Deal Making as a method of devolution policy

Posted on: 17 December 2020 by Mike Palin, managing director of GC Consulting in Blog

In this blog, managing director of GC Consulting, Mike Palin, outlines three problems with 'deal making' as the dominant method for deciding devolution settlements in England — identifying a series of steps that can be taken to renew devolution both as a process and a project.

Recent months have seen the language of ‘deal making’ between national and local government become common parlance on TV and in printed media. ‘Deal Making’ as a policy tool has been common for a number of years – but is fundamentally flawed in the long term.

It is not conducive to good, long-term policy planning or delivery. It is inevitably short-term and places power at the centre. It is also not conducive to developing strong inter-governmental relationships between the centre and local areas in the way Dr Tom Arnold outlines as necessary in Policy Briefing 29, produced in October of this year.

The process of Deal Making between the centre and local areas has emerged in the last decade. It began in economic development with City Deals, Growth Deals, and most recently Town Deals, but this approach has become more prominent. The process of ‘doing a deal’ was front and centre of plans for local government reorganisation, with areas asked to submit their ‘bid’ for the centre to decide. The model will also carry on as the various new funding ‘pots’ announced in the Spending Review continue the bid-making method.

Deal Making has therefore become the method of devolution – an ask from the local, and a decision from the centre – based on a centrally determined set of constraints. In this respect it is not devolution in a meaningful sense but a form of delegation with numerous problems arising from it.

The first of these problems is the allocation of resources on the basis of political negotiation, rather than need. The Towns Fund is a classic case of where ‘need’ was largely ignored in the way funds were handed out, with politics very clearly at play instead. Analysis by the Manchester Evening News and the National Audit Office suggests that the selection of towns for investment was at least in part politically motivated, with some situated in close marginal seats. Yet this approach then started to permeate the public health response to the pandemic, with allocations not based on what is required but on what can best be ‘negotiated’ instead.

Second, and more fundamental, is that Deal Making reinforces the power dynamic that the centre has over the local which devolution aims to break down. The local makes an ask, the centre makes the rules, and ultimately, the centre decides. The current and very live issue is a perfect example – it is the centre that can ‘impose’ which areas enter ‘Tier 3’ of Covid restrictions, leaving the local to ‘ask’ and ‘negotiate’ for some associated resource.

Third, and most simple, is the cost of doing the deal. Bid writing and case making does not necessarily come cheap and local areas have been asked to meet those costs at a time of increasingly constrained resource. Whatever the circumstances, local and combined authorities should have their capacity and resources focussed on the delivery of benefits rather than embroiled in the back and forth of a negotiation. ‘Deal Making’ is not a good use of time, especially when there is a more pressing priority.

To be clear, this is not the fault of local government. In these Deal Making scenarios the power sits nationally and that is where the game rules are set, but what it does do is highlight the constitutional weakness of devolution as it stands. The local has to ask for things from the centre. It reinforces the centre’s power as a result.

This needs a fix – we need a method that actually transfers powers from the centre and allows the local to react when localised need occurs. The problem, short-term, is that local government is always incentivised to ‘do a deal’ rather than to fight for the long-term gain of genuine devolution. 

This is because those that do not do the deal lose out, stuck with ‘what’s on the table’ rather than what is actually required. Councils and combined authorities are placed in the incredibly difficult position of either seeking a better long-term, sustainable approach (which might actually deliver some gain) or taking a short-term deal on the table which only part-fixes the problem.

What is the long-term solution? We need actual devolution – some form of constitutional transfer of accountability from the national to the local. But that doesn’t feel like it is coming any time soon.

So what could the future look like?

Devolution in England must be seen as both a process and a project, and that what we have today is just a small step towards what devolution might eventually be. 

It is a process in that it is about loosening the grip of Whitehall and proving that subsidiarity is best and that ‘the local’ can be trusted and empowered. With time, you would hope that that empowerment grows and that more powers, with fewer strings, get passed over.

It is a project because it needs implementation. In this sense it needs a plan and it needs ‘doing’ over time. In this regard it will require leadership and advocacy beyond the short-term nature of immediate politics but with a longer term, collective goal, of making sure that empowered local leadership is allowed to occur.

The question then is who is now leading and implementing the devolution project today?

In government, devolution had advocates in people like Lord Heseltine, Greg Clark in his roles as Minister for Cities, and then as Secretary of State in Communities and Local Government and then Business, and even the Prime Minister himself as a former Mayor of London.

Yet recent months have suggested that the appetite for devolution has waned, both with the inability to bring forward a White Paper and then from the regional arguments over COVID-19 response and implementation. The intensely political challenges exhibited by these events show how susceptible and at-risk devolution can be to the short-term nature of politics.

Similarly, who at the official level in government now acts as a sponsor for devolution in the future? When it was a political priority, a clear line of sight existed to government officials, in multiple departments, authorising or at least sponsoring them to ‘devolve’. Brutal honesty is required that, unless pushed, Whitehall is unlikely to be doing this itself.

Hence, the future might not look much different to today.

In effect, both the process and project of devolution in England seems to be effectively stalled. There will be an ongoing demand for more powers, responsibilities and funds from Mayors and from local areas, but unless the process and project is un-stalled those expectations and requests are unlikely to be met.

Of greater concern to advocates of sub-national subsidiarity is that we have history for what happens when the process of handing over powers and funds comes to a pause.

From the 1990s into the 2000s there was a similar (but clearly different) process and project that established the Regional Development Agencies (RDAs) as new institutions and funders of projects in their regions and the concept of new Regional Assemblies to provide political and democratic legitimacy to powers when transferred.

Like the combined authorities, which are new institutions and funders of projects, and Mayors as providers of democratic oversight, the project and process was to transfer powers and monies from Whitehall and place them closer to where they would most make difference.

Like the combined authorities today, the RDA / Regional Assembly model was supposed to stimulate enhanced economic growth, coordinate skills delivery with economic need, fund economic projects, and determine a statutory planning document to coordinate land supply for both industry and housing at their regional level of scale.

And like the combined authorities today, the RDA / Regional Assembly model was constructed as a ‘hollow box’.

By this I mean that the legislation creating the entity does not automatically transfer to it the powers which it might want to have. These, instead, are transferred on a case-by-case basis with government determining how and when and, critically, the constraints to be applied. It also exposes combined authorities to the same risk as the RDAs / Regional Assemblies, in that if government decided to take those powers and resources back, there is little, in a technical sense, to stop it being done. RDAs, after all, were not abolished through a repeal of the RDA Act but simply by cutting off the supply of monies, bringing their role to an end overnight.

So, by the late 2000s the project and process of delegating powers to the regions was beginning to stall. The failure to deliver on intended responsibilities – including Regional Spatial Plans (akin to the City Region Spatial Frameworks required today) alongside a loss of advocates in the centre, meant the momentum was quickly lost and the concept of passing down power, as a principle, was suddenly lost too. Advocates of devolution must not now let that happen again.

So what next?

If we are to avoid an abandonment of devolution in the years ahead then we need to learn from the mistakes of the past. This means we need a renewal of both the project of devolution and the process, and a vision for what that devolution might be in a decade’s time.

As a project it will need implementation that goes beyond the short-termism of the political cycle and a professional view of what a new constitutional devolution might be – and how it is enacted to have an institutional life beyond political whim.

Alongside this, it needs advocacy. This must be political, and cross-party, but also professional. We need to institutionalise the idea that devolution is the right thing to do, not just politically but also rationally as the best means of delivering the objectives of economic growth and connected policy. That is the case in Germany and that is the case in many other places where spatial disparities are far smaller and ‘devolved’ models are more institutionally fixed. We need to learn from those places too.