Future of the UK Constitution and Devolution

Debate between Yvonne Fovargue and Bim Afolami

Wednesday 8th March 2023 Westminster Hall

[Bim Afolami]

This is how that could work. First, alongside what I was saying about local leaders, a standardised system of local government—whether people live in unitary authorities or a mayoralty, and whether they live in England, Scotland or Northern Ireland—would by necessity spread representation all over the United Kingdom. That is how we build in a lot of regional balance. Secondly, we could change the system by ensuring that, in the weight of the total number, there was always at least a significant minority—if not at least 50%—represented in that sort of way, rather than this being just about appointments. Ultimately, lifetime appointments cannot be made on a regional basis; even if we tried to, people are free to move around. However, if by necessity, in an ex officio capacity, the Mayor of Newcastle had a right while they were Mayor to speak in the second Chamber, it would have that regional balance.

This matters because not only would it improve democratic accountability and increase economic growth, as well as helping investors understand who to go to, but it would help to spread good practice and ideas. Constitutions matter because of what they practically do to the governance of the country. We currently have ad hoc relationships that depend on the political colour of the Government and, for example, of mayoralties, and whether particular individuals are perceived to be effective. To some degree, that is always the case. However, where we find good practice happening, we need to highlight it and have a vehicle for it to be aired in a public forum. Parliament, if nothing else, is a vehicle for the public airing of issues and debate. Linking local governance with the review of the second Chamber in that way would be effective.

I will add a bit more detail about why, economically, it makes a big difference if we get more standardised control of how our local government works, and how it links in with central Government. I like data—it is important. If we look at the data for most of the 20th century, inequality in GDP terms between the regions of the United Kingdom was quite low by European standards. However, by 2010, we had started to perform quite badly in comparison with our European partners, and we have continued to perform badly in that vein. I happen to think that that is more about the strength of London than it is about the weakness of certain parts of the country, but we can have a debate about that.

The consequence of that high degree of regional inequality has been twofold. First, it has caused political problems. In certain parts of the country, people feel left behind and that, economically, they have not been given a fair shake. There are calls to reform the Green Book and the Treasury. There are all sorts of political shenanigans and things that Opposition Members will appreciate, as we do on this side of the House. Secondly, that regional inequality has contributed significantly to our national productivity problem, which is well documented. It is out of the scope of this debate to go into that in detail, but if there are big portions of the country performing economically poorly—even if London and the south-east are doing well—the country’s economy overall is not going to improve as much as it needs to.

How does effective devolution help the national productivity problem? Some people might argue that it is about tax, education or skills policy passed in Westminster. Effective devolution, standardised and regularised in the way that I am describing, will help. There are two broad reasons economists give for productivity and regional inequality. The first is poor transport infrastructure in huge swathes of our country. The second is poor policy on innovation clusters, particularly in areas of high skill and around universities. Compared with the UK, other countries are just doing better in those two areas, although the economic debate is broad. If we had more effective power for local leaders, more of a voice to spread good practice, a clearer understanding of who was responsible for what and when, and a more effective fiscal package for each of those local areas, I submit that we would perform better in both those areas.

It is impossible for any centre of government in Whitehall and Westminster to focus appropriately on every single need of every single part of the country, because we make broader national and international policy. We cannot deal effectively with everywhere; that is the role of local leaders. Helping them do that better, whether that means transport infrastructure, skills or innovation clusters around top universities and areas of learning, is what we need to do, and to do that effectively we need to talk about money. It is easy for me to talk about powers and how things should be better and more effective. We have to talk about not just the money available for local authorities and leaders to spend, but what they are accountable for raising. I will be candid with the House. One of the difficulties politically that I and many party colleagues have felt at times is that certain local leaders seek to blame Westminster for all that goes wrong, yet take the credit for everything that goes right. I know it will be a shock that any politician would think of doing something like that.

In this country, we are incredibly centralised fiscally. About 12% of taxes are spent and raised locally, the lowest proportion in the G7 by some stretch. The next is Italy at about 17%, then Germany at about 30%, Canada at about 50% and the United States at somewhere between 40% and 50%, depending on how it is calculated. We are an outlier. I do not want to stray beyond the subject of the debate into Treasury policy, as we have the Budget for that—I know the Minister will be itching to weigh in on the Treasury, and will hold himself back—but when we think about raising more revenue, we should do that as closely as possible to people in the places where that money is spent.

We should politically enable local areas to raise more money, because people would know what they were responsible for and how they were responsible for it in a more standardised way. By raising more money locally, they would be responsible and accountable for it, and there would be a higher degree of trust that the money would be spent well. If that money is not spent well, local people will vote for somebody else. That is how democracy works.

I finish by saying that yes, we need the powers to be regularised. Yes, local leaders across the whole United Kingdom need to be linked in much more closely with Westminster. I have not touched on the powers of the devolved Parliaments, because I am not convinced that a huge shift in power required at devolved level is necessary. When we think of England, we should ensure that what we do mirrors existing models. The hon. Member for Aberdeen North (Kirsty Blackman) described how local government in Scotland interacts with Holyrood. That is the sort of model we could bring in more broadly, on a UK-wide basis, but the money really matters.

Enabling local areas and local leaders to raise and spend more of their own money, whether through property taxes, local income tax or a reformed version of business rates, rather than always relying on Westminster to raise all the money and dole it out, would be an effective way to build our democratic Union, as well as helping our understanding of how we are governed and our economy.

[Yvonne Fovargue (in the Chair)]

I shall move to wind-ups from the Opposition spokespeople at about 3.30 pm.