Devolve to make us richer?

Manchester skyline
Image caption More power means more economic growth for cities such as Manchester, the Commission says

It may not have escaped your notice on Tuesday that HM Treasury is not finding it altogether easy to close the UK's huge and unsustainable fiscal deficit, the gap between what the government spends and what it raises from taxes.

Of the yawning gap, which looks set to significantly overshoot this year's official forecast of £86.6bn, around £4bn to £5bn relates to spending in Greater Manchester alone.

Now the vast bulk of spending there - more than 90% - is determined in Westminster, not by municipal and regional bodies.

Which is just one reason why the City Growth Commission would argue that centralised government has failed to generate the prosperity we desperately need.

It points out that if the growth rate of our largest urban areas, what it calls metros, could be increased to the UK average, national income would increase by £60bn in today's money by 2030 - equivalent to almost £1,700 per urban dweller.

Which is tantalisingly alluring, but is much easier said than done - as shown, for example, by the yawning 100% difference between gross value added (or output) per head in London and in the North West, a gap that has widened over many years.

Local taxes

The Growth Commission's prescription to improve the economic performance of Greater Manchester and 14 other large metro areas - from South Hampshire to Cardiff to Glasgow - is a mixture of devolution and significant investment in infrastructure.

The idea is to improve communication within and between metros, both physical (integrated modern train networks, with simple electronic payment systems, like London's Oystercard) and digital (superfast broadband).

It also favours more local control of how money is raised - through property taxes and borrowing - and how it is spent.

The arguments in favour of this kind of financial and fiscal devolution are simple and persuasive - and, put simply, are that local people know better than the man from the ministry what are the needs of the local economy.

So, as the former deputy prime minister Lord Michael Heseltine has banged on about, decentralisation of the determination of what skills are needed in an area, and how they are provided, seems anything but bonkers.

Big bill

That said, the Commission's suggestion that a town like Manchester should wrest from Whitehall the power to decide quotas for skilled immigrants is not uncontroversial (except with many larger businesses, which would prefer to hire local talent, but cannot always find what they are looking for in the indigenous population).

But the case for devolution has been powerful forever. Historically, what has terrified chancellors (and Margaret Thatcher) is that a Manchester mayor or council chief executive would go mad with the credit card, and land us all with a big bill.

To which proponents of transferring serious power to City councils and mayors would say:

First, that it is mad to trust the Scots with more taxing and spending powers, and not trust the North West - whose economy is actually bigger than that of Scotland; and

Second, that Whitehall has not exactly done a bang-up job of maintaining the integrity of the UK's balance sheet, and it is hard to see how local officials could do much worse.

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