Oral evidence: Fiscal devolution to cities and city regions, HC 1018Monday 10 February 2014
Oral evidence, 10 February 2014.
Witnesses
Sir Richard Leese, Deputy Chair, Greater Manchester Combined Authority, Lord Smith of Leigh, Chair, Greater Manchester Combined Authority, and Leader, Wigan Borough Council, and Councillor Sue Derbyshire, Vice-Chair, Greater Manchester Combined Authority, and Leader, Stockport Borough Council, gave evidence.
Chair
Good afternoon. Thank you very much for joining us this afternoon. Sir Richard, welcome to Manchester.
Sir Richard Leese
I am sorry you have to welcome me to Manchester Town Hall, but thank you.
Chair
Just for the sake of our records, could you say who you are and the organisation you represent?
Lord Smith of Leigh
Hello, I am Peter Smith. I am leader of Wigan and chairman of the Greater Manchester Combined Authority.
Sir Richard Leese
Richard Leese, leader of Manchester and vice-chair of Greater Manchester Combined Authority.
Cllr Derbyshire
Sue Derbyshire, leader of Stockport Council and one of the vice-chairs of the combined authority.
Chair
Thank you very much for coming. Can we start off with what is happening in Greater Manchester? Do you have a nice blueprint now for devolution to the combined authority, and to the individual authorities for that matter, and a timescale over which you would like to see that achieved?
Lord Smith of Leigh
As a timetable, probably yesterday. We have been a combined authority now for just over two years and working together for over 25 years through AGMA. We are confident we have a form of governance that works together for 10 different authorities with different interests politically, as well as wholly different parts of the conurbation. The confidence we have is shown in the quality of work we have done, particularly on community budgets but also what we have done on transport across Greater Manchester. There are lots of examples of how the 10 of us have worked well together to make this city as prosperous as we can, and that is what drives us forward: to try to get prosperity and to drive that prosperity throughout our communities.
Sir Richard Leese
We have done an enormous amount of pilot work over the last few years, both on economic and social issues. Clearly, through the city deal, we have a certain amount of devolution that has come through that route and with other things, and there is some more particularly with the work-programme leavers programme we have now commissioned on behalf of the DWP and we will start running next year. We are now in a position in Greater Manchester to scale that up. I would hope, from the work we are doing on business planning between now and the next general election, that from 2015 to 2020, when there will be another expenditure round, we will see significant devolution, both in social and economic policy. As I think we can demonstrate, they are inextricably linked. It is fair to say there is still a limit to that. We are talking about Government giving us the ability to do stuff. We would also like to see, to support greater financial devolution, less dependence on Government giving us permission; it is a greater ability at a local level, by which here I mean the combined level, to make those decisions for ourselves, because we are raising the money.
Cllr Derbyshire
It is always difficult going last. I would agree with all that. We have a combined growth and reform agenda, which is well thought through and clearly linked. Through the earnback and the work-leavers programme, we are piloting quite a bit of some devolution from central Government. The frustration is that, every time a scheme comes up, it has to be argued from first base. We have to prove we are competent to do that. We are the oldest combined authority, aren’t we?
Lord Smith of Leigh
We are the only one.
Cllr Derbyshire
But we are only two years old.
Sir Richard Leese
We are the only one so far.
Cllr Derbyshire
However, the major message we have is we came out of the AGMA working, and there is a very long history of working there, which may make us slightly different from the others that are going for combined-authority and city-deal basis. We would probably like to start a bit further on in the conversations, rather than always having to start with convincing we are competent to do things. We believe we have demonstrated a great deal of competence.
Chair
Would it be fair to say you almost have a twin-track approach—it is a well-used expression—where you continue to work through the sorts of extensions of power you might want through things like a city deal and community budgets? If that is as far as you get, you will keep on pushing it, but you would like something more radical and fundamental—real fiscal devolution and the right to do these things without having to argue the case every single time you want to do them.
Sir Richard Leese
Yes. I think there are three things. Yes, we want that, absolutely. We want fiscal devolution so that, in a lot of areas, we can take more decisions ourselves. We also want a fair number of what would remain central Government services or agencies to be far more decentralised so they are far more able to make their decisions about what is best for a locality on outcomes set by Ministers, clearly, but on a locality base. That implies a very new and different sort of deal between local government and central Government. There has to be, in some areas, agreement on that. If we look at early years, for example, where we have been doing pioneering work across Greater Manchester, it requires a whole range of agencies, including the National Health Service, to work together. As well as fiscal and other devolution, we also need a new way of working between central Government and local government.
John Pugh
My question is largely directed at Lord Smith, but please feel free to chip in. Some financial instruments work, some do not—the PFI and so on. If an earnback did not work, what would it look like? What would be a symptom of failure?
Lord Smith of Leigh
The presumption of earnback is that we will get growth in the economy. If we do not get growth in the economy, we will all be in trouble, although we are confident we have the tools to determine what will work in Greater Manchester. We have now appointed a professional to help us manage those funds. We take it very seriously; it is not just a group of us sitting around thinking, “Oh, that is a good idea.”
John Pugh
I am not suggesting that.
Lord Smith of Leigh
We are making sure of that, because it means a lot to us. It has worked so far in that the money is beginning to improve our transport network. We have held up reasonably successfully as an economy over the last few years; other areas have done worse than we have.
John Pugh
Do you view it as wholly risk free?
Lord Smith of Leigh
Nothing in life is risk free, John, like crossing the road. We do not think it is risk free.
John Pugh
What about the scenario where you borrow against the projected business growth but do not get the projected business growth?
Lord Smith of Leigh
In a sense, the risk is shared by us and central Government, and we both have an interest in wanting it to work. That is the point: both parties want growth in the economy. We want to see that happening, and we think giving power more to us, who know what is going on in Greater Manchester, will be more successful than teams of civil servants trying to second-guess what is best for us.
John Pugh
The Authority mentions an “investment fund that has allowed us to co-ordinate funds to deliver growth priorities across the city region”. How is this controlled and how can you ensure this has been done fairly and to everybody’s satisfaction? Maybe Stockport has a view on this.
Sir Richard Leese
Probably, in the sense the Chief Executive at Stockport has been the controller general for this, although Sue has not been the lead member on investment; it is actually the leader of Tameside who is the lead member on investment. Maybe none of us should answer on that basis. First of all, we have agreed very clear criteria by which investment decisions are made. Those are agreed across the whole of the combined authority and they are rigorously applied. They are, in crude terms, what creates or protects the most jobs and gives the best return for the combined authority to be able to reinvest. That is controlled, clearly, through professional management, through an investment board, and that reports through the leader of Tameside to the combined authority and to the local enterprise partnership.
John Pugh
Could I invite any of you to comment on this part of your submission? “Capturing the benefits of growth … should also be related to new investment models which are designed to deliver savings by reducing dependency. This can only be delivered on an individual place basis.” What precisely did you mean by that?
Cllr Derbyshire
That refers to the reform side of the agenda. For instance, on the investment in businesses, you referred to fairness. We do not work on a fairness basis: one for Stockport, one for Rochdale, one for Wigan. We work on the basis that preserving jobs or creating jobs within the conurbation—within Greater Manchester—helps all.
John Pugh
Is that what you meant by “new investment models”?
Cllr Derbyshire
Certainly with regard to the investment into the growth side. With the reform agenda, for instance early years, working with troubled families, supporting people, clearly the delivery is much closer to the ground. I have my troubled families, and everybody else has theirs. We are now looking at ways in which we can put together the best practice, and where, for instance, capital might be needed to do that, to try to replicate the very successful model we have on growth in the reform agenda. At the moment, we work very closely sharing good practice with regard to particularly troubled families, early years and health; those are three areas perhaps where most is done.
John Pugh
Would it be fair to say you are keen to see an element of devolution even within the system, then?
Cllr Derbyshire
Even within that system, there is very local delivery, particularly on the reform agenda, but we want to make sure we maximise the resources we have for delivering that.
Sir Richard Leese
We are going to have to have, between local government and national Government, far more sophisticated business planning and budgeting procedures. A simple, practical example is pilot work with troubled families in one relatively small neighbourhood in Wythenshawe in South Manchester. Over six months, that showed an 81% reduction in antisocial behaviour and a 70% reduction in crime. That led GMP to identify that they probably needed 12 fewer police officers in that neighbourhood. However, it was not Greater Manchester Police who were making the investment there. That is why I say the new investment models have to take the totality of the budgets of the agencies to work with that family, so effectively what they put in and get out balances out in the end.
Simon Danczuk
Is it realistic to retain the principle of national equalisation under fiscal devolution?
Sir Richard Leese
Yes.
Cllr Derbyshire
Yes.
Lord Smith of Leigh
Yes. Equalisation means presumably passing money to areas of deprivation. It is the very opposite of the way funding is passed to local authorities at the moment, so, yes, we want to go back to a system whereby where there is need, we get the money. Wherever it is distributed to, we support the idea that those areas need more control themselves over how the money is to be spent, whether in Greater Manchester or the areas you talked to earlier.
Sir Richard Leese
Also, apart from moving money around from richer areas to poorer areas, which is an important element, national Government has tended to interpret—and this is all Governments—equalisation as having a national programme and giving everybody the same thing, wherever they are. That almost certainly guarantees you do not get the same outcomes, because different people in different places need different things to get the same outcomes. I would argue, for those things of genuine national significance, that Government needs to move commissioning programmes through outcomes, rather than those inputs. It is places and the public sector working together at place level that are best placed to determine what you need to do to achieve those outcomes.
Simon Danczuk
Just developing that further, how would that work in terms of business rates? Would you set your own business rates under fiscal devolution?
Sir Richard Leese
We are arguing, along with London Councils and the Mayor of London, that we should have control over the whole range of property taxes, and that should include the ability to revalue, set the rate, and so on. Going back to John Pugh’s question, we take the risk that goes with that as well. That can only work, ultimately, if every so often there is a periodic resetting of the base to ensure that it is a fair system.
Simon Danczuk
Would that work within the Greater Manchester area? For example, the failure to revalue business rates recently does not affect Manchester City very much but adversely affects Stockport and certainly Rochdale. How would that work under devolved fiscal responsibilities?
Lord Smith of Leigh
Our view, as I said earlier, is the evaluation ought to be done on a national, independent basis, rather than by politicians. I agree; there had been cross-party agreement to have a regular revaluation, as there should be, because it reflects the changes in the economy. Five years, which is the previous review period, is probably too slow anyway. It should be much more regular to reflect the changes in the economy. The way it has been done this time is massaging the figures, because the majority of cases that were known would show businesses were missed out. The only area in which they did not was the area that they almost invented: manufacturing, services and everything else. For everything else, they thought it would be beneficial. That includes public houses now. If you travel around any part of the country, I would suspect that public houses are not doing particularly well. A number are up for sale or closed. We should not do that. I am quite worried about local government finance. We have a council tax system based in 1991 that has never been revalued. You buy a new house where there are all these broadband facilities and so on. How do you measure that? It was built in 1991. We are getting back to the same in business, if we do not get proper revaluations. I understand why, in the Autumn Statement, the Chancellor did relief for business; it is understandable and in some ways welcome. It undermines, again, the basis on which property tax is raised.
Sir Richard Leese
One area where we have some discretion over business rates is the enterprise zone. The enterprise zone is based around Manchester Airport. It is entirely located within the City of Manchester, but we are very clear that the business rates that we are able to retain there are reinvested across Greater Manchester. Again, it is on the basis of an economic assessment of where we will be able to do the most to create or protect jobs.
Chair
To explore a couple of things you said a little bit further there, the idea of retention of business rates under the property tax is so that areas are rewarded for taking decisions on investment and growing their own local economies, and that money stays in the area. If that happens, surely therefore less money goes to central Government to redistribute for equalisation purposes, to help more needy areas that cannot grow. Isn’t that true?
Sir Richard Leese
Part of the deal you do with central Government is, if you retain this money, what do you provide? At the point at which you start, what does Government provide in grant or not provide in grant? What does it provide from other departmental budgets? If we have the money, what will the locality take the responsibility for? There are a number of areas, particularly those things that support business growth and economic development, where we would wish to take a greater level of responsibility.
Chair
What you are saying, therefore, is the pot of money that will be looked at overall is larger. If authorities are taking, say, the business rate element for themselves, because the totality of what is within that devolved pot is bigger, there is still sufficient money there to do the equalisation process that Government needs. Have I got that right?
Sir Richard Leese
Both that, but also something else as well, which is that the Treasury has tended to make assumptions that economic growth, in terms of spatial locations, is a zero-sum game. If you get a bit more economic growth in one place, that is because you have less in another place. That is a fundamentally flawed way of thinking of things, and I believe that we can get accelerated economic growth in Greater Manchester and not at the expense of other parts of the country.
Lord Smith of Leigh
That is right, and we mentioned in the earlier session that there is probably a £5 billion gap between public spending in Greater Manchester and the level of taxation that we raise. If we are going to bridge that gap and stop that happening, which we want—we do not want to be the dependent part of the country—we need to do it through getting growth, growth that is spread across the parts. Public sector reform is so important to us because we want to end the great level of dependency in many of our communities. All of this is kind of in investment terms. We see that we can improve the growth and get more revenue coming through, and the Government will not need to distribute as much money to those deprived areas.
Mark Pawsey
Can we stick with business rates? The Chair has just referred to the fact that there is less money available for redistribution. One of the reasons why I think the ability to set the business rate locally was taken from local authorities years ago was, to use the expression of an earlier witness, silly vanity projects. Look at it from the perspective of central Government: bearing in mind that businesses do not have a vote or a say in what happens to it, although lots of small businesses are paying business rates, why should Government allow you even greater powers, which is what you are calling for?
Lord Smith of Leigh
I am so old in local government that I remember the time when we controlled business rates. Whereas, in fact, you got complaints from local businesses, they were a lot happier then, because they had more control over what I did, as Chairman of Finance at the time, and what we did collectively than they have now. The money is just going to a central pot, where they do not see anything. So, the fish and chip shop owner in Rochdale just pays his money and does not see it again. He does not think of it; it is a disconnect for him. However, we would consult with local businesses; we have a good relationship with the chamber across Greater Manchester and within local areas. We would say, if we got that back, we would need to consult with businesses about what we did.
Mark Pawsey
Let’s stick with the fish and chip shop owner in Rochdale who is unhappy about the level of the business rate. He knows who his Member of Parliament is. He goes to see his Member of Parliament, expresses his anger and concern, and tells him lots of other people feel the same way, and his local Member is able to raise it in Parliament, so the whole issue gets brought out. In the current system, he does not know, perhaps, who his local councillor is, who is then responsible to the leader of that particular district council, who then has a seat on the Greater Manchester Combined Authority. It is all a bit vague in terms of getting any influence over the fact he is a taxpayer and he is unhappy.
Sir Richard Leese
Yes, a chip shop owner can go and see his excellent Member of Parliament in Rochdale, who then goes to see another Member of Parliament from not very far away, George Osborne, who takes no notice at all. That is the way Government works. It is a lot harder for local councillors to get away than it is for the Chancellor of the Exchequer. We are on the ground, and for us, as leaders of councils, if people want to see us, by and large they see us. We are available.
Mark Pawsey
On the issue of business rates, lots of MPs came together and made representations to the Chancellor, and I think there was some regard taken by the Chancellor to the weight of opinion. I am just arguing that may be a more direct method of local accountability for a small business owner than under the new model.
Cllr Derbyshire
If business owners in Stockport had known people were lobbying George Osborne to stop the revaluation, they would have done one the other way. That was very much behind the scenes. As far as most people knew, including the businesses very seriously affected by the fact the expected and planned revaluation did not happen, it was all behind closed doors. I would argue, with Richard, that what happens at local authorities is quite transparent. We try to be very transparent at the combined authority. It is difficult to get people terrifically interested in coming along and watching us, but all our decisions are published, all our papers are published, and we work closely with the LEP. To overcome the issue you raised about vanity projects, you have to define whether it is a vanity project from Westminster’s point of view or crucial to us. It must be based on the outcomes. We must be challenged to prove that what we are doing produces the outcomes. What we are asking for is to be left to decide how to do that, knowing our own area. We are not arguing that Government does not have an interest in saying what it wants us to achieve.
Mark Pawsey
You raised the business of revaluation, and I wonder if I could ask you all about that. We can all agree that a property-based tax should be based on a relatively recent valuation, but are we going to keep an army of valuers in business by revaluing every 12 months, every three years or every five years? What is a reasonable period of time in which to carry out your revaluation?
Lord Smith of Leigh
It has been five years, since the system was brought in, and then it was raised to seven years, which is far too long. I would have thought three to four years, not on an annual basis, would be ideal.
Mark Pawsey
Is that a consensus?
Lord Smith of Leigh
Going back to house valuations, there is a view from estate agents of what houses are worth across all areas. It is quite sophisticated. We could use that as an index in different areas.
Sir Richard Leese
Whilst business rates are very important, there is a danger of seeing it as the only show in town. All the evidence shows that a stable taxation system, and clearly we want a stable taxation system, requires a basket of taxes to raise the same sum. This is not about squeezing people; it is from a balance of sources, so that when one is in a bad way, another will not be in quite such a bad way.
Mark Pawsey
In Manchester, you are pretty keen on sticking with property-based taxes, and that is great, because property is immobile and there is some certainty around that. We have heard evidence from other people talking about local sales tax and bedroom taxes. What is your view on that? Governments say, “We are going to stick with the business rate as it is, because it is very certain and it provides a substantial sum of money for the Treasury.” Here is a series of alternatives. What would you go for?
Sir Richard Leese
Having other choices available—hotel tax might be one of those choices for local discretion—does make sense. Indeed, we are talking in Manchester about a tourism BID, which would, effectively, be a voluntary tax on hotels for services that they receive in return for that. Being able to determine those arrangements would be a good place to be. There is a way of doing it now, but it is a very clumsy way.
Mark Pawsey
Would you go as far as a top slice of income tax? Would you want those sorts of powers?
Cllr Derbyshire
I think I would.
Sir Richard Leese
We may have some political differences.
Lord Smith of Leigh
Properly valued property taxes, both for individuals and for business, I am okay with. That is a good basis for local taxation. Others specifically might work from time to time, but they would not be significant revenue raisers. Those would be the two main revenue raisers. It has worked for a long time in history, and I think it would work. Income tax is a national tax and could be used for the redistribution we talked about earlier.
Sir Richard Leese
We could adopt the Swedish model, where income tax is local and property taxes are national. It is the other way round. In terms of the basket of taxation, we could think about an apportionment between local and national. It is not on the table at the moment, but it is something I think is worth considering.
Chris Williamson
Last year in December, the GMCA’s executive announced it was going to undertake a root and branch review of the combined authority. I wonder what you would say to those who suggest that indicates you are not yet ready or fit for fiscal devolution.
Lord Smith of Leigh
No. It just means we want to do even better than we are doing at the moment. That is why we did it. We have been in existence for two years. It is a very new organisation. Nobody has done it before. We use the legislation as a guide, but it is not in as much detail as it might be. We need to understand exactly what we can do as a combined authority as to how we integrate more with some of our other agencies that are directly under local democratic control: the fire authority, Transport for Greater Manchester and so on. We need to ensure that arrangement is right. We need to make sure we do a review of blue-light services, to see whether there are economies that can be gained through collaboration in terms of police, fire and ambulance services across Greater Manchester. We are working with our health partners to integrate at the local level but also to have a review of acute services. Again, we need to ensure we get all the governance arrangements right. It is not just about us. As an authority, we work well. One change I introduced was, as Richard referred to earlier, each of the 10 members having a portfolio interest. We are not just there on a committee once a month. Between the committees, each of the members has a particular area of speciality that they get into, and as they need to, they report back to the combined authority so we understand more about what is going on. We think we are pretty good, but we are not satisfied. We want to be the best. We want to be the cutting edge. There are one or two other areas that want to become combined authorities, but we want to make sure we are the best combined authority, and that is what it is about.
Chris Williamson
I am not saying I am sceptical, but could you convince a sceptical Minister, say, who is wedded to control from Whitehall, and does not want to let go? What would you say if they use that as an argument to say, “It is clear the GMCA is not ready”?
Sir Richard Leese
There are two things. It is just sensible for a new organisation—we are nearer three years old, Peter, than two—to review itself. That is just common sense and good management. It is nothing more than that. In terms of our ability to take on things, there is one happening at the moment. The work programme is a nationally commissioned programme by DWP, except in Greater Manchester we have already done the commissioning. It will start running next month, where we will have commissioned, using DWP money largely, a work programme for all the people who failed the work programme. There is sufficient confidence from both sides, and the DWP is one of those ministries that does not like handing any powers away. We have commissioned work programme leavers, starting next month, on behalf of DWP. We are doing it.
Chris Williamson
Sue, do you have anything to add to that?
Cllr Derbyshire
Yes, one of the changes was the creation of the portfolios, and one of the things we are looking at is how we broaden political involvement, engagement and the wider community, because the combined authority can look a bit techy to people who are not interested. That is part of it. One of the things that came out of the public service reform is, as Richard has talked about, the way all the organisations need to work together. There are issues about who does the spending, who gets the saving and how that is balanced. We think that is probably going to raise governance issues into the future. We want to be as ready and prepared as we can be to deal with those challenges as they come up, rather than be surprised by them. It is really a temperature-taking and making sure that we are best fit for the next leap forward.
Chris Williamson
Do any of you think the GMCA would work better with a directly elected mayor?
Sir Richard Leese
You are going to get three different views, I think.
Lord Smith of Leigh
To have a directly elected mayor of any area, you need some kind of political coherence in that area. For people who live in the East, in David’s area, and people who live in my area, Wigan, there is not that much between them. They would not understand who would represent them whom they feel well connected to. We think that, by using the local authorities, we do not have the challenge that sometimes existed in London, although London itself is a recognisable area, with all of this tension between the mayor and the boroughs. We do not have that tension, because the boroughs are effectively the central governance body too.
Chris Williamson
Do you think there is tension with the electorate and the mayor in that sense? Do you think that in London there is greater affinity with the mayor than in the arrangement you have in Manchester?
Sir Richard Leese
Turn out in the last London mayoral election was 38%, of which just over half voted for the current incumbent, so it is a similar sort of mandate to what the average councillor has. You cannot make the case from that point of view. I am rather more sympathetic to a Greater Manchester mayor than perhaps Peter is, but certainly not on the London model. The London model is fundamentally flawed, because it separates the mayor from the 32 boroughs, and I do not think the mayor is genuinely accountable. For basically four years, within the powers, they can do what they like. I do not think that is a very good model. It is worth looking for, not because a combined authority does not work; it does work. It would be quite nice, particularly on the outward-facing part of the combined authority, to have somebody who can do the work on our behalf. It is what the Americans would describe as the weak-mayor model. In places like Los Angeles, for example, the mayor is clearly the figurehead for the city, as the outward-facing face of the city, but most of the decisions are taken by the council within Los Angeles, not by the mayor. That sort of system could work very well in Greater Manchester, but rather more for the audience out there internationally than within Manchester itself.
Chris Williamson
Is there a third view?
Cllr Derbyshire
I tend to believe we do not need an elected mayor. If we did, it would certainly be the weak-mayor model. AGMA has survived—and the combined authority came out of that—because the 10 authorities managed to work together. We work together because we want to work together; we want to find solutions to our problems. If there was someone saying, “Well, I’m actually the mayor, and I have the power,” I have a feeling that could cause difficulties, because it is not always easy to convince everyone back in councils. There are 10 councils; only one of them is Manchester, although it is the Greater Manchester Combined Authority. We all have our own independence; we all have our own uniqueness and pride in our own area. It is the fact that we are working together in that way that makes it work. I can just about see the value for the outside world of having a figurehead or person. However, we have a chair, and I do not think that outweighs the disadvantages of it I would see.
Chris Williamson
Obviously, in Greater London, they have the London Assembly, with scrutiny powers and so on. Do you think Greater Manchester would benefit from a similar directly elected body?
Lord Smith of Leigh
I think we abolished those in 1986, didn’t we?
Cllr Derbyshire
Yes.
Chris Williamson
This is common; they go round and come round again.
Cllr Derbyshire
I am old enough to remember Greater Manchester and Merseyside county councils being abolished. Although we quite clearly see Manchester as an economic unit, and we work well together, the electorate do not necessarily see it in the same way as in London. Londoners might describe themselves as Londoners from all over the place. People do not describe themselves as being Greater Manchester’s residents—Greater Mancunians. I suspect it would have the same impact as the police commissioner elections, which is very little. Maybe as police commissioners move on and people see the value, hopefully, of them, that might build, but I do not think it helps a democratic body to be elected on mass indifference. That is probably what you would get if you held elections for a Greater Manchester body at this stage.
Sir Richard Leese
On underpinning principles, there is agreement between all three of us, which is that the combined authority is a success, and part of the reason for its success is it is owned by the different geographies that make up Greater Manchester. It is not separate to the different geographies that make up Greater Manchester. It is vital to maintain that principle. There are alternative ways of taking that forward as we develop and grow. The other thing I would say about what we have done in Greater Manchester is it has been an evolutionary route that we have developed; it is not something that has been imposed on us. Where did combined authorities come from? Well, Peter, Susan Williams, one of your colleagues—I cannot remember which one—
Cllr Derbyshire
Dave, probably.
Sir Richard Leese
—and I went to see David Miliband when he was Communities Minister in 2006, saying that we needed statutory authority for Greater Manchester. This is something that came out of our own work, not something imposed on us.
Chris Williamson
What mechanisms are in place to ensure that minority political views are heard?
Cllr Derbyshire
That is me. The vice-chairs go across the three parties that are represented. We sit around the table. We do not divide along party lines very much. The biggest row AGMA ever had was not on party lines; that was before the combined authority, and that was on the congestion charge. It managed to survive that and move on and form the combined authority. We have a great deal of depth of discussion, involvement and the leaders working together to reach a conclusion that is, as it were, good for everybody. That was built into AGMA’s DNA and it is in the combined authority’s DNA. I am a very recent leader compared with Richard or Peter; I only became leader of Stockport in 2011, just as the combined authority came about, but I know what the previous leaders did. It is about the fact that we are very open and we discuss, and we are all signed up to the best for Greater Manchester. I go back to AGMA because it is older than the combined authority. The political balance within that has altered fairly significantly over the years, but without us pulling apart.
Lord Smith of Leigh
The tension is not just within political representation across Greater Manchester but obviously between Manchester and outer areas—there can be some tensions there. Also, in some ways, what we notice is a political division; the makeup of Greater Manchester has changed as the politics have changed in recent years and Labour gained more control of councils. Sometimes where we had a very enthusiastic opposition leader—the leader of, for us, an opposition party, a Conservative or Lib Dem—who lost their seat and Labour took over, the incoming Labour leader was often very sceptical: “What is this all about? My political opponent thought it was a good idea; I am not sure I should,” so we had to re-educate some of them to understand why they need to work together, what is in it for all of us. We all give up something, but we gain a lot more.
Sir Richard Leese
The constitution for the combined authority requires that, if a political party has the leadership of one of the 10 districts, they have a vice-chair of the combined authority. That is built in. For some bodies like Transport for Greater Manchester, again, where there are committee chairs there, they are allocated on the basis of the number of places that they have on that body. There is a political proportionality. We do have a Greater Manchester scrutiny pool as well. That scrutiny pool is constructed on a politically balanced basis as well. At a number of levels, we have political balance and the rights of minority parties very clearly built into the constitutional arrangements. However, as Sue says, it really works by spending a lot of time talking and agreeing a shared agenda. That is what really works best.
David Heyes
This evolutionary process you refer to, Richard—a piecemeal development of devolution—is going to continue for the foreseeable future. Certainly, in Greater Manchester you have deservedly achieved combined-authority status way ahead of everybody else. If that process is to be followed by fiscal devolution and you get that before anybody else, what is going to be the impact on adjacent local authority areas? I particularly have in mind those to the north and south of Greater Manchester. If you look east and west, you potentially have combined authorities on either side of you, but not to the north and south. How are you going to work with authorities like the example that has been given, for instance, of Burnley?
Sir Richard Leese
It is a very good question. Earlier this morning, I had a meeting with, amongst other people, the person who will be head of the paid service for the West Yorkshire Combined Authority, because, again, as they come into being, they want to learn from the Greater Manchester experience. I know Peter has had similar meetings with the leader of Wakefield and others from West Yorkshire.
David Heyes
Can you show them your scars?
Sir Richard Leese
The head of the paid service happens to come from Kirklees, which is a neighbour of Greater Manchester, and part of the conversation was exactly about how we have a strategic relationship when there are industrial sectors, particularly around Calderdale, Kirklees, Rochdale and Oldham, that have quite a lot in common, where there are travel-to-work patterns that cross those borders. Part of the answer to the question is that we will develop, and are in the process of developing, strategic partnerships with our neighbours. We are developing a strategic partnership with High Peak and Cheshire East, again, crossing party political lines. Cheshire East is very keen to have a strategic relationship with us. You have formal links that cross those boundaries.
David Heyes
We heard earlier that your attempts in Cheshire East had broken down.
Sir Richard Leese
No, they have not. Sorry, no.
Lord Smith of Leigh
We jointly agreed not to go over the business rate pooling, because we thought it was too much of a risk for all of us. We will have a look at it again next year, but because of all the big changes in business rate, it was just thought to be too much of a risk for all of us.
Sir Richard Leese
With Cheshire East, there were three areas where there was a common interest, although I perhaps say this more easily than Sue, because there are a few disagreements between Stockport and Cheshire East. In housing, there is the ability of Cheshire East to meet some of our housing supply needs. Transport is a key element, but also, in industrial sectors, bioscience. There are areas where we can have a real strategic relationship. I think the other part of the answer to this question is that what we have discovered in Greater Manchester is that most of what we want to do in devolutionary terms is not possible for an individual local authority to do. We can achieve a lot more by combining together on a statutory basis. I would not choose to dictate the boundaries for other sub-regional areas but I could envisage, for example, in Lancashire the equivalent of a combined authority that involved Lancashire County Council, the unitary authorities in Lancashire and the district councils in Lancashire. Other areas are going to have to develop their own arrangements to have the sort of power we get from operating collectively.
David Heyes
I think it is beyond dispute the Greater Manchester economic area is far larger than the administrative boundaries. You almost hinted at: let us take over some of these adjacent areas. Is that on your agenda?
Cllr Derbyshire
No.
Sir Richard Leese
No.
Lord Smith of Leigh
No, I do not think we want to take them over, that is for sure. Working together as 10, we found we could do better. We understand that, if we need to work on what our natural economic boundaries are, we will need to work with adjacent authorities, but working with someone does not mean to say you want to take them over.
David Heyes
Does Wilmslow, for example, gain or lose from the combined authority of Greater Manchester?
Cllr Derbyshire
I am not sure it does either at the moment, but one of our big projects is the A6 relief road, which involves Manchester, Stockport and Cheshire East councils, because it goes through those three areas. As I say, there is a great deal of discussion going on on Cheshire East’s proposals for new settlements, in effect, along the A34. The duty to co-operate is happening at quite a level. There has always been quite a lot of discussion with Cheshire East. Stockport shares a lawyer with them. They are looking at potentially joining some of the combined joint services. I think they are looking at the procurement service that we have. We are the combined authority, but we are not closed for business with other authorities. We will look at those. We would hope that it would be good for Wilmslow. We certainly put a great deal of mitigation on the road to help the A6. No, I do not think it is an either/or. It is not Greater Manchester and nobody else. It is just that we will carry on working with others, whether they are a combined authority or individual council, depending on what is going on and what the need is.
Lord Smith of Leigh
When we set up the combined authority in 2011, we thought that the natural political boundaries were what we had: because we had 10 authorities, we had experience working together and we could push that forward. When the police and crime commissioners came in, we became the police and crime panel. The leaders became the panel, so we can have a relationship with the police. We talk about strategy and certainly talk in a very detailed way about: “What do you want to do with this precept?” We talk at that level; then we have an operational side to it, which talks about the more detailed police operation. As leaders, we do not have time to get into that police operational thing, but we felt strategically we wanted to have that relationship with the police and crime commissioner. We understand that, if he is to achieve the budget changes he will need to achieve, he has start to work with our public service reform agenda, as Richard said, in closing his case in Wythenshawe. He is not going to have as much money to police Greater Manchester as he did 10 years ago. We need to make sure we put that application in to prevent crime happening, rather than assume we are going to be able to load areas with police when crime takes place.
Chair
You say you will not take any areas over. What happens if another district wants to join?
Sir Richard Leese
It is a very hypothetical question in a way.
Cllr Derbyshire
I am sure we would listen politely.
Lord Smith of Leigh
We have had more formal arrangements in the past with Blackburn, Warrington and oddly, in a sense, Blackpool, because they thought themselves Billy-no-mates. When they became unitaries outside the counties, there was a natural antagonism between the former county and the unitary, and they did not understand. We helped them in terms of getting their European policies together and talked about regeneration and stuff like that. As we became slightly more internal, as we looked to the changes the combined authority led us to, they saw a bit less relevance to our meetings. We do meet together; Richard chairs the regional board here, which brings together the whole of the North West. We try to keep that power shared; we want to have a good, strong relationship with all our neighbours.
Sir Richard Leese
David said the economic footprint of Greater Manchester extends beyond the boundaries of Greater Manchester, but if we take Cheshire East as a case in point, you can argue that the northern end—Macclesfield, Wilmslow and so on—of Cheshire East is part of the Manchester economic area. It would be a lot more difficult to argue that Crewe, at the other end of Cheshire East, is in that economic area. In order to consider taking another authority into membership of the combined authority, first of all we would have to form a view as to whether that local authority was entirely or largely within the Greater Manchester functional economic area, because one of the things that holds Greater Manchester together—probably the most important thing that holds us together—is that we are a single economic area.
Cllr Derbyshire
Also fire, police, waste—it is all coterminous for us. That makes it a lot easier for us to have that strategic overview. As I say, if anybody else came in, it would start to be more complicated.
Simon Danczuk
On fiscal devolution, we had the congestion charge reports, and under fiscal devolution in Greater Manchester, that would have been agreed by the combined authority and become a financial-collection process. However, through the referendum, the public stepped in and stopped that happening. If we fast forward to the precept you mentioned in terms of policing, if it were left to the combined authority, it would have gone up by £5, because the police and crime panel agreed with the police commissioner, but Eric Pickles stepped in and reduced it to £2.97. There is a risk with fiscal devolution, isn’t there? The public do not get a chance to step in. Eric Pickles does not get a chance to step in. Where are the checks and balances?
Sir Richard Leese
You are opening up some of my scars now, Simon, I can tell you that. No; under fiscal devolution the congestion charge would not have happened, because it would have required all 10 districts to have individually voted for a congestion charge, which is the case now. In that area, there is fiscal devolution; we could have a congestion charge, but it would require all 10 districts to vote for it. I think at the moment the prospects of any voting for it are very low indeed. If you go back to the circumstances pre-referendum, there were two districts that said, “We will not support that.” The reason the referendum happened was that it was the only way politicians agreed that they could settle the dispute between the eight that wanted it and the two that did not. It could not have happened simply through fiscal devolution.
Lord Smith of Leigh
On the police precept, Simon, things go on that do not always get reported, but if you look at the powers of the police and crime panel, we cannot stop precepts going through; we can just delay them. We had a long and hard discussion, I can assure you, with the police and crime commissioner on his plans. This was agreed reluctantly to be this year’s effort, but we said to him, “We want to talk to you throughout next year so you are more ready to embrace some of these ideas about public service reform, but you will be able to get away with not simply assuming you can put it on the precept.”
Sir Richard Leese
The veto powers there are clear. We can tell the commissioner to go up or down, but not how far to go up or down. If we had vetoed £5, it would have been £4.99, and there is nothing we could have done about it.
Chair
Finally, there was a point someone raised this morning about the issue of democratic accountability. If, say, a substantial package of devolution were agreed—fiscal devolution in terms of the property taxes you were talking about and maybe some powers to have more responsibility for other services—do you think there is any merit in that package being put to a referendum of local people, as we saw with the changes in London with the creation of the mayor and those reforms?
Lord Smith of Leigh
It would be an interesting question to frame, I think, so people understood it. I am not a great lover of referendums in lots of ways. In this country, we have an elected democracy. We elect people to make decisions. If they do not like what we do, they have the obvious answer: they can get rid of us. You would have problems talking to most councillors about fiscal devolution, let alone members of the public. It would be really a whim of things. I do not like to attack neighbouring countries, but in Ireland they always lose the referendum the first time around and then win it the second time around. These things are not done sensibly in politics. We have long-standing arrangements, and we ought to stick to what we have.
Sir Richard Leese
We ought to talk about devolution here on a cost-neutral basis. By and large, I think people in Great Manchester do not care that much who provides support to get people back into work and so on; they care about doing it well. We are arguing for being able to do it better rather than anything else. In terms of fiscal devolution and the ability to raise taxes at a local level, it is a question of whether a local authority should have a completely unbridled right to raise taxation by as much as it wants. I think the answer to that has to be no. There is some debate as to who chooses to curtail that: should it be the electorate, or should it be national Government? I think you can argue that it is quite reasonable for the national Government to set parameters about what is excessive. It is a bit hard to argue that 2% is excessive.
Cllr Derbyshire
I do not really have anything to add to that. I do not see how you could have a referendum on the potentially complex set of proposals there would be for fiscal devolution. You would need to tell people it was happening and whom to hold responsible for the outcomes.
Chair
I would say Scotland, Wales and London have had a fairly complex set of arrangements each, but never mind.
Mark Pawsey
A simple last question: is there anything to be said for local authorities having sufficient powers not to need to rely on central Government for anything, so that councils could effectively be self-sufficient?
Cllr Derbyshire
That would be lovely.
Lord Smith of Leigh
That would be an ideal world, wouldn’t it? However, we have to accept that parts of this country, for various reasons, have certain levels of deprivation that nationally we need to do something about. In Greater Manchester, this is our ambition: we do not want to be a dependent part of the country forever. We have had significant social change in this area. I come from an ex-mining area. We need to get beyond that, but we do not want to be people who are always on the receiving end. We want to create a successful economic and social background so we can get away from that, but there may then be economic change that means other parts of the country need support. We will willingly give that.
Sir Richard Leese
When I talk to my friend the leader of Glasgow Council, he will tell me that he is still waiting for devolution to reach Scotland. It now has problems with a parliament in Edinburgh, rather than one in Whitehall. That is as far as devolution has gone. The case for fiscal devolution is as strong there as it is here. It would be an ideal position for local government in England to have that level of financial independence. However, there are still going to be a whole range of things that are genuinely national, where a national Government will quite reasonably want to say, “These are the outcomes that we want to achieve.” I cannot imagine at any time a national Government would suddenly say, “Economic growth is nothing to do with us,” for example. Whether it is financial independence or not, that assumes that there needs to be a relationship between national and local around delivery of outcomes. I think the devolutionary argument in part is calling for a more sophisticated and balanced relationship between national and local, not anarchy in the UK.
Chair
Thank you all very much for coming this afternoon for a very interesting session. Oral evidence: fiscal devolution to cities and city regions HC 1018 15