Using participatory methods: fiscal devolution
Ross Mudie, Research Analyst at the Centre for Progressive Policy, blogs on developing a model of fiscal devolution through participatory methods
Ross Mudie
Research Analyst at the Centre for Progressive Policy
Ross Mudie
Research Analyst at the Centre for Progressive Policy
There is value in using participatory methods as a way of developing economic policy, navigating tricky policy areas, and developing reasoned, informed policy designs as a result.
Participatory methods enable the public to play an active role in shaping policy and decisions that affect their lives. The lived experience of participants can result in better decision-making. A joint report by the RSA and Inclusive Growth Network has set out how local places can advance and embed use of participatory democracy.
Funding Fair Growth – Citizens’ Jury
The Centre for Progressive Policy (CPP)’s recent report, Funding Fair Growth, explores how we can meet the challenges of a constrained fiscal environment, creaking public services and regional disparities, all while moving the UK towards a smarter, fairer and more productive economy. One of the central themes of our research was whether greater fiscal devolution could improve resourcing and capacity, embolden local government to become engines of growth, and reduce regional inequalities.
We worked in partnership with the National Centre for Social Research (NatCen) to convene a Citizens’ Jury, broadly reflective of the UK population. On fiscal devolution, there were three key questions we wanted to test with the jury:
- Whether or not a consensus existed among the public on greater fiscal devolution;
- How the public viewed the trade-off between redistribution between richer and poorer areas, and local governments having a greater stake in local growth;
- What principles or conditions the public believe should be attached to any future proposals for greater fiscal devolution.
An initial ‘learning session’ intended to bring participants up to speed with the subject of fiscal devolution and the various pros, cons, risks, and trade-offs associated with it. Following this, we used a role-playing exercise based on a fictitious scenario in order to see whether or not, in principle, a consensus on greater fiscal devolution existed. The jury were asked to imagine they had been tasked by the Chancellor of the Exchequer to collectively review the hypothetical evidence base for the Chancellor’s decision to grant greater powers on spending and taxation to three different fictional local governments, spanning vastly different geographies. Jurors were provided with a balance of information and space to engage with one another.
Findings from the jury
The vast majority (84%) of jurors determined that the Chancellor should expand fiscal devolution beyond the initial three local governments in the fictional scenarios to a full nationwide roll-out. Yet 72% of the whole jury supported greater fiscal devolution only with reservations.
Given this, further deliberation between the jury took place to develop a set of five principles to form a starting premise for the development of a model for greater fiscal devolution. These addressed their concerns, primarily around exacerbating geographic inequalities.
Fiscal devolution must...
- ... be responsive to the views of local people - local people must have a say in how the system works and decisions to tax and spend
- ... ensure local and national priorities are balanced - through robust and evidence-based oversight
- ... be well regulated and implemented with accountability measures - to ensure safeguards against corruption, inefficiency, and mismanagement
- ... ensure transparency, and be open to public scrutiny - so that the public knows what is spent, where and why
- ... build capacity to create a level playing field - among local authorities by rebuilding local government capacity
Policy recommendations
Based on the broad consensus for greater fiscal devolution and the five principles for a future model, we developed a model which could feasibly be delivered over the course of the next parliament, operating within the existing tax system, given our tight fiscal environment.
Our primary recommendation is to devolve 2% of income tax receipts to local governments, using a new model which would see the highest tier of local government in an area retaining 50% (or around 1%) of these receipts, with the remaining half split between redistribution (0.8%), as well as investing to rebuild local government capacity (0.2%).
While we estimate this policy may feasibly be implemented within the first year of the next government, being worth around £5.6bn to local government per annum, we also think we can go further. So, we recommend that the next government widens this model out to encompass VAT and corporation tax around the middle of parliament, which we estimate could be worth approximately £11.8bn annually – all without increasing the overall tax burden.
We estimate that the three largest beneficiaries would be the West Midlands, Greater Manchester, and West Yorkshire. Illustrative modelling on the redistributive share of our recommendation on income tax suggests that some of the poorest areas would see significant gains. Blackpool, Hull, and North East Lincolnshire would see the overwhelming majority (>75%) of their additional revenue come through redistribution, helping level the playing field between richer and poorer areas.
Our report sets out in detail further recommendations on overhauling the local government finance system in England to provide greater financial stability over the long-term, reduce the restrictions around pooling resources, and promote greater private investment.
Summary
Convening and delivering our Citizens’ Jury has demonstrated that there is real value in using participatory methods as a way of developing economic policy. We also recommend that deliberative processes be used to inform possible routes towards greater fiscal devolution in England and the devolved administrations.
In this case, the end result is a clear path for the next government to implement a model of fiscal devolution that is both equitable and growth-oriented, as well as considerate of the views of a broad sample of the UK population. But more so, our experience of using a Citizens’ Jury has demonstrated how such approaches provide policymakers with robust evidence and insight to navigate policy choices and economic change.
Funding Fair Growth
This report looks to inject some realism into the debate on the state of the UK’s public finances ahead of the next election.
Our analysis shows that the next government will need to spend an additional £142bn per year by 2030 (equivalent to a 1.56% increase in public spending per year) just to maintain current levels of public services. We put forward four solutions to tackle UK’s public spending problem and drive long-term growth across the UK.
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