Fourth Report - Progress on devolution in England

There has been important progress with devolution in England since our predecessor committee’s report in 2016. But further progress can and should be made over the course of this Parliament. The remainder of this report sets out our recommended next steps for extending devolution. (Paragraph 17) The role of central government

Devolution across the United Kingdom has been pursued for different purposes, and its scope, structure, and geography reflect this. There needs to be clarity on the most important purposes of English devolution. This can then guide discussions on the appropriate geography and institutions that are needed. The Government should clearly outline what it considers to be the purpose(s) of devolution and why those are the right ends for which devolution is the means. It should then consult widely with stakeholders and the public on its proposed purposes. Careful consideration should particularly be given to the purpose of combined authorities and the appropriate boundaries for them to have.

To embed devolution at the heart of central government the new Secretary of State for Levelling Up, Housing and Communities should be responsible for vigorously driving forward English devolution and this should be explicitly stated as one of his responsibilities. Our predecessor committee’s recommendation of permitting local authorities to report on their interactions with different government departments in the annual report on devolution should be adopted to drive a culture of positive and proactive support across the whole of Whitehall for devolution. Furthermore, a council of all areas with devolution deals should be established and hold meetings at least twice a year with the Prime Minister.

The lack of transparency and public engagement in the negotiation of devolution deals have not been addressed since our predecessor committee’s 2016 report. Both have remained minimal. We reiterate our predecessor committee’s recommendation that there should be greater efforts to engage the public before as well as after negotiations, through consultations, citizens assemblies and better publicity. To ensure that local councils use their limited resources on compiling proposals with a chance of being accepted, the Government should also publish the criteria it uses to assess and agree proposals.

We approve of the principle of a devolution framework. It will provide clarity as to what is available for devolution. The Government should work with local government and other stakeholders to produce a devolution framework. To succeed, the framework must provide flexibility and be grounded in a comprehensive consultation with stakeholders to avoid being a top-down imposition from central onto local government. It should include a set of principles committing the Government to devolution as an evolving process with a forward direction. Devolution is not just about increasing the powers of combined authorities, but enhancing the powers of local government as a whole. A key principle should be that devolution is the default option unless Progress on devolution in England 63 there is a good and compelling reason why a policy area should not be devolved. The Government should consider following the model used for the devolved nations, where there is a list of reserved powers not available for devolution, with all other powers available for combined and local authorities. It should not be obligatory for any area to take on all of the available powers straightaway or at all. Furthermore, councils should also devolve to their local communities—devolution does not stop at the town hall door.

Instead of using Greater Manchester as a yardstick, all existing places with devolution deals should be offered the same powers as all others currently have. They may not choose to immediately take them up, but the option should be available. (Paragraph 50) Financial devolution

We reiterate our recommendation from our recent report into local authority financial sustainability that the Government should allow councils to retain 75% of business rates from 2022, and that it should not impose commensurate cuts to grant funding. The additional funding should then be put towards equalisation in a separate grant designed for this purpose. As we also recommended in that report, in the longer term, the Government should consider options for wider reform of council tax and business rates, including possibly replacing them with a proportional property tax.

Financial devolution is necessary to ensure the success of devolution through giving devolved authorities greater freedom from central government, enabling them to take longer-term decisions reflective of their strategic purpose, and enhancing their direct accountability to their electorates. It must be accompanied by redistributive measures to ensure areas with lower revenue raising potential do not lose out. We therefore recommend that the Government should: • explore alternative ways in which revenue can be raised, which could reduce reliance on council tax and business rates. • consider offering devolution of a tourism tax, possibly to combined authorities where the revenue can be redistributed as well as meet the costs incurred by tourists. • follow our previous recommendation to explore how to level the playing field between bricks and mortar retailers and online retailers. Further financial devolution could follow these measures if they prove to be a success.

The Government should commission research into how income tax or other national tax revenue could be allocated to local and combined authorities, or how a local income tax across a combined authority area could work, including details of tax setting, funding equalisation, and how HMRC can better identify where taxpayers live. The Government should consider permitting other measures, including land value capture for local authorities, to help them raise additional money. (Paragraph 72) 64 Progress on devolution in England

The Committee has persistently sought clarity from the Government about how the UK Shared Prosperity Fund will work. The Government has had over four years to design and bring forward a coherent alternative to the European Development Funds that will completely end in 2023. This delay has been unacceptable and requires an accelerated approach. The Government should bring forward as soon as possible its proposals for how the UK Shared Prosperity Fund will work, including the funding profile to be controlled by combined authorities or local authorities. The majority of the funding should be allocated as block grants with local and combined authorities empowered to allocate the funds within the general principles of bolstering regeneration and tackling unemployment and skill shortages already announced by the Government. The Government should confirm that the £1.5 billion, equivalent to that formerly provided by the EU, will be increased to retain its real value over time. It should also increase the total amount of funding for the UK Shared Prosperity Fund to ensure that English regions that would have been eligible for greater sums of structural funding had the UK stayed in the EU and if the Government had strictly followed the EU’s former allocation of funds do not lose out by its guarantee to retain the existing amounts of funding for other parts of the UK.

A sustainable approach to local government funding requires longer term budgetary arrangements and discretion for local authorities and combined authorities over how to spend. We therefore welcome that the 2021 spending review will be multi- year. This reflects the wider need for a long-term plan to support the finances of local government. We recommend that the principle of devolution funding should be that grants are given on a block basis to cover all services of which local and combined authorities have oversight, without ringfencing or competitive bidding. (Paragraph 87) Devolution of other powers

We retain our predecessor committee’s scepticism about whether health devolution accurately describes the current arrangements in Greater Manchester. It clearly does not in Cornwall and the Isles of Scilly. We support the recommendations of the Health Devolution Commission on the future of health devolution and the role that should be played by local and combined authorities in the new Integrated Care System. The Government should seek to implement these proposals. It should also explore the merits of establishing a London Health Commissioner to oversee all London health matters, and of devolving the London Ambulance Service.

The devolution of the adult education budget should be part of the devolution framework, accompanied by transitional support and measures to mitigate differences in course options between areas. The same powers over adult education should be available to all areas with devolution deals. Further education, in particular FE colleges, should also be included in the framework. The Government should work with the Local Government Association to agree proposals as to how local authorities’ oversight of schools and their funding should be strengthened. This should include devolving the functions of the Education and Skills Funding Agency to county councils and combined authorities; and the transfer of the powers held by Regional School Commissioners to local authorities. (Paragraph 108) Progress on devolution in England 65

The devolution framework should provide for the devolution to combined and local authorities of the spatial planning powers, call-in powers for planning applications, the powers to establish development corporations, compulsory purchase orders, consultation on strategic planning applications, and strategic infrastructure levies, currently exercised by some combined authorities. There should be greater transparency about the process. The Government should also consider further devolution of housing powers to London. There should there be a single pot for housing, with a requirement that a spatial plan be adopted beforehand.

The Government should consider the case for extending powers for Transport for London-style oversight of local buses to all transport authorities, whether combined or local authorities. Where transport services cross local authority boundaries, joint working relationships should be encouraged between the local authorities affected. Similarly, Network Rail, Highways England and other comparable bodies should be required to organise joint working arrangements with transport authorities. Local government should ensure there is proper and transparent scrutiny of transport arrangements in their areas.

We have heard, both in this inquiry and our inquiry into local government and the path to net-zero, that local government can play an important role in policies relating to energy efficiency. The Government should strongly consider the case for devolution of further powers in this area. It should also examine how additional oversight can be given to local government of the environment, aspects of farming and forestry policies, and the takeover of public assets. (Paragraph 121) Widening the geography of devolution

Devolution should not be restricted solely to urban areas. The Government must strive to ensure devolution deals are reached with rural areas. The Government must make pursuing devolution deals with non-metropolitan areas a priority. It should write to us with an update on its progress in this area no later than June

There was a lack of consensus on the merits of moving to unitary authorities and resistance to making structural changes a condition of devolution. The combined authority model may not be appropriate in all places and should not be a condition of a deal. The Government should commission a review of the benefits and costs, in economic, democratic, local connection, and service delivery terms, that have resulted from previous moves to unitary authority structures. This review would help inform the on-going debate over the structures of local authorities.

The devolution framework should clarify the relationship of local authorities with combined authorities. As we have noted devolution is not just about increasing the powers of combined authorities, but enhancing the powers of local government as a whole. The Government should continue to ensure Local Enterprise Partnerships 66 Progress on devolution in England and combined authorities have the same boundaries and are effectively integrated. We reiterate our predecessor committee’s calling in 2017 for scrutiny committees from local and combined authorities to monitor the effectiveness of Local Enterprise Partnerships. The Government should support organisations such as the Northern Powerhouse to foster cooperation, without imposing any further formal layers of government. (Paragraph 140) Scrutiny in combined authorities

There is no consensus on the optimum structure for scrutiny in a devolved authority, including as to whether the London Assembly is superior to the existing combined authority structures. The new audit arrangements being introduced by the Government should consider the best way to conduct scrutiny and ensure greater transparency of the budgets of combined authorities. Scrutiny must be on a cross-party basis and scrutiny bodies should reflect this. We reiterate our predecessor committee’s recommendation in 2017 that the Government ensure there is adequate funding of the scrutiny of the metro mayors. We reiterate our predecessor committees’ recommendations in 2013 and 2016 that the London Assembly should receive a forward plan from the Mayor of London, receive call-in powers, and be able to reject the Mayor’s Police and Crime Plan and appointments for deputy mayors. The Government should also examine the case for permitting the London Assembly to scrutinise other aspects of London governance beyond those areas overseen by the mayoral administration.

Scrutiny committees for combined authorities has been hindered by strict quorum rules. The Government should consider whether the quorum for combined authorities could be made one-half of the membership rather than the present two-thirds.

The Local Government and Social Care Ombudsman expressed concerns about its oversight of combined authorities, pointing to uncertainties over its jurisdiction and a loss of oversight when unitarisation occurred. We agree that proper complaints procedures should be in place in all combined authorities. The Local Government and Social Care Ombudsman’s jurisdiction should also apply to services such as passenger transport authorities which are integrated into combined authorities unless there are equivalent complaint procedures already in place. The Local Government and Social Care Ombudsman should also be given jurisdiction over those powers which were formerly exercised by district councils which have been passed by unitary authorities to parish, town and community councils.

There is a need for more data about combined authority and other sub-national areas. The Government, the Office for National Statistics, and the Chartered Institute of Public Finance and Accountancy should develop datasets to enable effective evaluation of combined authorities and other sub-national areas. The Government should also ensure there are resources to enable areas with devolution deals to undertake more thorough evaluation of their own work. (Paragraph 161) Progress on devolution in England 67