Mayoral authorities like the North East and Tees Valley should have stronger financial watchdogs if they are to be given more funding and control over how to spend it, according to a new report.
“As authorities gain fiscal powers, the safeguards that come along with those powers are crucial for building trust,” says the Institute for Public Policy Research (IPPR), a think tank with strong northern links.
“This will have direct implications for the relationship of England’s new tier of regional governance to the public, local authority leaders, parliament and government.”
The IPPR wants the introduction of regional accounting officers, in place of Whitehall permanent secretaries, and local audit offices for how money is spent and what it delivers.
It also warns that fiscal autonomy requires local institutions that are resistant to the misuse of funds, corruption and elite capture by lobbying interests. What it calls Advanced MSAs (mayoral strategic authorities – see below) should face enhanced transparency and audit requirements.
As part of this, it proposes mayoral authority accountability committees, which would expand and professionalise the current role of mayoral authorities’ overview & scrutiny committees,
Advanced MSAs, in the IPPR’s scheme, are a new top tier of mayoral authority with greater fiscal powers than the existing 11 established mayoral strategic authorities including London, Greater Manchester and the North East, mayoral combined authorities like Tees Valley and foundational combined authorities such as Cumbria.
‘No income tax rise’
The Burnham government is already committed to replacing grants with a share of income tax, a move reported by North East Bylines on 4 August and now supported by IPPR, which says MSAs should be able to retain a share of the growth in tax revenues generated in their area as well.
IPPR estimates that 2.5% of income tax would equal existing integrated settlements (government grants), and an ambitious settlement would assign 5% and shift an additional £3.8bn a year from Whitehall to mayoral control. This would not involve an increase in income tax, says IPPR, but would instead replace existing Whitehall funding through integrated settlements with a larger and more autonomous devolved revenue stream.
Borrowing powers
Borrowing powers are described as the final piece of the fiscal devolution puzzle and essential for translating devolved revenues into infrastructure delivery, because infrastructure investment requires substantial upfront capital, while the revenues and wider economic benefits accrue over many years.
“The aim is not unconstrained borrowing,” says IPPR, “but targeted borrowing tools consistent within the fiscal rules that the government decides to set and the spending envelopes spelled out in spending reviews. This should let mayors invest against their expected income tax revenue streams, which provide the certainty needed to do so.”
This would enable large mayoral authorities like the North East to invest in major projects like mass transit, housing & strategic development and industrial clusters & innovation districts. Finally, IPPR wants an equalisation mechanism to protect places with weaker tax bases.
Comment
Fiscal policy usually refers to tax and spend. But not in the context of English devolution, where it is about giving mayors greater freedom to spend the funds they are handed by the government – principally a share of income tax. Unlike in Scotland, where the Edinburgh government has the power to vary most income tax rates, thresholds and bands, there is no suggestion here of a similar power for Kim McGuiness in the North East and the other English mayors. This is not true fiscal devolution – it is the power to spend without the responsibility for taxing, as this author has argued before.
That is not to say it is a bad thing, and if the government follows the IPPR recommendations and gives the North East a share of income tax it will be welcome. But the new accountability measures it proposes – regional accounting officers, local audit offices and accountability committees – are essential. We don’t want another Tees Valley.
Friends of Bylines Network
There has never been a greater need for grassroots journalism that investigates the stories that really matter, holds power to account and champions the voices of everyday citizens. We are proudly powered by volunteers but what we do isn’t free.
STAND WITH US for independent, citizen-led journalism that makes democracy stronger, and you will even get some exclusive benefits.
