The Government's Cities and Local Government Devolution Bill inquiry

For most of the Orders brought forward under the Bill, parliamentary scrutiny is likely to be limited. We therefore recommend regular select committee scrutiny of statutory instruments implementing devolution and the Government’s annual report on devolution, which is required by the Devolution Bill; for example, the Transport Committee might wish to examine proposals for devolution of transport powers.

We believe that the Government should set out the aims of its devolution policy more clearly, preferably in a way that would, over time, allow success to be measured. The Government needs a clear hierarchy for the many things it is trying to achieve through devolution—promoting local growth at minimum cost, achieving a better balanced economy, improving integration of public services, enhancing local freedom to experiment, bringing decision-making closer to local communities and enhancing the democratic process. It also needs to be clear how the forms of devolution it favours are intended to achieve them, while recognising that there may be a different balance and mix of objectives in different areas.

Our witnesses gave us many important and ambitious reasons for pursuing devolution, particularly so for health devolution. However, with the exception of increasing economic growth, we are not certain whether these are intended to be the measurable objectives of devolution and are not convinced that the Government itself is any clearer. We are also not satisfied that the Government has considered and identified how to measure the success of a devolution deal once in place.

We recommend that the Government publishes, in order of priority, its long-term objectives for devolution, the mechanisms needed to achieve these and the means by which it will measure success. Following discussions with the local areas involved, relevant objectives can be incorporated in each devolution deal. This would enable areas to assess whether they are doing better with a deal than without. Linked to this, the Government should set up a mechanism for monitoring deals and reviewing and consulting the public on their impact. This would also make it easier to gather and disseminate best practice and lessons learnt. Local areas must have the powers needed to achieve the objectives of devolution, for example to integrate and deliver public services aligned to local needs. In the annual report (described in more detail at paragraph 45), they should state whether they have been given sufficient powers, levers and resources by each of the Government Departments involved to achieve the objectives of a deal and what more is needed.

We believe that deal-making, which seeks to find a balance between a ‘bottom-up’ or ‘top-down’ approach, is a pragmatic way to approach devolution, and we particularly agree with Lord Kerslake’s comments that a framework approach to devolution at this early stage in the process can lead to the lowest common denominator. The Devolution: the next five years and beyond 51 natural consequence of deal-making is bespoke but asymmetric devolution as places ready to take on more powers put forward proposals and agree deals ahead of others.

In acknowledgement of this asymmetry, it should be made explicit in each devolution deal that areas may acquire further devolved powers over time. Where an area has asked for particular devolved powers but was refused them, if still desired, such powers should be available to that area if they have been given to other similar areas at a later date. By the end of the Parliament, we should have reached the position of devolution by right to local areas, with the Government having announced the powers that will be on offer to local government. This would then provide a basis for the negotiation of further, more ambitious deals covering new policy areas and/or a more comprehensive package of devolved measures agreed between Government and local government as a whole.

The Greater Manchester deal provides a prime example of the type of governance arrangements expected by the Government and the powers that might be devolved. As it is a product of the particular circumstances of that city which are unlikely to be reproduced in other areas in all their aspects, this deal should not be assumed to be a model for other areas pursuing devolution, even cities. However, other areas pursuing deals may wish to reflect upon and cultivate Manchester’s characteristics: a history of joint working between authorities, trust between leaders, acceptance that devolution will take place gradually and proactively presenting Government with ideas and solutions for their city.

Due to the city’s unique circumstances, and also the fact that the population, their health challenges and the health economy are different from other places, health devolution in Greater Manchester is not a model for other areas. What is happening in Greater Manchester is, however, something for other areas to learn from.

We appreciate that there will be areas of commonality between deals as certain powers, for example transport and business support, are natural candidates for devolution to local areas because of their role in driving economic growth. However, we have heard that areas are making imaginative and ambitious requests for specific powers only to have them turned down, which leads us to question the commitment across Government Departments to truly bespoke devolution (we consider this issue further in paragraphs 41-45). In each deal, we would expect to see more than “a few items” that are not common to other deals being devolved and are devised by an area as a unique response to its geography, economy or social needs. In addition, we would expect to see that commonly devolved powers reflect and respond to the geography, economy and social needs of the local area to which they pertain.

There is an obvious difference between joint working and devolution, namely that devolution involves a transfer of responsibilities from, in this case, the DWP to a combined or local authority. With ‘joint working’, there is a risk that Departments will carry on without changing their practices. Devolution, on the other hand, leaves 52 Devolution: the next five years and beyond decision-making in the hands of local politicians, with accountability to local voters. We recommend that, where the terms ‘joint working’, ‘joint commissioning’ and ‘co- commissioning’ appear in a deal, they are challenged and defined in practical terms. In such cases, we would expect to see local areas actively involved in designing the project, performance management and its integration with existing local services. Joint working on or co-commissioning of services should be considered as a first step towards eventual fuller devolution.

The Devolution Bill is just one part of enabling devolution. There also needs to be an enthusiasm for it across all Government Departments and a commitment to it as the ‘default position’, resulting in the devolution of substantial powers. Devolution should be as of right, not subject to the fluctuating enthusiasm of central government. The Devolution Bill should be seen as a first step towards a more comprehensive devolution framework for the whole of local government, covering significant spending and tax raising powers. Without this, economic growth, real public service reform, service integration, or any of the other objectives cited for devolution, will not be realised.

We would like to see a culture of devolution embedded in all Government Departments. The annual report on devolution, which is required under the Devolution Bill, should be prepared with input from a wide range of Departments, such as the DWP, the Department of Health, the Department for Education and the Department for Business, Innovation and Skills. A section of this report, left unedited by Government, should comprise local authorities’ reports back on the Government’s commitment to devolution and rating their experience of different Departments, in terms of what the Department was like to work with and whether it fulfilled its part of the deal. The Committee will use the report as a means of scrutinising the Government, and it may also be of use to other stakeholders in holding the Government to account.

All contact and communications about a deal with a local area should be made through the Cities and Local Growth Unit, regardless of which Department leads a deal. This would ensure consistency of approach across Government Departments and have the practical advantage of being a single channel of communication for local authorities.

We are not at all convinced that the Government will have the capacity to work through all the bids that have been submitted and also to return to agreed deals to negotiate additional powers and then go on to deal with a ‘second wave’ of devolution proposals at a later date. Extra capacity will also be required to consider the wider, long-term implications of devolution for the Government and how it will change its modus operandi to deal with these. While it appears that the work is currently being adequately resourced, the Government should make an explicit commitment to provide the necessary additional resources as the number of deals under negotiation increases and, as discussed at paragraph 27, work on more extensive devolution develops. A programme of secondments of staff from the Cities and Local Growth Unit to local authorities, and vice versa, would aid sharing of knowledge, best practice and understanding of the different environments.

For devolution to take root and fulfil its aims, it needs to involve and engage the people it is designed to benefit. There has been a consistent very significant lack of public consultation, engagement and communication at all stages of the deal- making process. This is due to areas having limited time in the run up to the 4 September deadline. The Government drove the first wave of devolution deals through at a rapid pace (considered in more detail in the next section) which meant there was no opportunity for engagement with residents, or for residents to have their say on the principle of devolution or the framework of the specific deal proposed in their area. Despite this, we believe that local leaders could have communicated more effectively and extensively with their residents about the deal process, the contents of the deal and how it would affect them. It should, for example, have been clear to any citizen what their elected leaders were seeking to secure for the area in negotiating a devolution deal with the government. In addition, deals involving complex negotiations between national and local politicians do not lend themselves to public engagement However, from now on, efforts should be made to engage, consult and communicate with the public at all stages of the process—in the preparation of proposals, their negotiation and following agreement. Strategies to involve the public may include citizens’ juries, public meetings and, within the NHS and local government, staff engagement sessions. Once a deal is entrenched and its reforms have had the chance to take effect, the public should be consulted on their experience of its practical effects.

We think it is too late to engage the public only once a deal has been agreed. While it is reasonable that the actual negotiations are not open to the public, steps should be taken to inject more openness into the process by publishing on the relevant authorities’ websites: • Devolution proposals and the Government’s counter-offers, within a reasonable time of them being made; • An outline of what is being negotiated; and • Drafts of the deal, and the text of the final deal. The Government should also publish the criteria it uses to assess and agree proposals so local areas can refer to these when drawing up their devolution bid. A similar level of transparency should continue to be maintained once the deal has been agreed.

The Government is moving devolution forward at a rapid pace, which is welcome. However, some areas, particularly non-metropolitan areas, found it very challenging to meet the 4 September deadline. There is a risk that they may be rushing into bids which have not been properly planned and are based on relationships with neighbouring areas which have not had sufficient time to bed down. The Government also appears to be setting deadlines in accordance with events in the parliamentary and political calendar. We welcome the Secretary of State’s acknowledgement that some areas may take longer than others to submit bids and recommend that any deadlines imposed should take this into account. Then, once a bid has been submitted and negotiation on the content of the deal begins, the parties should 54 Devolution: the next five years and beyond decide on an agreed and prompt timeframe, with fixed deadlines, not influenced by political criteria, for negotiation and agreement of the deal. It is essential that this takes into account the time needed to undertake consultation and engagement with the public.

In addition, in accordance with the evidence given by the Minister, we suggest that the Government makes a clear statement that devolution will take place at different speeds in different places, and that taking time to craft a proposal to take account of local specificities will not adversely affect the Government’s response to it. This would encourage areas to spend longer building relationships, preparing proposals and consulting residents, and would be particularly beneficial for non-metropolitan areas.

The recommendations we made above—encouraging devolution at different speeds and setting out a timeframe—would provide a clear process for parties to follow and would help to counter the perception that the Government is exerting too much influence over the deal-making process.

It is often argued that urban areas are increasingly the source of the highest levels of economic innovation and growth and that, if the objective is economic rebalancing, this requires greater devolution to city regions. We understand and sympathise with this approach. Nevertheless, the agreement of a devolution deal with a non- metropolitan two-tier area would help to address any sense that the Government is biased towards devolution to city regions. The next non-metropolitan deal will therefore be particularly significant and we look forward to one being agreed in the next six months.

Nevertheless, we are concerned that this will not be the case for small towns and county areas outside the South East which risk being left out and left behind. The Government should consider this a major issue and monitor the impact of devolution deals on adjoining or nearby areas to assess whether such areas are benefitting or being left behind.

International comparisons aside, we heard evidence that there are benefits to be gained from having an elected mayor; for example leadership, strong accountability and a ‘go to’ voice for business However, we believe elected mayors are likely to be better suited to urban areas. The scale, geography and economic diversity of non- metropolitan areas mean elected mayors are unlikely to be an easy fit. Local areas should be allowed to decide whether or not they wish to have an elected mayor. Those which do not want an elected mayor, but nonetheless want substantial devolved powers, should be allowed to propose an equally strong alternative model of governance.

In fact, where a combined authority has been created, the mayor could be seen as a fifth tier of local government. Aside from the potential for confusion, which we discuss below, we think that the public will probably be left feeling that there is too much bureaucracy and too many politicians. There is a risk that this could lead to low turnouts at mayoral elections, which would have implications for the democratic Devolution: the next five years and beyond 55 legitimacy of elected mayors. This is a consequence that needs to be addressed in the long-term, possibly by a move to having more unitary authorities

As the DCLG says, the overview and scrutiny requirements in the Bill are an initial framework to be used as a basis for more robust provisions, which we believe have a role in fostering public confidence in the new arrangements, as well as balancing vested interests. These should be developed to suit the characteristics of the local areas as a result of deliberate efforts to hold active discussions at local level, with residents involved in designing new and more open methods of scrutiny. Local areas need to give active consideration to how the mayor will work with the council leaders and how s/he will be held to account. Although the elected mayor is intended to be a ‘first among equals’, s/he may soon establish, or already have, a profile and position which makes this balance difficult to achieve.

There will be a complex division of responsibility between local authorities, the combined authority and the elected mayor which will not necessarily be apparent to the public. However, as the figurehead, people are going to hold the elected mayor accountable, regardless of whether or not s/he has responsibility As a result, careful thought needs to be given to determining the division of responsibility in a way that provides a coherent set of powers and makes sense to the public; this should be an integral part of the deal-making process with the division of responsibilities written into the deal.

Health devolution has great potential. In the context of some areas, such as Greater Manchester, it is a necessary step to design health and care to suit the circumstances of a particular place, to speed up and enhance existing work on integration and help address the cultural challenges posed by joint working for the NHS and local government. In other areas, however, health devolution may not be needed in the short term to advance and improve health and social care. But, to achieve a great deal more in the longer term, real devolution and a transfer of more power to local government is needed.

However, health devolution has arrived at a particularly difficult time for the health and social care system and its staff: there has been significant structural change in recent years and there is now an unprecedented level of financial challenge. With such uncertainty, we are concerned about the long-term consequences and recommend that, over an appropriate timescale, the Government gathers evidence on the impact of these reforms. It is important that areas should not pursue formal health devolution at the expense of health and social care initiatives with similar aims that are proving fruitful. Areas that do wish to pursue health devolution must have clearly defined objectives for what they expect it to deliver.

We reiterate, however, that, from now on, the public must be engaged, consulted and communicated with throughout the devolution process and once a deal has been agreed. Public engagement is particularly important in the case of health devolution where the complexity of the systems in place make understanding the consequences of change more difficult in an area where the public’s response is likely to be more emotional.

Accountability in health and social care is already extremely complex and further changes, such as the creation of an elected mayor, are likely to leave patients feeling confused about who they should approach for information or to pursue complaints. Any health devolution agreement should be accompanied by plans for how the changes taking place will be communicated to residents. Residents should be informed about the new structures and responsibilities and be told where to go for information and advice and to make complaints.

We found this explanation [of accountability for services] confusing. It is unclear to us how accountability will work in practice.

It would appear that their powers do not extend to regulating a local authority’s financial contribution to a pooled budget and it was not clear which body was in fact responsible for checking their financial position. There is also a lack of clarity about the audit and regulation of pooled budgets and, in particular, oversight of the sustainability of local authorities’ contributions. Again, we were left feeling that the arrangements the Minister described were more aspirational than a thought-through and watertight system of financial regulation. There is a need for a clear articulation of how health devolution will work and for clear governance arrangements set out in a way that residents, patients and staff can understand. This will ensure there is no adverse impact on the quality of local services and that services are accountable. We are not satisfied that there has been sufficient consideration as to how pooled budgets will be regulated and audited and how they will be handled in practice. Unless this is carefully considered, we risk both not having the flexibility to use budgets to reflect local priorities and facilitate joint working and replicating locally the silos that exist at national level. This applies to services devolved from all Government Departments, not just health We would like the Government to revisit this issue on an ongoing basis as health devolution is rolled out and embedded in local areas.

The Government should set out the steps it will take to ensure the relevant Departments share data, for example relating to Attendance Allowance, with the NHS and local authorities.

While we were satisfied with the plans [for the treatment of specialised services] we received, we highlight this as an issue which needs to be carefully monitored in emerging health devolution agreements.

Devolution to London was successful because it enabled the city to meet the key challenges it faced in 2000. Sixteen years on, London faces a series of additional challenges including housing and skills, which are not addressed by the existing devolution framework. London is therefore not only ready for further devolution, but urgently needs it. In keeping with the recommendations of our predecessors, we believe fiscal devolution is essential to London’s continuing success. The scale of growth of service demand alone in London requires significant investment in infrastructure for which fiscal devolution is required.

We agree that, depending on what makes most sense, certain types of reform and devolution in London will and should happen at regional or subregional level and that arrangements will be more complicated than in other areas. However, there is a real risk of confusion for the public, and indeed for officers, in having three levels of governance and particular efforts should be given to avoiding such confusion.

Both the current Mayor of London and his predecessor have been judged to be successful in their role. It remains to be seen whether elected mayors for combined authorities are similarly successful. Not having the same profile, they are unlikely to enjoy the same level of influence and leverage as the Mayor of London. However, the office does demonstrate what an elected mayor can do for an area. In keeping with our predecessors, we are persuaded that the London Assembly’s scrutiny of the Mayor is effective, but recommend that it is given the power to call-in mayoral decisions, veto the Police and Crime Plan and, if necessary, reject the Mayor’s appointment of a Deputy Mayor. We further recommend that, as London acquires more devolved powers, the arrangements are kept under review.

We believe that the overview and scrutiny committees in the Devolution Bill should be a framework for more robust arrangements developed by local areas as a result of active discussions at local level. In developing their own scrutiny arrangements, local areas might wish to adapt or adopt some of the methods used by the London Assembly, such as broadcasting question times and public meetings, to hold the Mayor of London and Greater London Authority to account.

We expect to see a continued commitment by the Government to devolution throughout this Parliament, including moves towards fiscal devolution.

As an immediate first step to inject more openness, transparency and public engagement into the deal-making process and assist local areas embarking on deals and preparing proposals, all information pertaining to devolution—agreed and updated deals, comparisons between deals, announcements relating to devolution, the criteria by which proposals are judged, objectives and measures, suggested timeframes, best practice in public engagement and scrutiny, the annual reports on devolution and, in time, the results from the monitoring of deals—should be published and collated on a Government website for all to access. The devolution resources hub created by the Local Government Association (LGA) performs a similar function and we suggest that, within the next two or three months, the Cities and Local Growth Unit works with the LGA to create and run its own devolution website.

Before the end of this Parliament, once the majority of deals have bedded in and elected mayors have established their positions, we intend to undertake a review of the progress of devolution in England which will examine the issues that we have identified in this report. The review is likely to consider, but will not be limited to, the following: 58 Devolution: the next five years and beyond Success and scope: • The success of devolution deals, measured by, for example, improvements to local economies and health economies, and whether we have reached the stage where powers can automatically be devolved to local areas as of right, and whether it is time for negotiation of further, more ambitious deals and/or a more comprehensive package of devolved measures between Government and local areas as a whole. • What further powers areas have accumulated over time, including fiscal powers, and whether there are any powers not currently being devolved to local areas which should be. • The impact on areas which do not have a devolution deal. • Whether the Government is capturing data at the right level—for example, city region and combined authority level—to assess the effectiveness of deals. • Local authorities’ views on the Government’s commitment to devolution, working with different Departments and the process of negotiation and consultation. Progress: • Progress with the development of further devolution to London, outside of the framework of the Bill. • The rate at which the Government negotiated and agreed the 38 devolution bids submitted by local areas for the deadline of 4 September 2015 and whether any new deals are being agreed. • The number of deals proposed since 4 September 2015 with new areas and the number of existing deals which have been extended. Geography: • The geographic spread of deals and the extent of devolution to non-metropolitan areas. • Whether areas without deals which adjoin or are nearby those with deals are at an advantage or disadvantage and, if the latter, how this could be addressed. Governance and accountability: • With particular regards to health devolution, how accountability is working in practice. • The impact elected mayors are having on local areas. • How scrutiny is working in practice and whether local areas are building on the scrutiny requirements set out in the Devolution Bill. • The extent to which local areas are engaging and consulting the public and whether local democracy has benefitted from devolution. Devolution: the next five years and beyond 59 Wider issues: • Whether there are any signs that devolution is encouraging the restructuring of local government—for example, towards local authorities in two-tier areas becoming unitaries or a single, large authority across a combined authority area. • How access to new sources of local finance—for example, 100 per cent retention of business rate growth—have impacted on local areas. • How devolution deals relate to the debate on the UK constitution and whether the deals, once embedded in local areas, are a balance to devolution to Scotland, Wales and Northern Ireland.