1. Governance
July 20, 2016

In the wake of Brexit, city devolution is more important than ever

By Alexandra Jones

The accession of Theresa May to No 10 last week, and her rapid Cabinet appointments, have finally brought an end to some of the uncertainty surrounding British politics since the EU referendum. But the new Prime Minister’s early statements and the extent of the reshuffle she has conducted indicates we are unlikely to see a return to business-as-usual anytime soon.

Theresa May and her team face an incredibly daunting in-tray in her first months in office – including healing divisions within the Conservative Party, setting out a timetable for Brexit negotiations, and securing the best possible deal for Britain to leave Europe.

The risk is that these issues will eclipse most other political questions in the coming months. But it is vital that city region devolution, one of the government’s flagship policies, continues – not least because, as the nature of the UK’s continuing political crises suggest, this agenda is becoming more important now than ever before.

Take for example the need to restore trust in politics. If the vote for Brexit was in part a reflection of widespread disillusionment with the Westminster political establishment, then putting in place new mayors – strong, democratically accountable leaders – in city regions across the country could help re-engage people with the political process.

The need for greater devolution is even more striking when we consider the unbalanced nature of the UK’s economy. Our most recent report showed that the UK is increasingly dependent on taxes generated in London, which now account for around 30 per cent of national “economy taxes” (including all tax revenue dependent on the growth of the economy, such as income tax, land and property taxes, and VAT). And while the capital’s tax intake grew by 25 per cent (£28bn) in the last decade, other major UK cities like Manchester and Birmingham saw little or no growth in the same period.

Being so reliant on just one city to generate so much tax revenue for the country clearly carries many risks for the national finances. That’s particularly true given the uncertainties facing the country in light of the EU referendum, with many financial services firms openly saying they would consider their position should the UK not secure access to the single market.

Of course, devolution can’t be the sole answer to these problems. However, ensuring more decisions over issues such as skills, housing and transport are taken at the level at which the local economy actually works will play a big part in driving investment, job creation and wage growth in places across the country.

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Delivering on this in short order has to mean making the most of progress already made. The new Prime Minister’s first and only leadership speech suggested she has ambitions to extend devolution to other parts of the country. That will attract support from all parties, but it’s vital that it doesn’t jeopardise the city region devolution deals already on the table, but which are yet to go through parliament.

After all, the six city region deals that have been secured to date don’t just cover the most economically significant places such as Manchester or Newcastle: they include over 30 small, medium and large cities, including many with struggling economies such as Oldham and Sunderland, who voted to leave the EU last month. Creating a directly elected mayor for these areas not only ensures that they can be held to account by local people for delivering change, but also that it will be easier to devolve further powers to these areas in the future.

No one doubts the size of the challenges ahead for Theresa May in her first months in office. But allowing the hard-won progress made on devolution by national and local businesses and politicians to stall – or worse, stop altogether – would make it harder, rather than easier, to achieve the Prime Minister’s broader aims of extending economic prosperity and improving life chances.

Backing devolution will not only enable May to start to bridge some of the political divides that exist across the country. It will also be crucial in ensuring the new government can navigate the economic uncertainty ahead as the UK prepares to leave the European Union.

Alexandra Jones is the chief executive of the Centre for Cities. This article originally appeared on the think tank’s blog.

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