ‘a fair suck of the sauce bottle’.

The role of the local state to help direct local economic development can only be accomplished if it has a solid financial base from which to direct public service reform and economic growth.  Conservative manifesto commitments to council tax and business rates hinted at more of the same for the former and fundamental review for the latter.  If we want to make this all cohere in the long-term, a Royal Commission into local government’s finance and function would be a good starting point.

During his time as London Mayor, Boris Johnson’s involvement with the London Finance Commission secured his interest in and understanding of the importance of fiscal devolution to economic development.  And indeed, during his pitch to the party faithful at the ConHome fringe in October 2018, Johnson urged that councils be given incentives to encourage growth with long overdue fiscal devolution – something he said was in itself ‘not only Tory in principle’ but also ‘a way to help councils that are really feeling the squeeze’.

Perhaps this hope seems a bit far-fetched for councils having to deal with the nightmare before Christmas which is the draft local government finance settlement.  But as we are all aware in the past week, stranger things have happened, and might just again.

Jonathan Werran is chief executive, Localis

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MHCLG Economic growth Devolution General Election Fiscal devolution climate emergency
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