CBI calls for greater devolution to boost region’s economy and close productivity gap

October 11, 2019

Devolving more power from Westminster to the South West will turbo-charge its economy and end a productivity gap that costs its workers an average of £5,000 a year in lost income, according to a new report.

But decisions on spending money devolved from central government must be taken by an independent regional board rather than politicians, the CBI, which has published the research, said this week. 

It argues that real devolution for England’s regions has stalled over recent years, yet it holds the key to solving the country’s engrained productivity crisis and raising wages.

Shifting more power and funding to the regions would “ignite a new era of prosperity” its report claims.

It says it wants to build on recent momentum including speeches by the Prime Minister concerning the need to ‘level up’ places across the UK and so has outlined three steps needed to kickstart devolution and maximise the potential of all English regions.

  • Step One would develop and publish a clear framework for devolution so that local leaders understand what powers government are willing to consider devolving
  • Step Two would optimise Westminster and Whitehall for devolution including buy-in and support from Treasury who hold the purse strings
  • Step Three would deliver new deals to cover 60% of the English population and streamline local government by championing unitary authorities.

Its report says despite some attempts, the UK’s productivity puzzle remained and tackling it required bold and sustained action.

The UK lags international competitors when it comes to productivity, with output per hour in the second quarter of this year just 1.3% higher than it was in 2007. 

With productivity a key driver of wage growth and living standards, addressing it must be a priority, from Whitehall to townhalls, said the CBI.

Stagnating productivity in the South West and throughout England is estimated to cost private sector workers on average £5,000 in lost income every year so there was now an urgent need to get local decision-making, funding and delivery working effectively in all parts of the country, it added.

CBI research in 2017 showed that closing the productivity gap between the best and worst performing parts of a region and replicating this across each region of the UK could add more than £200bn to the economy in the next decade.

Devolution allows key decisions relating to productivity to be made closer to the places they affect and, if done right, could help unlock regional growth, said the CBI.

It recommendations removing politics from decision making by establishing an independent board to assess proposed devolution deals, and simplifying boundaries between combined authorities and local enterprise partnerships (LEPs).

The West of England, including Bristol, has already benefited from some devolved powers and funding from central government. Its combined authority can now make local decisions in areas such as skills training, transport and housing allocation.

According to the CBI, such devolution deals, despite being limited in scope, have raised the international profile of the regions where they apply and brought clarity over their strategic direction as well as increased collaboration with neighbours across the region and the country and a greater focus on inclusive growth.

The CBI report follows an announcement by Chancellor Sajid Javid at the Conservative Party conference that the government will bring forward a White Paper on English devolution in the months ahead.

The CBI said it hoped this would kick-start a national conversation on the future of devolution – with business at its heart,

CBI South West director Deborah Fraser, pictured above, said now was the time for the government to work with business to set out plans to devolve powers and unlock regional growth.

“Within five years, 60% of the population should be covered by a devolution deal.  This change will turbo charge our economy and will ignite a new era of economic prosperity in the South West,” she said.

“Business is keen to unlock growth but wants to avoid future deals being influenced by politics. A clear framework where deals are assessed by an impartial independent board is sorely needed.

“I believe it is time the Prime Minister harnesses devolution and runs with it. If he does the CBI will support him every step of the way. Everyone knows that productivity is a key driver of wage growth and living standards, so addressing it must be a priority, from Whitehall to townhalls.

“We encourage government to work with the business community to reduce local government complexity and kicking the politics out of decisions on devolution.”

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