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Central government "must trust local government with fiscal powers": law firm

Within local government there is “the willingness and – fundamentally – the capacity” to take on significant new powers but there is a need for greater trust and support from central government to allow relevant authorities to do so, a report from law firm Browne Jacobson has said.

The report, The Path to Greater Regional Devolution (which can be downloaded by clicking here: BJDEV), says that austerity is a major factor in the attitude of both the centre and the regions – and that there was “no sign of this becoming less important in future”.

Browne Jacobson notes that devolution of genuine fiscal powers is politically unpopular. However, it argues that “for public service delivery to be sustained, authorities not only need greater spending freedom but also additional powers to raise money”.

The law firm suggests that existing powers to trade for a profit or borrow money are underused. “Greater awareness combined with a relaxation of the restrictions attached to their use may be part of the answer, and more politically acceptable, but efficiency savings are quickly running out and sub-national authorities are likely to push for further revenue raising powers,” it warns.

Browne Jacobson argues that increased fiscal powers would be most effective when combined with collaboration between authorities, a redrawing of administrative boundaries and clarity over structures.

The report also argues that maximising democratic accountability and the engagement of the electorate is an important enabler of regional devolution.

In addition, it says the post-election period could present an opportunity for central government to clarify its own role and empower local authorities to allow for increased regional self-sufficiency and improved service delivery.

The report was informed by a roundtable – held by Browne Jacobson at its new London office and chaired by the former Treasury Solicitor Sir Paul Jenkins – that was asked to address the following questions:

  • Does local government need further powers in order to meet the challenge of providing more public services for less?
  • What form will local government take in future?
  • How will local government be funded in future?
  • What will the role for central government be?

Attendees included Graham Allen, MP for Nottingham North, who said: "Central government should take the thousands of strings off the Gulliver-like figure of local government so that it can make a contribution."

Participants were also drawn from a range of organisations including the City Growth Commission, Local Partnerships, Hampshire County Council and University College London.

In the conclusion to the report, Browne Jacobson highlights the risk that pressure to reduce the budget deficit will make the temptation to retain a firm grip on public spending too strong to resist for central government.

The law firm warns, however, that it is necessary to balance the needs of the UK economy with the need for effective public services in the regions.

“If spending cuts are to continue, devolution of fiscal powers to local government and the reorganisation of local authorities around functional economic areas would provide a firm footing for the future,” it argues.

The report notes that a supportive relationship between central and local government around the use of new fiscal powers in reality “appears a long way off.

Central government may not have the appetite for devolution of fiscal powers, Browne Jacobson says, but “without greater powers to raise and retain taxes local government’s efforts to drive efficiencies will deliver “little more than a superficial reorganisation of the status quo”.

Richard Barlow, partner at Browne Jacobson, said: “Austerity will remain a major driver for what happens. It has been bringing together organisations and given the lack of clarity we have at the moment collaboration will continue.”

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