Category Archives: Policy Bites

Policy Bites: Devolution: Evolution or Revolution?

UK RegionsOn 28 January the Cities and Local Government Devolution Act received Royal Assent, marking an important step forward in our very British process of devolution. We in the West Midlands will now use it to create our Combined Authority and implement the proposed devolution deal we signed last November.

It’s worth remembering that Britain is one of the most centralised countries in Europe (second only to Albania according to some), but the process of putting that right is clearly going to be more of an evolution than a revolution. Not for us the sweeping introduction of new structures of local government across the board seen in France or the neat federal constitution of Germany.

Instead, the Act is what those in Whitehall call an “enabling measure”. It allows the Secretary of State to devolve any function to any local area and to create combined authorities and new “metro mayors” with additional powers. But it does not define what these powers should be, nor the geographical areas that will receive them. It does not make devolution happen. It is a form of legislation designed to support what might be seen as a peculiarly English approach to policy making: the agreement of deals between the government and local areas.

Nonetheless, in theory, this should give us the freedom to develop our own approach to devolution and allow local government as a whole to drive the agenda.  We said that the first West Midlands deal would open the door to an ongoing dialogue and that has, indeed, proved to be the case. The Government is already talking to us about further deals and we expect some announcements in the March Budget and the Autumn Statement later in the year.

But in reality the devolution deals agreed so far have tended to look fairly similar and there are some fairly strong walls around the places that government will not let us go at the moment. That is the downside of an enabling approach – it does appear to leave the government very much in the driving seat and determining the pace and direction of change, with local areas appearing to be as much reactive as proactive as they jump when asked for new ideas and engaging in a glorified bidding process. As one of our Combined Authority Chief Executives regularly puts it, we are like kittens chasing a flashing light … so we need to get more control of the torch.

What we need is a fully worked through strategic approach to devolution looking ahead to 2020 and well beyond. In the West Midlands, therefore, we have set up a devolution strategy group to enable us to plan future deals and to lobby more effectively for a more radical approach from the government. We aim to develop a West Midlands model of devolution, not follow a standard blueprint.

Whilst taking a much more long-term approach, we must also look now at how combined authorities and mayors can engage more effectively with local communities and how we can link together the different levels of city governance and the two themes of public service reform and economic growth. We can also develop a distinct approach through our work across the three Local Enterprise Partnerships.

Birmingham can play a big part in developing this new model, not least in our thinking on the very local level, with the forthcoming changes to our wards and the potential for many more neighbourhood councils following the creation of the Sutton Coldfield Town Council. Who knows, but this might see us developing local devolution agreements with neighbourhoods within Birmingham.

But the biggest wall we need to break down is the one around the whole agenda of “fiscal devolution”. To put it bluntly, there can be no real devolution without true local control of taxation and more freedom on how public money can be spent. Tax set at a sub-national level in the UK is equivalent to just 2.5% of GDP, compared with 15.9% in Sweden, 10.9% in Germany and 5.8% in France.

Even with the re-localisation of all business rates from 2020 we will not have control over the level of rates and we will still not be free to set the council tax rate, to adjust the bands to suit local needs, or to levy a Supplementary Business Rate above 2%. We also need to look at other areas of taxation taken for granted in other countries, such as hotel taxes, and explore the options for localising other taxes such as Stamp Duty or Vehicle Excise Duty. And we need greater freedoms to use these sources of income to borrow and invest.

The devolution debate so far has concerned the localisation of functions.  Opening up the fiscal devolution box would support a strategy that gives us genuine freedom to design local investment programmes and local public services to better meet the needs of local people and local businesses.

During the year ahead the Government is seeking to engage with local government about how the post 2020 system will work.  We must make sure that debate is not just a narrow discussion of business rates, tariffs, top ups and incentives for house building.  We must insist that the finance system supports a vision for real devolution – a revolution not an evolution. And we must make sure that Birmingham and the West Midlands play a leading role in that debate.

Policy Bites: Housing

When it comes to the development of public policy, what Birmingham thinks and does really matters; here in the city obviously, but also regionally and nationally.

Of course, over the last eighteen months we have been reminded of the importance of looking outwards and learning from elsewhere, but we mustn’t forget the other imperative of getting a whole lot better at “keeping our ear to the ground” in order to understand and, as appropriate, act on the ideas that come from our communities and our public, private and third sector partners.

With this in mind, throughout 2016 it seems appropriate to share with you what the city council is considering or doing – either on its own or with others – on a number of key policy fronts. I will be highlighting where we have good practice to shout about, as well as drawing attention to those issues over which we need to grapple with Westminster and/or Whitehall.

Housing

I’ll begin with housing, the subject of two motions at full council last week – and also seemingly endless drip feeds from government. This is a top priority for the Leader and a pressing issue both for Birmingham and the whole country because of rising rents and house prices, the insufficient supply of new homes to meet growing needs, and the poor quality of too much of the housing in the private rented sector.

The government has made some eye catching announcements over the last week, including a plan to invest £1.2bn in unlocking development on up to 500 brownfield sites by directly commissioning new homes. In addition, it also plans to re-develop five large publicly owned sites in London and the South East.

We should also continue to press (as the LGA has been doing on our behalf) for Minsters’ recognition that it is not the local authority planning system itself that is to blame for the lack of new housing. The real problem lies, amongst other reasons, with the costs associated with difficult-to-develop sites, and a longer term tendency for some developers to “land bank”. Recent research showed that large developers have land for some 600,000 new homes but completed only 67,000 in 2015. This situation needs a positive response from the public sector in the form, for example, of new approaches to land remediation, the availability of innovative grants and loans, and the greater use of public land (whether owned locally or as part of the national public estate).

As you should know, this is an area where Birmingham is already delivering locally.  As Cabinet Member for Homes and Neighbourhoods Cllr Cotton said in full council this month, the city and the city council can take pride in the record of Birmingham Municipal Housing Trust (BMHT), created in 2009. It has built around 1,000 new council homes for rent and a similar number of private homes.  We are currently the largest developer of new homes in the city and this puts us at the leading edge of councils finding local solutions to getting development moving on brownfield sites, in partnership with the private sector. So, instead of a scheme run from Whitehall, we will be looking at how Birmingham and our neighbours can work with government to take this approach forward, allowing us to invest more effectively through local knowledge and based on our track record of delivery.

Meanwhile, the Housing and Planning Bill is passing through Parliament.  It confirms that the government will focus overwhelmingly on new homes to buy. The housing bits of the Bill will: create a new category of “starter homes” (ie new homes priced at least 20% below market value and below £250,000 outside London); extend the Right to Buy to housing associations and require councils to sell-off higher value homes (paying the proceeds to the government). It will also require councils to charge market rents to tenants with a household income over £30,000 pa and to collect information for this purpose (the so called “pay to stay” policy).

The Prime Minister has also announced a new policy for redeveloping council housing estates. At first glance this appears to be based on research in London and on private investment and may not be practical in areas that do not have London land values. Nonetheless, we will need to watch this development closely as the city council still has very significant responsibility for stock locally and we would want to ensure that, if there are transferable benefits, that the city gets access to them.

But, for a growing number of policy commentators, there is an elephant in the room and that is, here in Birmingham and across much of the country, a large proportion of aspirant homeowners will need genuinely affordable and secure rental homes – a demand that won’t be met by “Starter Homes” which will remain out of reach when the realities of local wage levels are taken into consideration.

So, the city council will, it seems, still need to find ways to build new social homes for rent (as we do through BMHT) and increase their supply as well – along with taking into account the opportunities and requirements that the new legislation will bring forward. It looks like that could well become much more challenging in the light of the measures in the Housing and Planning Bill which will reduce existing “council housing” stock still further, along with necessitating the compulsory reduction in council house rents which will take £42m per year away from the Housing Revenue Account – money we would have used to invest in new homes.

On 22 January the Leader and Cllr Cotton will be launching a new communities and partners initiative to develop a comprehensive housing policy for Birmingham and a new City Council “housing offer”, covering all of these issues and more. You will have the opportunity to have your say and help shape this crucial aspect of our future prosperity agenda.

Housing is one critical area where we can use our local experience and our track record to work in partnership with the government.  But we also need to push for different approaches that to locally, finding our own solutions on behalf of those people of Birmingham who, through voice or circumstances, will need low cost rental homes.