Power without responsibility is “the prerogative of the harlot throughout the ages”, the poet Rudyard Kipling wrote in his journal, in reference to the newspaper proprietor Max Aitken (later Lord Beaverbrook).
That thought may be in the minds of mandarins at HM Treasury when new Prime Minister Andy Burnham (as he surely will) proposes more powers and more funding for regional mayors like Kim McGuinness in the North East and, if not quite yet, Lord Ben Houchen in Tees Valley.
Or, as the Institute for Government (IfG) has expressed the same idea more prosaically: “Resistance to devolution from the centre arises from the fact that central government lacks trust in sub-national government competence or accountability.”*
While no one would claim the government itself is a perfect custodian of public money, there is certainly good reason to believe that some local and regional governments are as bad if not worse. We have to look no further than the Tees Valley Review of 2023-24, which found that standards expected when handling public funds had not been met (though no evidence of corruption) in relation to the well-publicised Teesworks scandal.
Tees Valley Combined Authority (TVCA) is in its second year labouring under a best value notice (BVN) imposed by the government because of ministerial concern as to the authority’s capacity to comply with its best value duty.
And TVCA is not alone. Nine local authorities including big ones like Birmingham, Nottingham and two London boroughs, are currently subject to even more stringent measures such as statutory directions or temporary take-over by commissioners.
Some in Whitehall and Westminster with long memories doubtless recall the days when local leaders in places like Liverpool and Lambeth took pride in defying Margaret Thatcher’s government – and were even condemned in an angry conference speech by Labour leader Neil Kinnock – by setting illegal budgets.
Quest for growth
Why would central government, especially Treasury mandarins, want to give more money to local and regional government with a record like this? Because after decades of half measures, ministers have recently started putting a lot more eggs into the devolution basket in their quest for economic growth, with mayoral strategic authorities required to prepare and implement local growth plans and receiving integrated financial settlements (ie, more but still limited – see below – control of their own budgets).
Accountability for this extra funding flows through the Whitehall machinery, which can certainly be tough on underperforming local and regional authorities. But local voters are largely bystanders.
That is not good enough. Local and regional authorities must be responsible to their electorates too, and voters have shown through low turn-outs that they are not much interested. Turnouts in mayoral elections in this region have ranged from the pretty average 37.6% in the North East in 2024 to the dismal 21.3% in Tees Valley in 2017.Voters probably would be more engaged though if they saw substantial mayoral precepts start appearing as additions to their council tax bills.
That would force regional mayors and authorities to really make the tough choices politicians love to talk about. It is easy enough, for example, for local representatives to call for dualling the A1 in Northumberland (a worthy cause) when they know the government would have to pay. But how would they explain it to local taxpayers in Barnard Castle. Sunderland, after all, was not keen about helping to pay for the Metro in the 1970s when there was no guarantee it would ever go there.
Good for democracy
So it would actually be a good thing for democracy if local politicians had to raise more of their own money, really have to make tough choices about how to spend it and then account to their own voters instead of taking the easy option of pleading for more government handouts then complaining about underfunding.
This inability of UK local and regional government to raise their own taxes contrasts sharply with that of many of the world’s developed countries. In the UK only 4.8% of total tax revenue is raised locally. The German regions (Länder) raise 32.6%.
There is no proven link known to this author between local tax-raising power and local growth. But according to research by Reuters, London’s share of the national economy has surged by over three percentage points since 2000 to 24%, at the expense of the vast majority of other British regions.
Comparable data from the European Union statistics agency Eurostat show far less polarisation between regions in Germany and France. It seems unlikely to be a coincidence.
The North East’s special problem
However, there is a special problem for the North East in linking taxation and spending at regional level. The tax base here is so small that whatever form of local taxation was placed in the hands of local politicians, from local income tax to a hotel levy, it would almost certainly raise less here than in any other region, leading the North East to fall behind. So we would still rely on some form of redistribution from the centre.
This, to my personal knowledge, was the worry of at least two of the four council leaders who voted against devolution in 2016, splitting the North East temporarily into North and South of Tyne.
More devolution would have been on the way now, even had Keir Starmer’s government remained in power. His Chancellor, Rachel Reeves, spoke in her Mansion House speech this month of “giving regional leaders control over a share of national taxes including income tax and business rates.”
That sounds like more money to spend but still without more responsibility to raise it: the prerogative referred to above would still apply.
If that is what Starmer and Reeves were planning, it’s a fair bet that in some shape or form Prime Minister Andy Burnham will be planning still more of the same, or similar. One possibility is that rather than giving more money to the mayoral regions in these straitened times, he will give them greater flexibility over how and when to spend it.
The six pillars of development
The North East Mayoral Strategic Authority (NEMSA}, for example, has a three-year financial plan for 2026-27 to 2028-29 totalling almost £1.3bn, divided between capital and revenue. All of it is provided by the government through NEMSA’s integrated settlement.
The settlement, in the words of a cabinet report in February, “will bring together a range of funding streams, historically individually ring-fenced, into a multi-year allocation formed of broad themes, providing greater flexibility, longer-term certainty and increased local control for the mayor and cabinet over investment decisions. Certain funding streams remain for now outside of the integrated settlement, including the investment fund, but it is anticipated that, over time, the integrated settlement will become the default funding mechanism for all government grant funding.”
The settlement is paid for six purposes, called pillars: housing and strategic planning; economic development and regeneration; skills and employment support; transport and local infrastructure; environment and climate change; and health, wellbeing and public service reform.
For all the cabinet report’s talk of increased local control, responsibility for deciding how to spend this money is limited. North East Mayor Kim McGuinness can carry over funding from one financial year to the next and move up to 100% of revenue funding within each pillar to capital. But she can only move up to 10% of capital funding within each pillar to revenue and move up to 10% between pillars.
Her power to spend anything extra overall is tiny by comparison with the £1.3bn in the three-year plan. She could impose a precept on council tax, but only subject to a limit decided annually by the government and a local referendum.
It is clear from all this that the government intends to retain effective central control of almost all mayoral spending. If Burnham wants to make a radical change, he may decide to give regional authorities the power to raise more of their own funds and answer to their voters for their decisions. To dual or not to dual? That is the question that may eventually fall to local politicians to decide instead of the ministers who have ducked it for decades. Tax and spend will rightly go together. How will mayors and their cabinets feel about that? At least they will escape Kipling’s jibe.
*Achieving Political Decentralisation: Lessons from 30 Years of Attempting to Devolve Power in the UK. By Gash, T. Randall, J and Sims, S. Institute for Government, London 2014.
