Following his experience as mayor of Manchester, UK prime minister Andy Burnham’s big project is to devolve power to cities and regions. His hope is that this will allow other parts of the UK to emulate Manchester’s success in increasing local productivity over the past decade.
It is not yet clear how this initiative will apply to Scotland, Wales and Northern Ireland, which already have their own regional assemblies.
London appears to have suffered less from Brexit than the wider UK economy. Looking at Manchester’s economic performance over the past decade, it has also been successful within a sluggish wider UK economy.
Output per head, which was 50 per cent of London’s in 2013, was 53 per cent of London levels by 2023, a success for the city.
However, the impact of Manchester’s growth on the wider north-western region of England where it is located was much more limited. Over the past decade, the wider region, with a population of 7.7 million, has seen productivity growth slightly above the UK average, but it has fallen further behind London.
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As the success of Manchester city has had a muted spillover effect on its wider hinterland, it is not clear that developing a number of successful UK cities under a new devolved regime would transform the wider UK economy.
The devolution of powers to Scotland, Wales and Northern Ireland has a longer track record than the case of Manchester under Burnham. Their experience does not suggest that devolution will be the magic elixir of growth, restoring the UK’s pre-Brexit economic momentum.
If the Burnham plan to revitalise the UK by devolving powers to English regions is to be effective, experience on this island suggests that serious thought will need to be given to the governance of the new arrangements
The recent productivity performance of Scotland and Wales has been worse than the UK average, falling even further behind London. Northern Ireland is the exception, with productivity actually rising faster than London’s. This probably reflects the benefits for the North of remaining within the EU Single Market for goods, which has softened the negative impact of Brexit.
Whether or not devolution will happen, or will raise the performance of the UK economy, governance for regions and cities with additional devolved powers needs to be thought through. While Scotland has taken responsibility for managing its economy, raising taxes where they wanted to extend the provision of public services, Northern Ireland is an example of maladministration.
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The Stormont administration in recent years has ignored spending limits and spent well above the resources available, despite the fact that funding from London for Northern Ireland is more generous than for English regions.
The Treasury in London has repeatedly threatened to penalise the North by reducing future resources by the amount overspent. However, such penal action is yet to be fully implemented.
Not only does Northern Ireland regularly burst its budget, it also has less to show for that money. Stormont spends more per head on its National Health Service, but with much worse outcomes than in England.
It also runs a seriously underperforming education system. So far, London has been prepared to leave the North to make its own mistakes.
If significant English regions with enhanced powers were to follow the Northern Ireland example, the results could be financially, and ultimately economically, disastrous for the UK.
At the very least, the Treasury will need to implement effective mechanisms to prevent regions with devolved powers from spending money they don’t have. Threatening cuts in future resources to make up for budget overruns has been ineffective in the case of the North. It might be better if the Treasury recouped overspending by raising local taxes, such as property taxes, in the offending regions.
This would make clear to the region’s electorate that their local government was doing a bad job, and incentivise more responsible policymaking.
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In the first 50 years of independence in the Republic, in response to corruption and maladministration at local level, the powers of Irish local authorities were progressively reduced by central government. The 1940 County Management Act transferred substantial powers from the elected councillors to the county manager.
In response to corruption in Dublin County Council in the 1980s, the remaining role of elected local councillors in individual planning decisions was effectively transferred to unelected officials.
If the Burnham plan to revitalise the UK by devolving powers to English regions is to be effective, experience on this island suggests that serious thought will need to be given to the governance of the new arrangements.
The devolution plan is also likely to take up significant administrative bandwidth, distracting from other more serious failings in the UK economy. Unless those failings are addressed, it would be bad for the UK, and also bad for its closest neighbour, Ireland.
