New fiscal powers allowing strategic authorities to retain income tax and business rates could deepen inequalities between established combined authorities and newer devolved regions unless matched with capacity-building support, a new report has warned.

Last week, Prime Minister Andy Burnham announced that English mayors are to receive a share of income tax revenues and business rates as part of ‘a new era of devolution’

While the announcement was welcomed by many in local government, a new study from the Local Policy Innovation Partnership (LPIP) Hub has cautioned that without targeted help, England risks a ‘two-track’ devolution system.

While moving away from competitive bidding for funding is welcomed, the LPIP researchers argue this alone won't close existing capacity gaps between city-regions, counties and rural areas, which have different levels of expertise, research capability and institutional relationships.

The researchers warn that devolving powers faster without first addressing those gaps could leave the places already best equipped to pull further ahead.

The report introduces the concept of ‘institutional thickness’ – the combination of expertise, funding structures and trusted relationships that allow devolved powers to work effectively. Established authorities like Greater Manchester have built this over years; newer authorities often haven't.

The paper calls for differentiated support based on regional needs and urges the new No. 10 North unit to ensure sustained partnerships between Government and local institutions accompany any new powers.

Comment

Professor Anne Green, Professor of Regional Economic Development and Co-Director of City-REDI at the University of Birmingham, said: ‘For some time now strategic authorities have been caught in a Catch-22: they need resources and discretion to build effective institutions but have been expected to prove those institutions are already strong before either is provided.

‘The Prime Minister’s move away from this model recognises that places cannot demonstrate greater capacity while relying on short-term competitions and operating under tight control from Whitehall.

‘However, stable long-term funding must be matched by capacity-building support tailored to each area’s starting point. Otherwise, devolution risks transferring responsibility faster than some places can build the capacity to use it. This could result in a two-track devolution where those with weaker foundations are left even further behind.’

Further reading:

• Breaking down England's fiscal devolution plans
• Andy Burnham, make devolution mean devolution!
• Local Government Reorganisation: What It Means and Why It Matters
• Devolution and putting place first
• Fiscal Devolution – has stuff just got real?
• Local Government Reorganisation: What councils must get right.