The document discusses the path to greater regional devolution in the UK. It summarizes the key discussions from a roundtable on devolving powers from central government to local authorities. Some of the main points discussed include: - Local authorities are facing significant budget cuts but are being asked to provide more services. They need greater powers to both spend funds freely and raise their own revenue to sustain services. - While some spending powers have been decentralized, true fiscal devolution that involves transferring tax raising abilities has not occurred and is still unpopular. Additional revenue raising abilities are needed for local authorities to meet challenges. - Local authorities already have some limited powers to borrow, charge for services, and raise taxes like council tax but

1. the path to greater
regional devolution

2. The path to greater regional devolution page | 3
contents
About the roundtable 4
Introduction 5
Executive summary 6
The age of austerity 7
The view from Whitehall 8
Recent changes 8
What next? 9
Do local authorities already have the powers they need? 10
Taking responsibility 13
The way forward 14
Ensuring accountability 16
A new role for central government 17
Conclusion 18
key figures at the roundtable...
Running order from left to right
Sir Paul Jenkins, former treasury solicitor (Chair)
Graham Allen, MP for Nottingham North
Charlotte Aldritt, City Growth Commission
Paul Dossett, Grant Thornton
Rob Hann, Local Partnerships
James Nation, CBI
Chris Naylor, LGiU
Roy Perry, Hampshire County Council
Alan Trench, University College London
Tom Huggon, Deputy Lord Lieutenant of Nottinghamshire
Richard Barlow, Browne Jacobson
Peter Ware, Browne Jacobson

3. introduction
Devolution to local authorities has the potential to
create real opportunities. However, there are also
challenges for all tiers of government in seeking to
provide sustainable and accountable service delivery.
This is clearly the right time to address some of the
fundamental questions arising out of the devolution
debate. Our roundtable discussion chaired by Sir Paul
Jenkins focused on the current issues around devolution
to sub-national bodies within England and the changing
role of central government. We asked our panel to
address the following questions, which are key to the
devolution debate:
1. Does local government need further powers in order
to meet the challenge of providing more public
services for less?
2. What form will local government take in future?
3. How will local government be funded in future?
4. What will the role for central government be?
This paper addresses some of the questions and themes
that came out of the roundtable discussion and proposes
a number of recommendations which could assist both
local and central government in achieving a sustainable
settlement for devolution in England.
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In particular we are grateful to former Treasury Solicitor
Sir Paul Jenkins who deftly chaired the roundtable event
and has supported this report from its outset. Whilst this
report reflects the nature of the discussions, it does not
necessarily reflect the views of any of these individuals
or the organisations they represent.
The information and opinions expressed in this report
are no substitute for full legal advice. It is for guidance
only and, where applicable, illustrates the law as at the
published date.
Browne Jacobson would like to thank the local and central government leaders, policy influencers
and stakeholders who joined us in our new London offices and generously participated in a
stimulating roundtable discussion.
The local government landscape is rapidly evolving, driven by a combination of political aims and
austerity but also by the vision shared by many within central and local government that decisions
about public services are better taken locally.
about the roundtable
Richard Barlow

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executive summary
Based on our research, experience and the discussions at our roundtable meeting,
Browne Jacobson’s conclusions are as follows:
• there are a number of factors driving the devolution
debate, not least the recent referendum in Scotland
and the widespread acknowledgement that some
decisions are better made locally. However it is clear
to us that austerity is a major factor in the attitude
of both the centre and the regions. There is no sign
of this becoming less important in future
• there is the willingness and, fundamentally, the
capacity within local government to take on
significant new powers. We believe there is a
need for greater trust and support from central
government to allow relevant authorities to do so
• devolution of genuine fiscal powers to local
authorities is politically unpopular. However, for
public service delivery to be sustained, authorities
not only need greater spending freedom but also
additional powers to raise money
• existing powers to trade for a profit or borrow money
are underused. Greater awareness combined with
a relaxation of the restrictions attached to their
use may be part of the answer, and more politically
acceptable, but efficiency savings are quickly running
out and sub-national authorities are likely to push for
further revenue raising powers
• increased fiscal powers would be most effective when
combined with collaboration between authorities, a
redrawing of administrative boundaries and clarity
over structures. For combined authorities or other
entities to be more efficient they need to be based
on functional economic areas, taking into account
both city regions and rural areas (in the latter
case given the distances involved it can be more
challenging to deliver economies of scale through the
sharing of services)
• maximising democratic accountability and the
engagement of the electorate is an important enabler
of regional devolution
• the post-election period could present an opportunity
for central government to clarify its own role and
empower local authorities to allow for increased
regional self-sufficiency and improved service
delivery.
the age of austerity
This huge reduction has had a profound effect on
services. Some have been reorganised (the Local
Government Association says that at least 95% of all
English Councils have now engaged in some form of
shared service delivery3
) and others have been given
less funding or cut altogether. We are now in a position
where 60% of councils are considering stopping at least
some services because efficiency savings are fast running
out4
. It is little wonder that local authorities are looking
for the devolution of further powers to raise and retain
money, because without them they will be unable to
continue to provide even the current level of services,
let alone the ‘continuous improvement’ which they are
required to achieve.
LGA research shows that ‘the majority of respondent
councils said that at least to some extent continued
efficiency savings will not be enough to tackle the
challenge that 2015/2016 represents.’5
The challenges
faced by local government are huge, and in many cases
there are few options other than to reduce public
services.
The problems caused by reduced central government
funding are compounded by the increased need
for public services caused by the recent recession.
According to the Audit Commission6
‘by mid-2009, almost
every local authority nationwide had experienced
increased demands for services which they had
attributed to the recession.’ The Audit Commission’s
report ‘Tough Times 2013’ found that despite continuing
demand for some services, almost all councils have
shown ‘a high degree of financial resilience’ supported
by a ‘wide range of strategies’. However, the report
recognises that ‘councils must adapt in order to
continue to provide services that meet their statutory
obligations and the needs of their local communities
with reduced levels of income’ and that there will be
‘ongoing risks for councils as they do so.’
In order to address these issues, local authorities are
demanding greater autonomy from central government
and additional powers to determine what will make the
biggest difference to their residents. As local authorities
receive smaller grants from central government, they
begin to question why they should rely so much on policy
dictated by Whitehall and instead prefer to pursue their
own agendas based on local need. In order to do so they
need alternative funding sources.
Local authorities are being asked to provide more services for less. Central government funding to
local government has fallen by 37% in real terms between 2010/11 and 2015/161
, during which time
£20 billion of savings have been made from local authority budgets2
.
1.
National Audit Office: The impact of funding reductions on local authorities, November 2014
2.
Local Government Association’s briefing ‘Provisional Local Government Finance Settlement 2015/2016’
3.
Ibid
4.
Local Government Association ‘Under pressure - how councils are planning for future cuts’
5.
Ibid
6.
Audit Commission ‘When it comes to the crunch...How councils are responding to the recession’
For public service delivery to be sustained,
authorities not only need greater spending
freedom but also additional powers to raise
money.

5. Cllr Roy Perry,
Leader Hampshire County Council
Graham Allen MP
11.
Local Government Association, ‘Under Pressure’ 2014
12.
Local Government Association press release 12 May 2014
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the view from Whitehall
recent changes
However, the true extent of devolved power is more
limited than it first appears. No ability to raise and
retain taxes has been devolved7
and there have been
no proposals to increase local government’s ability to
borrow. These ideas appear to have little support
in Whitehall.
Policies which relax controls on local spending are
referred to as ‘spending decentralisation8
’ as opposed
to ‘fiscal devolution’ which would involve the transfer
of significant powers to raise and retain taxes. Many
commentators argue that such relaxation is not
sufficient to enable local authorities to meet the
challenges of service provision and efficiency. The
House of Commons Communities and Local Government
Committee’s July 2014 report9
argues that ‘the process
of devolution, if it is to be meaningful and effective,
must include more than decentralised funding streams
spent in local authority areas. Fiscal devolution
provides enhanced local autonomy. Without it, local
authorities will be agencies of central government,
focussed in large measure on the requirements of the
funder, central government and acting within spending
constraints set by Whitehall.’
The three main political parties present themselves as advocates of devolution to local government.
Many of the Conservative-Liberal Democrat government policies involved granting local government
greater influence over how money is spent; for example the devolution of control of health budgets
to sub-national bodies.
On 3 November 2014 George Osborne and the leaders of the Greater Manchester Combined Authority
signed the Greater Manchester Agreement, granting the combined authority greater responsibility
over various schemes that offer funding from central government for specific purposes and
considerable new powers to a directly elected mayor.
Similar agreements are to follow for Sheffield, Liverpool,
the North East, the West Yorkshire Combined Authority,
and most recently a proposal for combined authorities
for Derbyshire and Nottinghamshire.
The devolution of a £6 billion healthcare budget to the
Greater Manchester combined authority has also been
announced. Despite these agreements, there appears to
be little political appetite for devolution of real fiscal
powers in the near future. Nevertheless, the increased
spending power and opportunity to make significant
financial savings as a combined authority provide a
clear incentive for local authorities to join together and
creates a powerful voice to lobby for further devolution.
7.
The Greater Manchester City Deal enables the Combined Authority to ‘earn back’ increased Business Rate
revenue attributable to economic growth from infrastructure investment - see BRRS section below
8.
House of Commons Communities and Local Government Committee ‘Devolution in England: the case for
local government’ July 2014
9.
Ibid
10.
George Osborne Budget speech 18 March 2015
what next?
At our roundtable discussion, Graham Allen MP
commented that “at the moment, most local
authorities are focussed on surviving”.
The statistics confirm that the outlook for public services
is bleak if funding cuts continue as they have been. LGA
research11
suggests that spending will fall for services
other than social care and waste by 43% in cash terms by
the end of the decade.
“Local authorities have strived to shield residents
from the impact of cuts, but with another
£10 billion worth of savings to be found we’re
approaching a tipping point where options are fast
running out.”
Cllr Gerald Vernon-Jackson, Vice-Chairman of the LGA.12
Nevertheless, it is clear that this support is unlikely to
come from central government in the form of increased
funding. We are seeing calls from local government
for new powers to raise money and this looks set to
continue in future. However, what form these should
take is a contentious issue and one on which the debate
looks set to continue.
“The most exciting development in civic leadership for a generation,” ...“we have now
reached provisional agreement to allow Greater Manchester to keep 100% of the additional
growth in local business rates as we build up the Northern Powerhouse.”
George Osborne, Chancellor of the Exchequer 10

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do local authorities already have the powers they need?
The power to borrow
Powers to charge and trade
Local authorities already have significant powers to borrow and raise money. These are being used
to some extent but there is the potential for them to be used more effectively with relaxation of
certain constraints. We heard at our roundtable that many authorities were reluctant to use (or even
unaware of) current powers to trade and charge for services, and to raise money in other ways.
Local authorities’ principal borrowing powers derive
from the Local Government Act 2003, which permits
them to borrow money for any purpose relevant to
their functions or for ‘the prudent management of
[their] financial affairs.’ In exercising this power, they
must comply with CIPFA’s Prudential Code for Capital
Finance in Local Authorities (the ‘Prudential Code’) and
the Local Authorities (Capital Finance and Accounting)
(England) Regulations 2003. The Prudential Code
requires each authority to set its own borrowing limit
based on ‘generally accepted accounting practices’.
In theory, local authorities may borrow from a range
of different sources, including the Public Works Loan
Board, banks and other financial institutions or the
bond market. In practice however, only a handful of
authorities have obtained credit ratings enabling them
to borrow on the financial markets and the only recent
example of a local government bond issue is the £600
million of bonds raised by the Greater London Authority
in 2011 to fund Crossrail. The vast majority of local
government borrowing is financed by the Public Works
Loan Board.
Local authorities also have powers to borrow against
the rental income generated by their housing stock.
Such borrowing is subject to a national cap based
on calculations made under the Housing Revenue
Account (‘HRA’) subsidy system, which imposes tighter
restrictions on local authorities than would apply under
the Prudential Code
Tax Increment Finance (‘TIF’) schemes allow local
authorities to borrow money for specific infrastructure
projects and use the business rates generated by the
project to repay the loans. Borrowing under a TIF
scheme is subject to a cap and local authorities must
apply to central government before entering into such
a scheme.
Finally, under ‘earn back’ schemes, central government
may allocate funds to local authorities for specific
policies that run for a fixed-term; the local authorities
are allowed to retain any unspent sums at the end of
the term. Such schemes are in place in a number of
local authorities, including the Greater Manchester
Combined Authority.
Local authorities have a number of powers which allow
them to trade and to charge for services.
The ability to trade for profit is controversial and, to
protect public funds and ensure that they are spent
appropriately on the provision of public services,
authorities have been subject to a number of
restrictions. Powers to charge are often limited to cost
recovery, or require the income generated to be ring-
fenced, and do not provide a significant opportunity to
deliver a profit. Both areas are subject to a complex
legal framework and this complexity does not help local
government in making best use of the opportunities
available to it. For further details see our special report
‘Local Authority Charging and Trading Powers 2014’.
Relaxation of these rules could allow local authorities
greater freedom to collaborate with other private and
public sector organisations and make use of a greater
number of their functions and powers in order to
generate income.
Tax raising powers
Local authorities have some powers in relation to
taxation, in particular council tax. However, even here
their powers are limited. Authorities can set the level
of tax for each band and retain the revenues generated,
but the ratio between the bands and property values are
set centrally. Property values were last assessed in 1991
and have not been increased since, despite significant
changes in the property market. Authorities cannot raise
council tax beyond a fixed percentage set each year by
central government13
unless they first obtain a ‘yes’ vote
in a referendum. However, no local authority has had
such a referendum to date14
.
There are a number of changes which could significantly
increase the council tax yield, such as revaluation of
properties or granting local authorities the right to set
council tax bands. However, in practice, any government
considering these changes will balance the benefit
against political considerations, and these changes tend
to be extremely unpopular with the electorate.
Since April 2013 a new Business Rates Retention Scheme
(‘BRRS’) has allowed local authorities in England to
retain a proportion of business rates generated in their
areas, subject to the redistribution of excess business
rates collected by some authorities to those which are
unable to collect sufficient for their needs. Prior to
2013, all business rate income was allocated to a single
national pot and distributed to local authorities via a
formula grant. The new BRRS is extremely complicated.
It was designed to reduce local authorities’ reliance
on funding from central government and to provide
an incentive for local authorities to promote private
enterprise in their areas.
13.
2% is the increase threshold for 2015/16
14.
The Bedfordshire Police and Crime Commissioner seeks a 15.85% increase in precept and this is subject to a
referendum on 7th May 2015
Each potential borrowing option is limited in some way, on the basis that increased
local authority borrowing increases the overall national debt. Removing the limits on
existing local authority powers to raise money is one option to significantly increase the
ability of authorities to raise money for investment. Ways of achieving this include:
• removing caps on HRA and TIF borrowing
• retaining the national HRA cap but allowing local authorities to transfer their remaining
borrowing capacity to each other to allow for greater flexibility
• introducing TIF schemes that allow loans to be repaid through a wider range of taxes –
for such schemes to work local authorities would need powers to set a wider range of
taxes (see below), alternatively, funds would have to be allocated to local authorities
according to specific tax receipts in their areas
• extending the use of earn-back schemes
• amending the Local Government Act to allow local authorities to use property as security
for loans
• relaxing the limits required by the Prudential Code
• creating a collective bond issuing agency for local authorities (which would allow local
authorities to gain access to the bond market without first obtaining a credit rating).

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17.
Office of National Statistics Regional Economic Indicators July 2014
In addition to extending the taxation powers that
local authorities already possess, there are calls
for local government to be granted powers to levy
additional taxes. The London Finance Commission has
recommended that ‘the full suite of property taxes
(council tax, business rates, stamp duty land tax, annual
tax on enveloped dwellings and capital gains property
development tax) should be devolved to London
government, which should have devolved responsibility
for setting the tax rates and authority over all matters
including revaluation, banding and discounts’16
. In
addition, it suggested that London government should be
allowed to introduce a suite of smaller levies and taxes
without the need to obtain permission from central
government. Although the report focusses on London,
it states that ‘most of our recommendations or similar
options could, and in our view should, operate well in
England’s other big cities.’
However, there are real issues with some of these
taxation proposals. As the London Finance Commission
recognise, ‘stamp duty has a disproportionate impact
in London, where the brunt of its burden is borne as
a result of there being a large number of high-value
properties in the capital. If wrongly handled, stamp
duty could act as a block to economic growth and
detrimentally distort the housing market’. Devolution
to local authorities in the English regions is therefore
far less likely to raise significant amounts of revenue
than it would in London, and the risk of damage to local
economies and housing markets mean that it may not be
suitable for devolution in its current form.
From 2016, Scotland will have powers to set a Scottish
rate of income tax. This is also the case in many other
major cities around the world. However, there are
concerns that devolution of income tax may have a
detrimental effect on employment. Additional tax
raising powers have been mooted in Scotland. A hotel
occupancy tax has been suggested, which would
allow local authorities to levy a tax on occupied hotel
bedrooms. Taxes of this nature are sufficiently localised
to be administered and collected by a local authority
but such small taxes will not raise sufficient revenue to
fill the gaps in funding.
There are understandable concerns within the private
sector about local tax raising powers. Different regional
taxation regimes could make doing business in the
UK extremely complicated. Nevertheless, where very
localised levies and taxes have been introduced which
have an identifiable local benefit; for example science
and innovation taxes, these are often supported by
the private sector as bringing wider benefits to the
local community. LCCI’s 2012 report ‘Driving Local
Growth: the Business Case’ said that ‘the success of
Business Improvement Districts (BIDs) is proof that
businesses are prepared to pay more in business rates,
but only because firms know those taxes will go towards
investment in their locality. If councils are permitted to
keep a proportion of increases in rateable values, it is
vital that they commit to developing a new relationship
with their business community’.
15.
George Osborne, 18 March 2015
16.
London Finance Committee ‘Raising the Capital’ May 2013
It is clear that there is no easy answer to the question
of how to raise additional funding for local government.
Use of existing powers may go some way towards
bridging the gap, but with continuing reductions in
public spending, some real alternative powers need
to be identified. Some English regions have a larger
economic output than Scotland or Wales17
, and there are
significant opportunities for these regions to use their
tax base to support public services.
Our view is that the funding question could partly be
addressed by continued decentralisation of budgets,
relaxation of the regulations capping the amounts which
local authorities can borrow against their housing stock,
and by devolving powers to raise a suite of local taxes;
for example hotel bedroom taxes, tourism taxes and
science and innovation levies. However, this will not go
the whole way to solving the problem of how to provide
more public services for less, which requires a more
radical solution.
“If you speak to a firm with a global export market, they are not waking up and thinking about
devolution. Fact. But they are waking up and thinking about how they can promote growth in
the regions in the UK and if this agenda links to tangible outcomes then you’ll bring the private
sector along.”
James Nation, CBI
However, there is a risk that local authorities do not
have sufficient resource to cope with the strategic
planning required where increased powers are
exercised. In his foreword to the London Finance
Commission’s 2013 report ‘Raising the Capital’,
Tony Travers said that “compared with other major
countries, sub-national government in London has been
infantilised by a long term move over many decades to
centralise public finance and tax raising...as a result,
co-ordination which can deliver real results at a local
level is lost.” Although this is an argument for retaining
powers centrally, our view is that this should not be a
barrier to devolution.
Central government will want authorities to demonstrate
that they have the capacity to run any new services.
That simply won’t be possible until they are actually
able to run them - local government will not be in a
position to invest in additional capacity and expertise
until it knows such powers will be available.
Our discussion group considered whether local government was ready for additional powers (or
perhaps more accurately, whether it was ready to have restrictions lifted from it). The unanimous
view was that it is.
taking responsibility
“Central government should take the
thousands of strings off the Gulliver-like
figure of local government so that it can
make a contribution”.
Graham Allen, MP for Nottingham North
Although relatively new, the BRRS scheme could be amended by granting local authorities
power to:
• retain a greater percentage of revenues15
• set the multiplier by which the rateable value of a property is multiplied
• undertake revaluations of properties
• set discounts and tax breaks.

8. the way forward
A combined approach
To achieve this liberation, central government must be
reassured that powers are being passed to a ‘safe pair
of hands’. Often this will involve adoption of a new
structure such as a combined authority.
Recent history has shown that the greatest powers
have been devolved to bodies which cover a regional
economy rather than a traditional council boundary, that
are democratically accountable and have the support
of more than one local authority (for example, the
Scottish, Welsh and Northern Irish assemblies and the
Greater Manchester Combined Authority).
These conditions allow a body to raise taxes and fees
from a local economy, to be held accountable by the
electorate and the UK Parliament and to take advantage
of economies of scale. It naturally follows that central
government is unlikely to grant further powers to
an entity which cannot demonstrate that it has the
capacity to become accountable and to some degree
self-sufficient.
Local authorities are increasingly coming together and finding that through collaboration, they are
more able to lobby central government to ‘throw off the strings’ restraining their spending power and
devolve greater control over budgets.
Innovative collaborations between authorities have
been a key feature of recent years and there are many
options for authorities to work together. These may
be in the form of combined authorities, but this is not
necessarily the case. Existing powers to collaborate,
for example through delegation of statutory powers
and functions under the Local Government Act 1972
and the Local Government Act 2000 may also provide
an opportunity to work together without the need for
a review, publication and approval of a scheme, and
consultation.
Combined authorities were set up to allow authorities to
collaborate to support economic regeneration, transport
and local growth. They provide an excellent mechanism
for regional collaboration for these purposes; however
they are now being passed a whole range of powers,
including devolved budgets for health and social care; in
essence forming an additional tier of government which
is not, itself, democratically accountable.
There appear to be two schools of thought about
combined authorities; either they should be limited
to the purposes for which they were created, or they
could become a new tier of government which takes
on the functions of all of the lower tiers. In either
case, we felt that there was a degree of rationalisation
which was required in order to clarify the roles of local
government.
‘Root and branch’ reorganisation
Some members of the panel felt that the time was
right for a ‘root and branch’ reorganisation of local
government, revisiting the roles of public bodies and
their geographical scope.
Combined authorities go part way towards redrawing
boundaries around functional economic areas, but they
do not allow authorities to collaborate unless they
have contiguous boundaries. A consultation is currently
taking place on changes which could allow greater
collaboration regardless of geography, but no change
to the legislation has yet been made. If enacted, such
changes could allow greater collaboration on the basis
of regional economies. Research by the City Growth
Commission suggests that ‘with the right fiscal and
financial flexibilities, metros (city regions) could be
sufficient in scale, ambition and reach to raise and
redistribute revenue within their own areas’ and the
reform of local authorities around a functional economic
area, with significant devolved fiscal powers could be
key to achieving this. Research suggests that if the
15 largest metros in the UK were to grow at the same
rate as the UK as a whole between now and 2030 with
London maintaining its historic growth rate, £44 billion
would be added to the northern economy in real terms18
.
But, what happens if authorities are not in a position
to receive additional powers? The capacity of local
authorities to take on devolved powers differs across the
country. The devolution of further powers is unlikely to
help unless the council is performing sufficiently well to
exercise them appropriately.
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“It’s now 44 years since the last major
reorganisation of local government.
The question we now have to
ask - is it time to have a root and
branch reorganisation again. Using
Nottinghamshire, the county boundary
was set out by the Danish occupation
1000 years ago. A lot has gone on
since then. There are lots of reasons
to change the boundaries. The tiers
simply haven’t worked.”
Tom Huggon
18.
‘On the pathway to a Northern Powerhouse’
George Osborne, Beetham Tower, Manchester, August 2014
“The point of a combined authority is
growth, economic development and
transport. We are now trying to wrap a
whole bundle of difficult issues into them.
We are not saying that there should be one
type of local authority, we are saying that
each area can bid for their own powers.
We are not rationalising the number of
public bodies, we are adding to them. It is
creating a checkerboard of differing levels of
bureaucracy and differing remits.”
Rob Hann, Local Partnerships
Tom Huggon - Deputy Lord Lieutenant of Nottinghamshire

9. A level playing field
The opportunities for authorities to become
self-sufficient are affected by the social structure
in their areas. Whilst some authorities have high tax
bases and opportunity to raise money through charging
for services, others (particularly in deprived areas)
have populations increasingly dependent on public
services but unable to pay for them. It follows that
there will always be a role for national government
to support weaker regional and local economies and
underperforming authorities. Without this level of
‘strategic balancing’ the effect of devolution in certain
areas would be restricted.
Authorities in fiscal surplus are unlikely to want to
subsidise those which aren’t. Financial support for
these authorities is therefore likely to have to come
in part from central government, whether as part of a
‘need’ based grant or through imposed collaborations
between authorities on a regional basis. This is likely to
be unpopular with local government, however, it could
provide an opportunity to rebalance regional economies
and rationalise, leading to the creation of larger bodies
with all of the functions of existing local authorities.
Such authorities would be a significant voice when
lobbying for additional powers.
ensuring accountability
A combined authority may be set up with membership
from each authority without taking into account the
views of the electorate within the combined authority
as a whole. In the examples of combined authorities we
have seen so far, central government has been unwilling
to devolve significant powers to an authority without
an elected representative. However, in the majority of
cases when a referendum has been held for an elected
mayor, the electorate has rejected it.
The Conservative party’s preference for elected
mayors was set out in their 2010 manifesto. Local
authorities themselves have the power to adopt a mayor
and cabinet system of governance under the Local
Government Act 2000 and this has been used by some
authorities already, such as Leicester and Liverpool City
Councils. It may be that in future more authorities will
adopt such arrangements as part of their proposal for
the devolution of further powers.
Alternatively, the government’s power to require a
local authority to hold a referendum on appointing a
mayor may be used to impose an additional layer of
accountability where this is seen to be required. The
issue will be persuading voters. Without significant
powers, mayors may be seen as symbolic with no real
relevance for a local community. Linking mayors to the
grant of new powers, or as a condition of new, more
economically powerful groupings may resolve the issue.
The alternative may be that mayors are imposed by
central government even where they are not called for
locally. Our view is that this should be resisted.
Whether a combined authority without an elected mayor, or another form of cooperation, there is
often a democratic deficit in many local authority collaboration arrangements.
Issues for central government
a new role for central government
Spending decentralisation appears set to continue, whether in the form of combined health and social
care budgets, the Better Care Fund, business rates relief or otherwise. Fiscal devolution appears less
likely in the immediate future, meaning the pressure on local government to innovate will continue.
Nevertheless, the existing options for innovation and collaboration are significant, including joint
ventures and other shared services, trading companies and delegations of powers.
There are two key issues which central government
must address. First, as some authorities use existing
powers to become more self-sufficient, what should
happen to those which are unable to do so? Secondly, is
there a need for a body to oversee all of the new sub-
national bodies which may be created by local authority
collaborations?
Many local authorities are collaborating to provide
services and lobby for greater devolution, and there
are plans for a number of new combined and unitary
authorities. However, this is not the case nationwide.
Often rural authorities and those in deprived areas
with a lower tax base are in a different position. The
options open to these authorities may be limited and
they may be left reliant on central government funding.
Central government could look for ways to encourage
relationships between authorities and to assist them
in forming alliances. More drastic proposals include
reforming local authority funding to base it primarily
on need or totally reforming local government on the
basis of regional economies which would allow the
stronger economic areas to support their rural and more
deprived neighbours.
In a reformed local authority landscape, the role of
central government can be clarified. The day-to-day
management of local funding will be divested to local
government and central government can focus on
strategy and policy considerations for the nation, albeit
maintaining responsibility for national oversight of
the health service, the majority of taxes and central
decision making. The result of significant devolution
may be the opportunity for increased clarity and
accountability and greater public engagement
with politics.
The path to greater regional devolution page | 16 The path to greater regional devolution page | 17

10. Managing risks
Local authorities have and will continue to adopt
strategies and structures aimed at delivering income
and efficiencies. Entities created for these purposes
are an additional layer of quasi-public bodies which are
performing public functions but are not subject to the
same degree of scrutiny as local authorities.
The risk of creating structures which are not
democratically accountable must be balanced against
the steady decline of service provision if the status
quo prevails. The National Audit Office report dated
November 2014 indicates that the reduction in central
government funding is making meeting statutory
service obligations more challenging. This looks set to
continue - LGA Chair David Sparks in his introduction to
the LGA’s response to the Independent Commission on
Local Government Finances report ‘Financing English
Devolution’ said that “The services councils provide
will not be able to withstand another five years of cuts
without radical reform, and it will be people who rely
on good roads, public facilities and care who pay the
price”.
This presents a potential financial and reputational risk
to all levels of government. An analogy can be drawn
with the academisation of schools, which now operate
without the oversight of local government. There have
since been numerous reports of financial irregularity,
poor governance and even extremist plots, which
could have been mitigated by additional oversight.
Central government’s oversight role is likely to become
increasingly important in future.
conclusion
If spending cuts are to continue, devolution of fiscal
powers to local government and the reorganisation
of local authorities around functional economic areas
would provide a firm footing for the future.
However, the grant of further fiscal powers would
require a supportive relationship between central and
local government to guide local authorities in using
their new powers. In reality this appears a long way
off. Central government does not have the appetite
for devolution of fiscal powers, but it is our view that
without greater powers to raise and retain taxes efforts
to drive efficiencies will deliver little more than a
superficial reorganisation of the status quo.
Whilst existing powers to trade for a profit or borrow
money are under utilised, we believe that austerity will
drive their increased use. We consider that the use of
these powers would be enhanced by a relaxation of the
restrictions currently imposed upon their use.
In our view spending decentralisation will continue and
local authorities will use innovative solutions to take
advantage of available opportunities. We consider that
the value of new structures open to local government
are likely to provide the greatest opportunity for
efficiency and budgetary savings, and increase the
ability of local government to effectively lobby for
greater fiscal devolution.
The path to greater regional devolution page | 18 page | 19
“Austerity will remain a major driver
for what happens. It has been bringing
together organisations and given the
lack of clarity we have at the moment
collaboration will continue.”
Richard Barlow, Browne Jacobson
The path to greater regional devolution
• adult services
• business transfer agreements
(including TUPE & LPGS
pensions issues)
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social care
• collaboration agreements
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• corporate governance
• corporate insolvency &
restructuring
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resolution
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infrastructure
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related litigation
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• social housing
• state aid
• supply of goods & services
• tax
• vires
Richard Barlow
richard.barlow@brownejacobson.com
+44 (O)115 976 6208
Richard Medd
richard.medd@brownejacobson.com
+44 (0)115 976 6242
Laura Hughes
laura.hughes@brownejacobson.com
+44 (0)115 976 6582
Peter Ware
peter.ware@brownejacobson.com
+44 (0)115 976 6242
Stephen Matthew
stephen.matthew@brownejacobson.com
+44 (0)20 7871 8505
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There is a risk that pressure to reduce the budget deficit will make the temptation to retain a firm
grip on public spending too strong to resist for central government. However, it is necessary to
balance the needs of the UK economy with the need for effective public services in the regions.

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