What would radical decentralisation look like?

Much needs to be done to end the irresistible pull of London.

Much needs to be done to end the irresistible pull of London

With Labour’s Policy Review acknowledging the importance of re-distributing power away from Westminster and George Osborne announcing over £15bn of rail improvements for the north, it is worth exploring some ideas for what could be done to truly overcome the London-centric nature of our politics and economy.

Firstly, public spending is necessary but not sufficient by itself. Austerity has and will continue to increase regional disparities (as regions outside London are more dependent on public sector investment) and with Labour signing up to Tory spending plans this trend will continue. The cuts to local government are significant and are testing their ability to function as efficient and responsive organisations to the fullest.

This can only increase the centripetal pull of Whitehall.

The infrastructure spending announced by George Osborne recently – around £15bn in rail investment for the north – is nowhere near enough to close the gap. Remember, London gets 24 times as much spent on infrastructure per resident than north-east England. Central government spending is not the whole answer but it’s a crucial element.

Secondly, any serious plan has to give general power of competency for local government to run their own affairs. This means a radical, constitutional shift in power away from central government but to do this local government has to have some autonomy from central government funding. Tax raising powers for local government as part of a broader transfer of competencies are needed.

Thirdly, we need to address London’s housing market bubble and the lack of sustained infrastructure investment outside of London. This could be addressed by a land value tax and the proceeds could be channelled into a regional infrastructure fund.

This would act to redistribute wealth away from the south east where land values are disproportionately high.

The regional infrastructure fund could award low interest loans to activities that have demonstrable social, economic and environmental benefit. Importantly, these local infrastructure funding bodies would have to be more accountable and democratic than Local Enterprise Partnerships are at present.

Fourthly, finance. The big universal banks are not set up to cater for local SMEs who often need patient funding. The market won’t provide a bank that will cater for local SMEs as this is often patient work for small returns. Luckily we have RBS which could be turned into a series of regional investment banks with a mutual structure.

Alongside providing patient finance for SMEs is keeping money and investment in the local economy. Important to this is the strengthening of the credit union movement so it becomes are real nationwide option. A Community Reinvestment Act (a levee on big banks not investing in certain areas) could provide the capital needed to help credit unions grow into a substantial force.

A lot needs to be done to end the irresistible pull of London. The tide may be turning, and its important the progressives grasp the nettle.

This blog draws heavily on Stuart Speeden’s essay for Compass published in Building blocks: for a new political economy, itcan be downloaded here

Joe Cox is a research coordinator at Compass

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