City Region

The current government has been committed to the concept of regional devolution, with the creation of Regional Development Agencies to manage economic development and Regional Assemblies, which sit above county councils as a third tier of administration.

The government’s 2002 White Paper ‘Your Region, Your Choice: Revitalising the English Regions’ set out plans for decentralising powers and strengthening regional policy. But following the 2004 ‘no’ vote on a regional assembly in the North East, the government’s preference to devolve decision-making powers through elected regional assemblies is now seriously damaged. An inherent challenge in this arrangement is that regional bodies are too removed from the range of local needs and interests to be representative and are just seen as another costly layer of bureaucracy.

There is, however, a general consensus that more flexibility to define and invest in local priorities is needed at the local level. The current approach to local governance is not producing regions or cities that are world-class in terms of economic performance. Local government finance is also in need of reform. Too great a percentage of local spending decisions are made centrally (both by volume and amount). Sir Michael Lyons is currently reviewing Local Government Funding and will report in time for the 2007 Comprehensive Spending Review.

Business Impact
Business rates, which are capped at the level of inflation, are currently set centrally, offering accountability and national scrutiny. The contribution of business rates towards local government finance is substantial - £15 billion in 2004-5. Business also contributes to local government expenditure through central taxation, but many business people do not feel that they are getting value for money and want to see a more effective local government structure, as well as greater accountability, efficiency and cost-effectiveness.

Central government currently controls up to 80 per cent of local authority expenditure, leaving little room for local accountability in how funds are spent. With greater accountability over the revenue from business rates, local authorities could be persuaded to enhance the business support services they offer and encourage greater economic development and regeneration. Crucially, businesses must have some influence over how the money is spent and there must be stringent safeguards to limit increases and ensure that business rates are not used as a mechanism to ease the strain on the council tax.

Chamber Position
Birmingham Chamber is broadly supportive of increased powers devolved to the local level to plug the competitiveness gap between UK cities and London and other European cities. Business has become remote from local decision making processes and disengaged from its historically strong civic leadership role. There is an opportunity to focus efforts on creating city-led regions, which maximise economic drivers and the symbiotic relationship between cities and their surrounding areas. Neither can grow without the other.

Birmingham Chamber has been involved in the work done by David Miliband MP, while he was Minister for Communities and Local Government, looking at the options for greater local powers and governance structures, including elected mayors. The Chamber is also working to enhance the role of business in local decision-making and ensuring that the priority needs of the business community are addressed, particularly regarding spending decisions.

Birmingham Chamber does not currently favour one governance structure over another. However, whether an elected mayor, or enhanced co-operation between the seven metropolitan district councils in the West Midlands is pursued, there must be clarity over strategic functions and the boundaries to which powers apply.

If you would like to have your say on the future of local government and how business can get real value for money c.ritchie@birminghamchamber.og.uk.

If you would like to be kept up to date or get involved with the Chamber’s lobbying work policyteam@birminghamchamber.org.uk.

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