speri.comment: the political economy blog

Devolution and austerity are intertwined in Sheffield City Region

A new conversation about devolution that acknowledges the impact of austerity on city regions is urgently needed

Martin Jones, Deputy Vice Chancellor, Staffordshire University, and David Etherington, Principle Researcher, CEEDR, Middlesex University

In October 2015, leaders in the Sheffield City Region signed an ‘in principle’ agreement with George Osborne (then Chancellor) for a £900M devolution agreement. At this time, Sheffield was second only to Manchester, with ‘Devo-Manc’ being the trailblazer of the Northern Powerhouse initiative for rebalancing the economy from South to North. The devolution agreement was to give the Sheffield City Region (SCR) new powers over transport, planning and skills and £30M a year for 30 years in return for an elected ‘metro mayor’.

Now in August 2017, according to the Sheffield Telegraph, the ‘wheels have come off’ devolution for the Sheffield city region (20th July, Telegraph Business, page 4). The context of this is threefold. First, some leaders in the SCR never bought into the idea of metro mayors, and opposed a new mayor having the power of veto over decisions made by council. Second, the fuzzy geography of the SCR mattered to some folk. The SCR isn’t coterminous: the ‘regional spaces’ that make up the stretched-out and networked local economy do not align neatly with the social and cultural ‘space of regionalism’, where issues of identity and culture matter. In August 2016, Derbyshire County Council launched a judicial review, claiming that the consultation about the devolution agreement had failed to ask the people of Chesterfield the right questions. In June 2017, Chesterfield and Bassetlaw pulled out of the mayor devolution deal, with Barnsley and Doncaster keen to explore other options. September this year will be the last opportunity to reassemble these pieces, to give enough time for public consultation to be held again if a vote to elect a new mayor is to be held in May 2018. Third, and most recently, although Northern Powerhouse Minister Jake Berry has said ‘There will not be a ‘full Yorkshire’ devolution deal’, a Yorkshire Day ‘coalition of the willing’, involving all Yorkshire local authorities except Wakefield, Sheffield and Rotherham remain keen to progress this broader territorial mayoral solution.

This ‘timetable of trouble’, as the Sheffield Telegraph on the 20th July put it, is only part of the story. We completed our own research on Devolution and Disadvantage in the  Sheffield City Region alongside the unravelling of these geographical events. Our study also found that there are issues of democracy and accountability that need to be addressed, as well as the legitimacy of a mayoral election system being independent from parliamentary control. Our research also highlighted the devolution of austerity, which is something that the press and popular commentary appear to have played down, and this needs to feature in this important debate on the future of South Yorkshire. Devolution to English city regions, the Northern Powerhouse and related developments such as the Midlands Engine, need a reality check.

A key finding of our research is that devolution is closely linked to austerity policies and various cuts to public spending (some of these being welfare-rated). Successive Governments since 2010 have in fact squeezed spending in relation to the regions. The National Audit Office reports that over the five-year period from 2010/11 to 2014/15 the government will have spent £6.2 billion on local growth programmes, including that spent via Regional Development Agencies (RDAs) and their legacy, and on new funds and structures. By comparison the RDAs spent £11.2billion over the preceding five-year period 2005/06 to 2009/10. Whilst the devolution deal for the Sheffield City Region potentially involves £900m over 30 years (subject of course to an elected Mayor and other milestones), we have found that cuts to welfare and local authority budgets between 2010-2014 amounted to £1.1 billion. PricewaterhouseCoopers management consultants (who manage the Sheffield City Region Skills Bank) state in their seventh annual ‘Local State We’re In’ 2017 survey highlights, ‘financial uncertainty will also continue to form the backdrop for local public service leaders: half (54%) of our local authority survey respondents believing some councils will get into serious financial difficulty in the next year, while 88% expect that to happen inside the next five years.’ Some academics in an analysis of local government finance refer to ‘worst Financial Settlement in Living Memory.’

We contend that local authority policies play a crucial role in the provision of the social and economic infrastructure that is so essential for economic growth, but the ongoing budget cuts for local authorities undermine this. Welfare cuts and greater welfare conditionality, along with ‘work-first’ policies, actually create and reinforce social disadvantage by distorting the labour market through increasing segmentation and poverty. All this means more limited chances for disadvantaged groups to actually access skills and apprenticeships, which are deemed as essential to devolution growth strategies.

Devolution has conditions and strings attached, and these need to feature in this debate, which can’t be reduced to a discussion about the interesting facets of South Yorkshire and Derbyshire’s fuzzy geography. The October 2015 Devolution Agreement, made and signed between HM Treasury and the Sheffield City Region, makes these conditions clear; on page 5 it states: ‘The devolution proposal and all level of funding are subject to the Spending Review’ and in paragraphs 49 to 53 under the ‘Fiscal’ heading, ‘the devolution table has to run alongside and not fundamentally challenge the Spending Review timetable’. These are parallel developments: devolution and austerity are deeply intertwined.

The Sheffield City Region Combined Authority also has responsibility for chairing Area-Based Reviews of the landscape of 16+ skills provision. The skills sector has been subjected to intense budget cuts in recent years leading to the restructuring of further education colleges and other providers. The Institute for Public Policy Research states that ‘by 2020/21 adult skills funding will have been nearly cut in half in real terms from 2010/11’.

Yet, there is no or little analysis within the various SCR growth plans on how to address these significant cuts and the labour market disadvantages that the skills system aims to tackle. This is a complex and significant challenge for policy makers. We found that a variety of groups such as women, young people and BAME adults, as well as those on long term sickness and disability benefits, are a long way from accessing employment opportunities.

In short, the devolution process in Sheffield City Region contains no clear policies to reduce social inequality. In our view the context smacks of the continuing ‘trickle down’ economics regime that has plagued the UK for decades; one where there is a ‘hope for the best’ that some deprived groups and areas will benefit, but where the reality of inequality is likely to remain. Indeed, a contradiction of devolution is that those policies such as the planned ‘devolved’ Work and Health Programme, which are likely to assist these groups, are likely to operate on significantly reduced resources and budgets, as a consequence of austerity policies, than those originally allocated to the Work Programme (which is being wound up in September 2017). In fact the cuts undermine any attempts to regenerate the city economy and actually reinforce the ‘race to the bottom’ of low pay and skills, and economic exclusion.

Central government has very subtly retained power over supposedly devolved cities and regions. The devolution process – and its integral components of fiscal conditioning, target setting, and the re-composition of local governance networks – involves in our opinion increased centralisation and this needs to be discussed and debated as a matter of urgency. As economic geographers, we are pro-devolutionists that want the Sheffield City Region and other localities to genuinely accelerate the delivery of their Strategic Economic Plans. We want to widen this debate to one that raises questions on how austerity and cuts are impacting city regions in irreversible ways.

We make a number of recommendations in our report that relate to a different devolution settlement fostered on the principles of inclusive growth, such as: governance accountable to the locality; redesigning and integrating employment and skills initiatives for disadvantaged groups; increased access to apprenticeships for all; and promoting employment rights within the SCR through social dialogue. We also argue that devolution if it is to be credible needs to involve actual control and co-design of policies by local partners based on realistic funding and resource allocations. Finally we argue for an honest and transparent debate by the combined authorities on the impact of austerity on city region inequality. This will involve a number of steps which we consider will mitigate the impact of austerity. It will also facilitate and build a conversation and advocacy that challenges austerity policies and seeks a step change in central government policies in terms of its Spending Review.

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