Magazine article Public Finance

A Faster Track for the City-Regions

Magazine article Public Finance

A Faster Track for the City-Regions

Article excerpt

The funding agreement for the £16bn Crossrail project marks much more than the go-ahead for a new railway line in London. It also provides a framework for a rebirth of the city-regions agenda and the promotion of economic growth in core cities outside London.

Despite the government's rhetoric since 1997 on the regeneration of cities and on the devolution of power to the regions, there has not been enough relaxation of central financial control to allow cities to think strategically about economic development. Regeneration has been driven from the centre and so has been targeted and selective.

The sheer cost of Crossrail has forced the government to look at innovative ways of raising funds and to consider passing on parts of the project cost.

The resulting funding agreement will allow the mayor of London to leverage a supplementary business rate of 2p across London from 2010 - a significant breakthrough for the devolution of tax-raising powers.

Outside London, the ability to choose to levy a supplementary business rate is both convenient and politically acceptable for local authorities, as the decision will be determined locally.

But those that want to preserve and enhance their autonomy from the centre will be able to do so only by pooling their resources with those of their regional neighbours.

Business rate supplements: a white paper, published alongside the recent Comprehensive Spending Review, says that the SBR will be levied locally - limited to 2p in the pound - by the highest-tier authority. It also says that efforts by authorities that work together and pool resources for large capital projects will be welcome.

This could be achieved through Multi Area Agreements (MAAs) or through more formal statutory sub-regional authority structures. This is likely to be a necessary outcome if local authorities are not to be left behind in a competitive economy.

Most upper-tier local authorities lack the population and business base to raise sufficient funds from a 2p supplementary tax to finance substantial infrastructure. This means that, irrespective of historic local rivalries, councils will increasingly face a Hobson's choice of either pooling resources or struggling to compete economically with areas where authorities have embraced the finance-raising power of a big city-region.

This is already starting to happen. The Association of Greater Manchester Authorities has suggested that a formal government structure be created to cover the whole city-region. …

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