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  • Writer's pictureEastern Powerhouse

Is a Devolution Deal the Key to Driving Growth in the East of England?

Currently, over half of England is covered by one form of devolution deal. Most areas have agreed mayoral combined authority structures to which central government has gradually devolved some key policy levers like transport and skills. The East of England currently has just one mayoral combined authority, covering Cambridgeshire and Peterborough, but Norfolk and Suffolk are scheduled to follow in 2025 having agreed their deals with government.


Places with mayors have seen benefits that others without have missed out on, while some (Greater Manchester and the West Midlands) have broadened and deepened their devolution deals with additional powers and responsibilities over sub-regional policy. The priority for the next government will be to boost growth in all regions and plans for devolution should therefore be central to this mission.



A new government should commitment to further roll out of devolution deals across the East, including greater control over:


  • Employment support including the devolution the advisory functions of JobCentre Plus, and a retained share of savings in the benefits bill to be re-invested in local programmes to further reduce unemployment.

  • Skills programmes, including the devolution of a reformed apprenticeship levy, all adult education budgets and the successor to the Single Programme Fund.

  • Planning, the reform and devolution of major infrastructure planning decisions to MCAs in line with a non-statutory spatial plan, and National Policy Statements, to speed up development and attract investment in the region.

  • Funding settlements, with simpler and longer-term place-based settlements for the entire allocation of public spending in devolved areas.





Fiscal devolution

Only five per cent of the UK’s tax revenues are collected by local government – compared to 14 per cent in France, 23 per cent in Japan, and 35 per cent in Sweden. Devolution deals for England have thus far included very limited fiscal control, beyond the pilot 100% business rate retention schemes. Deals are largely dependent on government funding with devolved areas answerable to Whitehall.


For our regions to really thrive, devolution deals will need greater autonomy to plan budgets and raise revenues. As one of only three regions and nations in the UK that makes a net contribution to the nation’s finance, the East would make an ideal test ground for piloting fiscal devolution.


Greater fiscal devolution should be built around a new settlement between central and local government and based on shared risks and rewards, which incentivise local investment - rewarding economic growth in return for reduced dependency on public funding. As such, the East should receive the powers to generate and retain a significantly higher proportion of tax locally to invest in major infrastructure opportunities which are seen as a priority for the region.


The next government should negotiate with areas prepared to take on the highest level of devolution governance and accountability to bring the following measures forward during the first three years of parliament:


  • Devolve property taxes, including council tax, business rates, stamp duty and capital gains tax. MCAs should keep 100% business rate and council tax revenues and gain control of the multipliers to set rates for business and council taxes.

  • Retain a share of growth in Income Tax and National Insurance Contributions, theses taxes relate directly to the workforce. MCAs in the region should retain a share of income tax to experience an immediate gain through local employment growth.

  • Devolution of Corporation Tax. Control of corporation tax rates to provide could influence firms to locate in the East, while Corporation Tax credits for local firms in exchange for investment in skills could drive productivity.

  • Allow local tax raising powers for health. Combined Authorities across the East should have the right to request localised tax-raising powers to fund improvements in the health and social care system. If we can have Business Improvement Districts funded by businesses – why not Health Improvement Districts that improve workforce recruitment, retention and reduce days off work due to illness?


These fiscal measures, in line with those already available in the devolved nations, will provide the incentives for growth and create a new mechanism for investment to help self-fund and self-finance investments in local infrastructure, including housing and transport (see above).

 



Health devolution

The health geography for the East of England is complex, covering both urban and rural populations and a large range of health and social care partners. The region faces a number of challenges, including:


  • Poor connectivity and access to health services in the more remote parts

  • Widening health inequalities between the most and least deprived communities

  • A growing and increasingly ageing population with rapidly accelerating chronic health conditions

  • Multiple and fragmented organisational boundaries that can complicate the commissioning and delivery of integrated healthcare

  • Mounting financial pressures across the whole health system including the NHS and social services.


A step change in the health of the population in the East is urgently needed. Too much potential is lost through high levels of ill health and early onset of life limiting conditions. There is a stark contrast in life expectancy between the least and most deprived parts of the region.  Importantly, many of these wider determinants of health (e.g. income, employment opportunities, education, housing conditions) lie outside the health and care system. Getting ‘upstream’ to prevent poor health outcomes requires a holistic range of public policies, better partnership working and local control of the levers of good health.


Combined Authorities in the East, in collaboration with local health partners, should seek a whole-system health devolution deal with Government. This would require the following:


Funding

  • Devolution of the total health and social care budget to Mayoral Combined Authorities in the East.

  • A single ring-fenced budget for the delivery of Total Population Health for a minimum five-year financial settlement.

  • Commitment to review the funding allocation formula for the East to ensure it matches the needs of the population.

  • VAT exemption for any new entity which Combined Authorities might seek to create for the purpose of integrated commissioning and delivery of health and social care services.


Commissioning

  • Delegated authority for the pooling of funds and the place-based commissioning of all health and social care services.


Transformation

  • A transformation fund, over a proposed five-year period, to facilitate reform of the system, including workforce development and infrastructure investment in both premises and IT solutions.


Ownership of assets and NHS estates

  • Enable local ownership and control of assets, with Combined Authorities and Health Partners taking on the management and control of NHS Property Services assets.


Regulation and monitoring

  • Devolve responsibility for designing and creating the provider structures to support the commissioning intentions of Combined Authorities in close collaboration with the relevant regulators.


Workforce development

  • Devolve responsibility for determining the supply side measures for adult skills training in the health and social care workforce to Combined Authorities and Health Partners.


Public Health

  • Upgrade the emphasis on prevention and the wider determinants of public health in the local health and care system.


Governance

  • Support the development of a new institutional vehicle for the purpose of integrated health and Social Care Government in the East. This should allow for localised structures to manage the programme of transformation, and in setting up governance arrangements for any new pooled budgets or sub-regional arrangements for delivery.


Data

  • Better data for better health. Central government should allow access to the wealth of data its departments hold. Doing so would enable them to monitor the markers of later ill health, identify those most at risk, and design early intervention programmes.

 



Regional governance

The question of regional governance must be raised when thinking about the appropriate scale needed to deliver infrastructure development across the East. There is one Mayor of London, responsible for 9 million people and 32 London boroughs. The current position in the East allows for one Mayoral Combined Authority in Cambridgeshire & Peterborough and two county deals with elected Mayors in Norfolk and Suffolk. This will leave Mayors in the East at a disadvantage when it comes to competing with large city Mayors, not just in London but in Birmingham, Manchester, Sheffield and elsewhere. The issue to be considered is whether a single Mayor for the East is better than multiple Mayors, tied to smaller county boundaries. Failing agreement for a single elected role, a ‘Council of the East’ comprising elected Mayors for all areas in the East should be formed.


A single elected Mayor or ‘Governor’ for the East. Responsible for 7 million people, this would become the second most powerful Mayor in the country.

 

Place-making

The new government will face tight fiscal constraints. Consequently, new financing mechanisms will be required to deliver ‘viable investment models’ to attract private sector funding of infrastructure projects. Public Finance Initiatives were introduced in the 1990s but scrapped in 2018 due to the high costs of repaying PFI funded schemes. However, they can still be used by some devolved administrations, such as regional transport bodies. Transport for London is financing the Silvertown tunnel under the river Thames, which is due to open next year, through a PFI scheme that was signed in late 2019.


Mayoral Combined Authorities in England need the means to attract private finance to rebuild and develop cities, towns and villages. Individual projects and funding interventions lack the vision and scale to meet the challenge which many places in the East are facing. A whole-place financing solution is required to regenerate and transform our communities and public services. The new government should review and learn the lessons of the past before approving large-scale public-private funded initiatives. However, MCAs, in partnership with private investors, should be encouraged to come up with viable whole place propositions for such schemes.


Whole-place Public Finance Initiatives (PFI) to fix the broken public estate. A new government should revisit PFI, learning lessons from the past, to provide the finance to support social housing, hospitals and schools at scale

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