How will the government's "city deals" work?

A tale of eight cities.

The Government’s announcement about "City Deals" has thrown open debate about the balance of power between central, regional and local government. Nick Clegg and Greg Clark have signalled that these "ground breaking deals represent a dramatic power shift, freeing cities from Whitehall control". 

The Coalition has set out a challenge for eight of England’s cities – if they can deliver more effective and accountable local government, then central government will transfer more powers and provide incentives for cities to apply their own solutions. Cities are keen to be in control of their own growth agendas and these deals represent the government’s biggest commitment yet to fulfilling its localism policy.

The proposals put forward by the eight cities show interesting differences in definition and priority. Alongside the areas you’d expect cities to focus on, such as housing and regeneration of specific districts, several cities propose focusing on areas such as physical and virtual connectivity, with powers on transport and superfast broadband. Birmingham has identified life sciences as a potential and exciting growth opportunity. 

The role of the private sector also varies from city to city. For example, Birmingham’s Local Education Partnership (LEP) looks set to play a significant role. In Liverpool, the city has looked at the transition from Council leader to mayor and how this can effectively engage the private sector. There are a number of major corporate players involved in the development of Liverpool’s future and, if successful, this could become a model for other locations. 

Each city has defined the geographical boundary between the city and surrounding region differently.  Manchester, Leeds and Bristol have taken the most regional strategies, with Greater Manchester in particular having the benefit of building on a number of years of collaborative working with different agencies and groups within the area.  Bristol’s deal also establishes "enterprise areas" outside the city boundaries and areas such as Bath, where full retention of business rate growth will apply. 

There is also considerable variation in how the low carbon agenda is incorporated. Six cities refer to it, with Manchester, Liverpool, Birmingham and Newcastle placing it prominently in their proposals.

These variations will help trial different models for devolving authority to regional, city and local authorities and it will be interesting to see how they progress. 

Despite the variations in approach, there are two factors which will shape the practical and commercial success of these schemes. For the City Deals policy to be transformative, the detailed powers transferred must be embedded in a robust governance framework, underpinned by access to sustainable finance for investment in projects.  These two key pillars are critical determinants of success or failure. 

As well as providing governance, the city authority should be a catalyst for change and provide for an effective working relationship between local and national government, business and communities. It needs to allow the clear space to be created where trust can be nurtured and the alignment of objectives achieved.

Delivery should be at arms' length from policy, so cities will need robust region-wide economic and financial assessment frameworks to appraise and prioritise projects.

Considering both governance and financing frameworks, Manchester's deal is particularly distinctive. Founded on the long-established governance framework of AGMA (Association of Greater Manchester Authorities) its 'earn-back model' aligns investment resources and economic development returns for reinvestment in strategic priorities. The model allows retention of additional business rates over and above that allowed by the forthcoming reform of local government finance, benefiting the city region to the tune of £30m per year. Not that substantial in isolation, but bigger ambitions underpin this and, used effectively as enabling finance, this could unlock substantially more private investment.

The "earn-back model" could offer a genuinely sustainable source of finance through which Greater Manchester is rewarded for good investment decisions made locally. Being region wide and non-sector specific, it is broader in scope and potential than those funding elements more narrowly defined and tied to specific spatial (enterprise zones) or economic policy areas such as skills or apprenticeships, and to that end it marks a more substantive devolution of powers and resource.

UK cities are at the beginning of the journey towards devolution and there is potential for significant change.  Could cities take a share of local collected corporation tax or secure powers to vary national policy in other areas of the public sector? This is an exciting opportunity, but to capitalise on it cities need to think, plan and govern differently and, for the long term, sustainability and flexibility needs to be built in at the outset.

Philip Woolley is a partner in Grant Thornton’s Government & Infrastructure Advisory team.

The city deals will

Philip Woolley is a partner in Grant Thornton’s Government & Infrastructure Advisory team.

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Why the Liberal Democrats by-election surge is not all it seems

The Lib Dems chalked up impressive results in Stoke and Copeland. But just how much of a fight back is it?

By the now conventional post-Brexit logic, Stoke and Copeland ought to have been uniquely inhospitable for the Lib Dems. 

The party lost its deposit in both seats in 2015, and has no representation on either council. So too were the referendum odds stacked against it: in Stoke, the so-called Brexit capital of Britain, 70 per cent of voters backed Leave last June, as did 62 per cent in Copeland. And, as Stephen has written before, the Lib Dems’ mini-revival has so far been most pronounced in affluent, Conservative-leaning areas which swung for remain. 

So what explains the modest – but impressive – surges in their vote share in yesterday’s contests? In Stoke, where they finished fifth in 2015, the party won 9.8 per cent of the vote, up 5.7 percentage points. They also more than doubled their vote share in Copeland, where they beat Ukip for third with 7.3 per cent share of the vote.

The Brexit explanation is a tempting and not entirely invalid one. Each seat’s not insignificant pro-EU minority was more or less ignored by most of the national media, for whom the existence of remainers in what we’re now obliged to call “left-behind Britain” is often a nuance too far. With the Prime Minister Theresa May pushing for a hard Brexit and Labour leader Jeremy Corbyn waving it through, Lib Dem leader Tim Farron has made the pro-EU narrative his own. As was the case for Charles Kennedy in the Iraq War years, this confers upon the Lib Dems a status and platform they were denied as the junior partners in coalition. 

While their stance on Europe is slowly but surely helping the Lib Dems rebuild their pre-2015 demographic core - students, graduates and middle-class professionals employed in the public sector – last night’s results, particularly in Stoke, also give them reason for mild disappointment. 

In Stoke, campaign staffers privately predicted they might manage to beat Ukip for second or third place. The party ran a full campaign for the first time in several years, and canvassing returns suggested significant numbers of Labour voters, mainly public sector workers disenchanted with Corbyn’s stance on Europe, were set to vote Lib Dem. Nor were they intimidated by the Brexit factor: recent council by-elections in Sunderland and Rotheram, which both voted decisively to leave, saw the Lib Dems win seats for the first time on massive swings. 

So it could well be argued that their candidate, local cardiologist Zulfiqar Ali, ought to have done better. Staffordshire University’s campus, which Tim Farron visited as part of a voter registration drive, falls within the seat’s boundaries. Ali, unlike his Labour competitor Gareth Snell and Ukip leader Paul Nuttall, didn’t have his campaign derailed or disrupted by negative media attention. Unlike the Tory candidate Jack Brereton, he had the benefit of being older than 25. And, like 15 per cent of the electorate, he is of Kashmiri origin.  

In public and in private, Lib Dems say the fact that Stoke was a two-horse race between Labour and Ukip ultimately worked to their disadvantage. The prospect of Nuttall as their MP may well have been enough to convince a good number of the Labour waverers mentioned earlier to back Snell. 

With his party hovering at around 10 per cent in national polls, last night’s results give Farron cause for optimism – especially after their near-wipeout in 2015. But it’s easy to forget the bigger picture in all of this. The party have chalked up a string of impressive parliamentary by-election results – second in Witney, a spectacular win in Richmond Park, third in Sleaford and Copeland, and a strong fourth in Stoke. 

However, most of these results represent a reversion to, or indeed an underperformance compared to, the party’s pre-2015 norm. With the notable exception of Richmond’s Sarah Olney, who only joined the Lib Dems after the last general election, these candidates haven’t - or the Lib Dem vote - come from nowhere. Zulfiqar Ali previously sat on the council in Stoke and had fought the seat before, and Witney’s Liz Leffman and Sleaford’s Ross Pepper are both popular local councillors. And for all the excited commentary about Richmond, it was, of course, held by the Lib Dems for 13 years before Zac Goldsmith won it for the Tories in 2010. 

The EU referendum may have given the Lib Dems a new lease of life, but, as their #LibDemFightback trope suggests, they’re best understood as a revanchist, and not insurgent, force. Much has been said about Brexit realigning our politics, but, for now at least, the party’s new normal is looking quite a lot like the old one.