Yorkshire Devolution Financial Settlement

There seems to be an assumption by those supporting devolution to Yorkshire that any devolution deal between the national government and the region will include a favourable financial settlement. All sorts of ideas of what the region might do with this windfall have been put forward, however, the evidence suggests that no such windfall will materialise. The UK public finances are still in a parlous state, local authority reserves are depleted, extra funding is required for the NHS, the Chancellor also faces competing claims from most other government departments, and all this even before the impact of the Brexit transition is taken into consideration.

The One Yorkshire Devolution Agreement Submission requests control over a new £125M a year gainshare revenue fund allocation for 30 years to be invested in driving growth across the region. There may be other grants available and the region may be able to borrow against elements of this income for large growth orientated investments but it is clear that this level of income will be woefully inadequate to cater for all the spending that some supporters of devolution appear to be planning.

Devolution should not be seen as an alternative to austerity. It may form part of the solution, as there is scope for resources to be better directed by a regional rather than national government, but, in the absence of an adequate financial settlement, it has to be combined with innovative, constructive financial management and adequate financial and revenue raising authorities to form anything like a complete solution. This will require the regional authority to exercise prudent financial management whilst doing everything it can to attract investment and expand the revenue base. These measures need not necessarily mean people and businesses paying more tax, rather, we should be looking for existing businesses to be more profitable and for existing workers to earn more so that we can raise more income from the existing tax rates. Similarly, we need to attract more successful businesses and their workers to the region which in turn should help us to raise more revenue. All this involves the regional government creating a positive business climate which encourages enterprises to thrive.

Ultimately, though, taxes may need to rise to pay for all the services we need. However, the regional authority cannot and should not raise taxes above a level that the vast majority of people are willing to pay. One of the prices of adequate devolution with full financial and revenue raising authorities is that the regional authority is unlikely to be subsidised by the national government which means that Yorkshire services will have to be paid for by Yorkshire taxpayers. There are many ways to deliver services effectively to a good standard. The regional authority will need to look at these and determine how best services can be delivered within its financial constraints. In doing this, it should not be constrained by any political dogma. Its priorities should only be delivery of the required services, to a fit and proper standard, to all those who need them.

Devolution on its own is not a complete solution to the region’s problems but even with an inadequate financial settlement a regional government could do a great deal to improve the lives of the people, so long as it is allowed to innovate and is not constrained by political dogma. If the regional government is constrained or is not given sufficient authority, then it will not be able to reach its full potential and could be placed in the insidious position of being yet another fall guy for a failed national system. In any event, those promoting devolution will need to manage expectations, not least their own.

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