Will devolution bring an economic and democratic dividend?

Our briefing for the New Economics Foundation (NEF) supports the existing literature in suggesting that such a relationship cannot be taken for granted

Dan Bailey and Matt WoodAs the Department for Communities and Local Government rolls out the first round of ‘City Deals’, advocates of English devolution have become almost Panglossian in their conviction that it will launch economic growth and empowerment across the country.  Unshackled from the chains of central government and no longer forced to suckle off the mothering breast of London, ‘underdeveloped’ cities like Newcastle will be ‘set free’, as Phillip Blond puts it, ‘for the first time to help stimulate their local economies’.

Over the last few months the Crick Centre has been working to produce a briefinglaunched tonight at the New Economics Foundation – which maps out the devolution debate and, in so doing, shows the extent to which these arguments have focused so intently on growth as the all-consuming purpose of devolution.  An eye-catching finding of the report, however, is not just that economic growth is so central to the current devolution hubris, but rather how rarely in practice this relationship is justified by City Deal proponents.  Very often, it would appear, the relationship between devolution and growth is simply taken as an article of faith.

Some have made the contestable claim that devolution will result in increased investment for the relevant local area, whilst others have suggested growth will be driven by empowering local policymakers who are better positioned to allocate resources effectively.  More commonly, though, ‘devolution’ and ‘growth’ are simply conflated, with advocates invoking questionable imagery and deploying lazy metaphors of ‘empowerment’ in making the case for these City Deals.

The academic literature on the ‘economic dividend’ of devolution suggests that the relationship between devolution and growth is not so straightforward.  Analyses of the relationship are of course complicated by a variety of other factors, but evidence taken from across Europe leads us to believe that the impact on growth can actually be negative.

The geographical disaggregation of any growth that is produced is a further cause for concern.  Andy Pike and John Tomaney find that previous attempts to address uneven development in the UK through devolution have led to fragmentation and incoherence in a way which has exacerbated inequalities.  Various analysts have since suggested that it is difficult to discern any evidence for the economic dividend hypothesis, but do note that where evidence of a boost in economic performance can be identified there are great disparities in its effects.

In other words, it is far from clear whether devolution will stimulate higher levels of growth in the UK, and it is even more difficult to forecast the geographical and social beneficiaries of this prosperity within the reconfigured UK political economy.  For, even if we do get growth, what kind of growth will this be?  Which places will grow, and will that growth be sustainable?  The government currently talks about ‘rewarding growth’, which seems strange as it suggests the rewards will go to those areas already growing, rather than those currently left behind.  In fact, there’s a real danger that the ways we currently have of redistributing resources across the country more evenly will be cut off in the future, leading to more, not less, inequality between regions.

Beyond growth, our briefing also highlights a surprisingly scarce word in the devolution debate.  This is democracy.  In some ways the existing debate takes the democratic nature of devolution as a given, and so it just isn’t discussed.  But this is questionable.  Recently, regions were given the power to set and keep local business rates, but can only raise the rates with agreement from businesses.  Is it democratic to give business this much power over elected councils?  And what other models of democracy could be used at the local level?  There is certainly a need to deliberate to a far greater extent on the possible alternatives, and here the use of a variety of democratic forums, such as citizens’ assemblies, could prevent this process becoming a fait accompli.

In sum, there is much still to be done in exploring how devolution and growth interrelate, not to mention the democratic potential in devolution deals.  Tonight, at the launch of our report at NEF, we will be joined by esteemed figures such as Phillip Blond (Respublica), Jessica Studdert (New Local Government Network), Sarah Ayres (University of Bristol) and Katie Ghosh (Electoral Reform Society).  We hope the event will be the ideal setting to debate further the actual socio-economic merits and risks of these City Deals.

This post draws on the research project ‘Discourses of Devolution’, funded by the A.D.H. Crook Public Service Fellowships and the ESRC Impact Accelerator Account in which Wood and Bailey are the Principal Investigator and Impact Knowledge Exchange Officer respectively.