Devolution has gained renewed momentum in UK policy circles, but economists warn it carries significant risks alongside its much-discussed potential rewards.
Andy Burnham’s pitch for devolution was laudable, with an economic mission centred around bottom-up, place-based policy capable of kick-starting national growth and productivity, especially given the overly centralised national policy engine.
However, devolution should not be seen as a panacea for lagging regional productivity and living standards across the country.
The UK has spent a decade experimenting with various place-based policies, from City Deals and Growth Deals to Enterprise Zones, Trailblazer Deals, and the more recent levelling-up agenda.
So far, according to Sanjay Raja, a researcher at the University of Cambridge focusing on the economics of English devolution, the results have been ambiguous at best.
Policymakers have mainly relied upon pinpoint initiatives rather than laying the foundation for long-term growth, a structural flaw that has undermined the potential of previous devolution efforts.
Building institutional capacity is one of the first prerequisites for getting devolution right, and Greater Manchester is often cited as a model because it built delivery capability over years via Transport for Greater Manchester.
Fulfilling devolution to its maximum potential would require a big downpayment from central government, including installing paid commissioners and experts, as well as secondments from Whitehall to build institutional capacity at a local level.
Political capital among regional institutions is equally essential, as devolution is fundamentally a coalition exercise where mayors chair combined authorities and depend on council leaders voting with them on funding and major decisions.
Where leaders trust one another to put “place before politics”, devolution moves, but political capital cannot be legislated into existence and must be built through repeated, successful collaboration.
Fiscal autonomy remains another critical ingredient, with the Treasury still controlling all core funding and local authorities largely spending allocated and ring-fenced money rather than revenues they raise themselves.
Too often, devolution has been shaped by a competition for Treasury funding rather than local need, distorting priorities and undermining the development of genuine bottom-up growth strategies.
Raja argues the path to delivering good devolution is sequential rather than simultaneous, requiring an ambitious but realistic roadmap to set the course for effective and lasting change.
Central government will need to work alongside local government to build capacity before transferring large amounts of power, and fiscal autonomy must be earned in stages to ensure taxpayer value for money.
There is one reality every place-based policy must confront directly: it will produce regional winners and losers, and devolution has a long history of widening the gap between thriving and struggling areas as much as closing it.
The next government will need to govern that tension openly, balancing the promise of levelling up against the tendency of growth to concentrate in already-strong areas.
Devolution works where it has been given the time, capacity, money, and trust to mature, and where any of those four ingredients is missing, progress stalls and momentum is lost.
The instinct to roll devolution out everywhere at once, on a single fast-track timetable, risks repeating the failures of previous initiatives rather than replicating the genuine successes like Greater Manchester.
Putting the right pillars in place needs to be an early priority for the next prime minister, to ensure Greater Manchester’s success can be replicated rather than remain a one-off example.