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Local government has been the success story of the UK’s response to the Covid-19 pandemic. In challenging circumstances, they have shown how place-specific knowledge and expertise, adaptability and flexible delivery mechanisms can, at least in part, make up for scarce resources.

But for all the rhetoric of local empowerment in recent years, the process of English devolution has been captured by Treasury orthodoxies concerning financial control and performance monitoring. If local government is to drive the economic recovery, overcome regional inequalities and provide the public services communities desperately need, the Treasury will have to enable greater fiscal autonomy whilst cascading accountability down to more meaningful levels.

The constraints of the ‘devolution revolution’

The 2015 ‘devolution revolution’, spearheaded by George Osborne, purported to transform central-local relations, catalyse economic growth and tackle England’s worsening regional inequalities. However, the model betrays the Treasury’s centralising tendencies and leaves the constitutional subordination of English local government intact. Whilst the ‘bespoke’ nature of city deals was talked up, the Treasury effectively shaped the nature of policy networks from the centre by controlling resources, reinforcing centrally defined priorities and framing the ‘rules of the game’. Extensive evaluation work and evidence of satisfactory performance determines future tranches of five-yearly financing.

English devolution promotes a contradictory set of governance arrangements. Regional and local government have been formally released from a range of mechanisms of centralised oversight, but remain constrained in practice by a restrictive fiscal environment. The current structure of financing for mayors’ offices and combined authorities leaves metro mayors as the figureheads of ‘grant coalitions’ at the mercy of central policy priorities rather than autonomous regional actors with executive power. Their powers are often shared with other public bodies, and they must conform to financial practices devised in Whitehall or risk being frozen out of funding opportunities governed by an institutionalised ‘bid culture’. These structures highlight the long-held suspicion that central government does not trust the competence of local government.

Local government and the Covid-19 pandemic

Research by the Institute for Government found that, across a range of public services, underinvestment had undermined resilience and meant that the capacity to meet the needs of citizens had been compromised whilst standards had declined. Staffing pressures left many local authorities stretched from day one of the pandemic. The Treasury’s preference for the use of discretionary grants lacked pace and precision. For example, as care homes became the epicentre of the crisis, local authorities were left waiting for resources to trickle down from Whitehall. Poor quality, often out-dated data led to an over-general assessment of needs when allocating emergency grants to local authorities early in the pandemic.

Whilst the acute phase of the crisis has presented unparalleled challenges, this is nothing compared to what is down the track for local government if its finances are not secured in the medium to long term.

Further cuts to preventative services, such as early intervention work to support children, families and the elderly, will follow. As with the 1980s, the spectre of local government bankruptcies has re-emerged, whilst the Chartered Institute of Public Finance and Accountancy has discouraged councils from making applications for assistance if their financial difficulties stem directly from the pandemic.

Meaningful investment is only part of the solution. Strategic leadership, innovation and the cross-fertilisation of ideas is needed. Andy Burnham recently described the status quo as ‘begging-bowl devolution, where we constantly go on bended knee’ asking for money. Mayors can provide strategic leadership but have struggled to catalyse a rapid response without resources. As Covid-19 demonstrates, their potential is unfulfilled and their power severely limited, largely due to their financial subordination.

What next?

Throughout the process of devolution, the Treasury has acted to reinforce rather than challenge the core tenets of the Westminster model. The long-promised White Paper has been pushed back indefinitely, and whilst reform of the Green Book is a welcome development in addressing regional imbalances, the scale of investment being proposed promises to be inadequate relative to needs.

The financial constraints faced at the regional and local level of government, coming on the back of a decade’s worth of fiscal austerity, mean that while the acute phase of the crisis may be over, the consequences for local government will persist for some time. The next phase of devolution should not only empower local leaders but also fundamentally reconfigure central-local relations. This will necessarily involve Whitehall generally, and the Treasury specifically, adopting an alternative approach to governance to that of the Westminster model.

Commencing inclusive discussions between policy makers and local communities about greater fiscal autonomy and an enhanced role for metro and city mayors would be an excellent starting point to bring about meaningful change. A serious debate about reforming the vertical accountability structures associated with ministerial responsibility and forging horizontal structures to promote accountability lines between local leaders and the communities they serve is also needed.

A longer version of this article is published in the Political Quarterly journal.