Waheed Nazir 19 October 2015

Can devolution boost council revenues?

Over the summer months, councils up and down the country spent a frenzied few weeks planning and drafting their bids to the Treasury for devolution deals. Now that those bids are in, the next big question is how new powers and responsibilities can be practically used to deliver the greatest benefit to local communities.

The driving force behind the creation of new combined authorities is economic. Raising productivity is one of the biggest challenges facing the UK economy. Part of the rationale for devolution is that the necessary investments required to raise productivity – in health, education, housing and infrastructure – need to be integrated and are best delivered at a local level.

The transfer of budgets and responsibilities is a great show of faith in the ability local government. That means it is incumbent on council executives to use the new powers not just as a short-term shot in the arm, but as a means to build local governments’ role as a catalyst for local prosperity over the long term. That means not just investing for now, but investing it wisely so that it delivers a return, creating an ongoing, reliable source of funding for public services.

Planning and property departments will be vital to meet these objectives. The extra funding will give councils much greater flexibility to build social infrastructure, such as leisure centres and libraries, as opposed to the current system whereby these developments are effectively outsourced via the s106 system.

Devolution will mean that authorities hold the purse strings, have greater ownership of projects and ensure they profit from the localised demand that services create.

In practice that means that if the council rather than a private developer is the landlord of a new library or GP practice, the rents from the on-site coffee shop or adjoining pharmacy will flow into public rather than private hands. A catering college can have an on-site restaurant that is both a viable business and a training tool for students, with the profits being reinvested in the college.

This kind of innovative approach will only be made possible by the extra flexibility and budgetary control that devolution offers; central government will never be in the position to deliver such hyper-local ideas in response to local needs. And by profiting from the local demand created by public services, councils can ensure new and robust revenue streams that help guarantee the ongoing funding of those services.

In Birmingham, we have partnered with other local councils to create the West Midlands Combined Authority to submit our devolution bid. But in advance of the scope of new powers for the region being agreed with the Treasury, we are already thinking how we can change the way we work to use them to best advantage.

Through our Big City Plan we are developing very strong working relationships with the private sector. We feel that if we can help private developers generate returns on their projects, the council will also benefit through a rising tide of increasing council tax receipts and business rate contributions. The news that HSBC is to transfer over 1,000 staff to the city from London shows that the approach is bearing fruit.

Devolution heralds an exciting new era for local government delivery. The excitement at the opportunity presented by new powers needs to be matched by creative thinking about how those powers can improve local communities over the long-term. Adopting intelligent property strategies that use the new freedoms to diversify and strengthen council revenue streams will go a long way to achieving that end.

Waheed Nazir is director of planning & Rrgeneration at Birmingham City Council. He is also a judge for the inaugural Lambert Smith Hampton Enterprise Award, which aims to showcase innovative thinking that will be required to make most of the opportunity presented by devolution. For more information, please visit www.lshenterpriseaward.com

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