Devolving tax and immigration decisions to metropolitan areas and fuller powers for Scotland could lift economy ‘by 5%’

This article is more than 5 years old

This article is more than 5 years old

Allowing cities to set their own tax, immigration and planning policies alongside “devo max” for Scotland could boost UK productivity by 5%, according to a thinktank’s report. The UK needs “devo met” – devolution of power to metropolitan areas – as well as north of the border, the Royal Society for the Encouragement of Arts, Manufactures and Commerce (RSA) City Growth Commission said.

The north of England should also see greater connectivity to create “one north”, particularly the north-west region dubbed “ManSheffLeedsPool”, which has a combined population greater than Scotland. This could include an “Oyster card for the north”, similar to London’s integrated transport card, a high-speed tube system and superfast broadband. The UK’s centralised political economy is “not fit for purpose” and attempts to manage down the deficit and national debt “will be futile and unsustainable in the long term”.

Businesses “struggle to meet their recruitment needs through immigration because the system is costly and complex”.

If the UK persists in restricting immigration to meet its “growth-inhibiting” net migration target, there is “a risk that households in all metros will suffer in the long term as GDP and GDP per person falls and average incomes are squeezed”, it added.

The commission also recommended reforming national immigration policies in favour of taking a metro-led approach, including lifting the cap on skilled immigration.

Cities should also be allowed to align their housing and transport planning across their travel to work areas, with the power to reclassify “poor quality green belt” areas for development, it added.

The final report from the commission concluded that devolution has the potential to boost economic output in the UK’s 15 largest metros by £79bn per year – approximately 5% of current GDP – by 2030.

But the scale of the challenge “is huge”, according to RSA, with Greater Manchester, the UK’s second largest metro area, in an annual £4-5bn fiscal deficit to the Treasury.

Jim O’Neill, chair of the commission, said: “Bolder efforts to improve our infrastructure, both digitally but especially physically, are crucial for creating agglomeration.

“As I have become fond of saying, greater connectivity between ’ManSheffLeedsPool’ and this 7 million person region could start to see the level of scale we need for change.

“We argue all 15 metro areas should be able to take on different packages of devolved powers over time, and there’s no reason why other places could not come together to take on policy and budget flexibilities, too.

“The current five metro areas that have combined authorities seem to be the best placed, along with London, for warranting earlier steps towards full ’devolved status’.”

Ben Lucas, chair of public services, RSA, and city growth commissioner, said: “With devo max being negotiated for Scotland, we need to see devo met for our British cities on a similar timescale.

“In a world in which cities are the new drivers of growth, decentralising our political economy will boost GDP and enable our major metros to achieve their social and economic potential.”

Charlotte Alldritt, secretary to the commission, said: “During the 19th century, metropolitan industrial growth drove our national economic success and established a strong industrial heritage, of which many of our city regions can be proud.

“The challenge is now to ensure these places have the capacity to fulfil their economic potential in the 21st century – whether through better connectivity, leveraging the power of data in public service reform, or by fostering their creative, innovative economies.”

David Sparks, chair of the Local Government Association, said: “The Cities Growth Commission report confirms that the benefits of devolving powers to local areas in England are simply too big to ignore.

“Our current overcentralised system, which has Whitehall holding the public purse strings, is no longer fit for purpose in the 21st century. This report highlights the extent to which some of our great cities are being held back by being denied the same sort of autonomy enjoyed by equivalent European cities.

“The huge economic benefits of devolution identified by the Cities Growth Commission are likely to be just the tip of the iceberg. Devolution to cities should be the start of a much bigger and wider process of devolution for the whole of England.

“People from across the country should benefit from more of the important decisions affecting their lives being made close to where they live, whether home is a big city or a rural area. Across a wide range of issues, there is compelling evidence that taking decisions closer to communities, through councils, achieves better results and saves money.

“The LGA has appointed a commission on economic growth and the future of public services in non-metropolitan England, which will publish an interim report next month on what more could be done to promote growth and improve services in non-metropolitan areas.”

Chancellor George Osborne said: “I warmly welcome the overall report. It makes a strong contribution to delivering the northern powerhouse I am determined to build.

“The commission recognises that, for cities to be successful, they need directly elected mayors, combined with real power and to be better connected both physically and digitally.”