Autumn Statement 2015: Devolved powers for business rates and corporation tax mark a fundamental shift in relationship - but for the flag to fly, Whitehall really has to let go

 
Stuart Thomson
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Whitehall must back off for the devolution flag to fly (Source: Getty)

The chancellor used his Autumn Statement to show that he means business when it comes to devolution.

Across the whole policy spectrum, George Osborne spoke about the role of the local as well as the national. No longer will all the answers come from Westminster and Whitehall. Instead, local leaders are being given the powers to drive change in the way that best suits the needs of their areas.

There is no doubt that the announcements made fundamentally shift the relationship between central and local government.

Changes to business rates have long been talked about but alongside the retention of the rates, councils will now be given the power to cut business rates to boost growth. The detail of flexibility – up or down – remains to be seen and this will dictate how much real power there is. Also the popularity of business rates is far from universal and wider reform has been talked about.

The creation of the metro-mayors remains at the heart of the devolution plans but the role of the largely unelected Local Enterprise Partnerships (LEP) has been given an unexpected boost.

Mayors will be given the power to levy a business rates premium for local infrastructure projects. The prospect of infrastructure being developed and funded locally is a massive step forward for those championing devolution. But the new rate has to have the support of local business through a majority of business members of their LEP. Relations between the city regions and their LEPs vary. The prospect of much-needed infrastructure being blocked by a relatively small number of businesses will be very real in some areas.

Fundamentally, Westminster does not like to really let go. There is every chance that central processes and assessments will still have to be followed so local priorities may not fit the national requirements.

New responsibilities look like being devolved but without new funding. Instead local precepts on top of the Council Tax are being suggested. The main local authority grant is being phased out so the challenges facing all leaders will be significant. Some other areas of policy may be devolved for delivery but central government could choose to maintain a tight grip on the priorities.

Many of the complaints about devolution so far have concentrated on the lack of financial levers given alongside the responsibilities. The chancellor has done something on this across England as well as strengthening the position of the other home nations – Scotland, Wales and Northern Ireland have not missed out.

There could well be different impacts on different areas, offering success to some but not to others. Without a strong and vibrant business sector and robust tax base, there could be as many losers as winners.

The chancellor is promising a ‘devolution revolution’ but for the flag to fly, Whitehall really has to let go.

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