It was the Scottish National Party’s failed attempt to persuade their electorate to leave the United Kingdom that effectively opened the Pandora’s box of devolution for the rest of the country.
At the same time, it succeeded in taking the spotlight off London and helped to reinforce a view, already held by some US investors, that there are some serious options opening up as viable commercial destinations in the UK.
A jittery coalition government faced with the potential break-up of the UK issued a series of last minute promises to increase Scotland’s ability to control its own economic destiny which not only effectively bolstered the “No” vote’s case to win the day but enhanced the business appeal of Edinburgh and Glasgow for foreign direct investment.
However, the problem was that not only were the Scottish voters listening but so were those in the rest of the UK, particularly outside London, which benefits from its close proximity to the seat of government.
The cry emanating from there though has not been for independence – although the Welsh nationalists and even the oddball Cornish version would disagree – but for decentralization or, as it has become better known, localism. All this was hardly surprising in a country which shares equal billing with Romania and Albania as having the most centralized form of government in the Western World.
Not that the move to localism is new. Under Prime Minister Tony Blair there was devolution for Scotland, Wales, Northern Ireland – and London. For the rest of England there were attempts to establish economic development bodies in each of nine administrative regions. However, when the electorate in the north east of England rejected a regional assembly, these hit the buffers.
Significant top down control followed, further alienating local authorities because of the damaging effect on their economies, so creating a climate of mistrust when the coalition took power.
Chancellor George Osborne gauged the mood of the country correctly by announcing a Northern Powerhouse initiative to devolve more powers to what is seen as the engine room of the UK, unleashing the economic potential of core cities such as Manchester, Liverpool and Leeds. With this happening, few doubt that they will now be able to compete with London, where properties are on average four times more expensive and the cost of living is at least 40% higher than the rest of the UK.
The move to localism is not new – but there is a heightened drive to unleash the economic potential of core cities and devolve more power to them.
The Northern Powerhouse arrived in the wake of the Localism Act, with key rights and powers for local communities; and City Deals agreed with more than 30 core and key cities around economic development; and a move from the top down, one size fits all dictates of central government.
However, there remains a concern over “interference” – the Localism Act also contains more than 100 new powers for central government to veto local decisions – but after 80 years of centralization it is obviously difficult to let go of the reins entirely.
Seen by some as a political ploy, the Northern Powerhouse is more a realization that the good times would not return until there was a move back to the city states that had powered the UK economy in its heyday at the time of the Industrial Revolution. The municipal authorities were, in fact, dominant through the 19th and the early part of the 20th century, effectively controlling their own purse strings. Sidney and Beatrice Webb writing in the 1920s insisted ‘the characteristic English preference for local over central administration has hitherto always proved too strong to be overcome’. That was not to remain the case some two decades later.
It was the Welfare State, unveiled in the 1940s, which proved the catalyst for the move to centralization as it demanded an even-handed approach for all. This saw public services and welfare benefits delivered centrally, with the National Health Service paid for out of general taxation.
All this worked reasonably well until London became the over dominant force. The London “bubble” as it became known increasingly unbalanced the UK economy. Though politicians are elected to parliament from across the country, it is claimed that they simply forget their roots when they are absorbed into the diaspora of the capital. All of this has caused a sense of disillusionment with politics in the rest of the country.
Then came the crash of 2008, when the City of London had its fingers badly burned and the realization that if financial services were vulnerable, there was a pressing need to rebalance the economy. The fact that some of the world’s most successful and enduring economies had been built on city states – the USA and Germany being two – was not lost on the government when the need to balance the books at a time of austerity became the order of the day.
Decentralization then has not only opened the door for the UK’s cities to prosper but in turn it has also enabled them to come out of the shadow of London in terms of attracting inward investment.