Local government is over-centralised, inefficient, and under-resourced and is harming the UK economy, a new report says.

The study from the think tanks Centre for Cities and the Resolution Foundation argues that local government struggles to deliver positive change because councils and combined authorities don’t have the necessary powers and funding to effectively manage local economies.

According to the report, entitled Centralisation Nation: How a broken system of local government harms the British economy, the UK’s divided administration with its patchwork of different bodies make local management of the economy and other reforms challenging.

As well as a fractious, complicated system of local administration, the UK is also held back by local authority funding cuts, the report says. Between 2015 and 2019, British local government spending per person only increased by 2%. Meanwhile, spending increased by 21% in France, 23% in Spain, and 25% in Germany.

Summing up Centralisation Nation, the report’s press release concluded: ‘The fragmentation and lack of resources experienced by the UK’s local authorities, combined with a lack of fiscal powers, has left them incapable of supporting their areas through times of economic change.’

Centre for Cities chief executive Andrew Carter said: ‘Britain’s unusual level of centralisation is a weakness, not a strength. It means subnational government is incapable of delivering the changes that they and the national economy require.

‘Making small gradual improvements to fix our broken system of local government – as Whitehall has been doing in recent years – is not going to be enough to help us escape our stagnant economy by 2030.

‘Big challenges require big responses and central government must now deliver reforms that devolve fiscal powers and give local authorities the resources to effectively level up their areas and encourage growth across the UK.’

A collaboration with the Resolution Foundation and LSE and funded by Nuffield Foundation, the report makes three recommendations: Devolve fiscal responsibilities to local authorities, fix fragmented local government structures and boundaries, and ensure local authorities have the resources they need.

Resolution Foundation research director James Smith said: ‘One of the key challenges facing the incoming Prime Minister will be to “level up” the country. This already daunting task is being made even harder by the fragmentation and squeezing of local government. A radical overhaul of devolved decision-making and resources will be needed to turn this around.’