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Devolution to cities 'should go much further', say MPs

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The UK’s cities and regions need to even more powers to close the north-south divide, a cross-party group of MPs and peers has demanded

In a report launched today, the All Party Urban Development Group (APUDG) said that current plans to give local authorities responsibility for rebalancing the economy, improving infrastructure and increasing the availability of housing ‘should go much further’.

The research backed by the British Property Federation (BPF) said that cities should be given ‘greater flexibility’ to borrow and keep extra revenue generated by growth and be handed ‘greater freedom to use innovative devices’ such as tax increment financing (TIF) and earn-back.

Last month Greater Manchester agreed to ‘an historic’ devolution settlement with government which will see the city region gain new ‘planning freedoms’ and a directly-elected mayor.

Under the deal signed with chancellor George Osborne, Greater Manchester will be handed greater local control over certain budgets - including a new housing investment fund worth up to £300million.

Speaking about the report’s findings, Liz Peace, chief Executive of the British Property Federation, said: ‘One consistent aspect of business feedback is that if government really wants to stimulate economic growth, create jobs, improve infrastructure and build more houses, it has to allow local leaders to make more local decisions.

‘Allowing for more flexibility and freedom within the current structures will allow local places to tailor them to their needs and unlock more development.’

The principal recommendations of the report are:

  • Take the devolution of powers to cities much further
    Real progress has been made in devolving more powers to city regions through fiscal and financial devolution, but this could be taken much further. Cities should be given greater flexibility to borrow and retain additional revenue generated by growth, as well as greater freedom to use innovative devices such as TIF and earn-back.
  • Improve the offer in Enterprise Zones and gear it more closely to local conditions
    The ‘offer’ in Enterprise Zones needs to be reappraised. Enterprise Zones need to become more bespoke, providing incentives geared to the specific circumstances of individual Zones. In some circumstances, this should include the use of capital allowances for new build. Renewed consideration also needs to be given to introducing powers for using ‘Enterprise Zone Schemes’ for the grant of planning permission, instead of relying on local development orders as the means to simplifying the planning process within the Zones.
  • Use Tax Increment Financing more constructively
    Lessons can be learned from the successful use of TIF and how it can be applied to other areas where upfront infrastructure expenditure is the key barrier to progress. Many more currently unviable schemes could be taken forward if the Government allowed TIF to be used more widely, within a set of rigorous parameters such as those advocated by the BPF and others.
  • Reduce the deterrent to development posed by empty rates
    If the Government wishes to boost construction activity then at a minimum it should extend Empty Property Rates Relief to cover the regeneration and refurbishment of empty (or substantially under-occupied) buildings. This is economically productive activity that necessarily requires void property and should be encouraged, not penalised by the tax system.
  • Give Local Enterprise Partnerships (LEP) long-term certainty
    The LEP model is firmly in place, and now some degree of continuity is crucial to ensure it has a chance to become truly established. Cross-party consensus to retain LEPs and make them work and a longer-term approach to funding would help in this regard. There also needs to be clarification about the role of the LEPs in relation to other local structures and whether they have a part to play in setting out strategic priorities for an area, while recognising that LEPs may not always be the most appropriate local structure to provide a framework for growth.
  • Expand the role of the Growing Places Fund in supporting local infrastructure projects
    The GPF is a highly cost-effective means of enabling developments to proceed whilst providing long-term benefits by recycling funds for other projects as developments are completed. It should be expanded and extended so that it can support additional schemes. The GPF could also be used effectively in combination with other schemes, such as TIF, to produce a beneficial effect disproportionate to the size of the Fund allocation itself.
  • Improve the effectiveness of the Regional Growth Fund
    The RGF is one of the cornerstones of the Government’s growth strategy and it is crucial that it operates effectively. In many cases the Fund is being used to support worthwhile projects but a more explicit recognition of the role that development can play in stimulating growth and regeneration could further improve its effectiveness.  There should also be a greater role for LEPs in the allocation of funding as they are often best-placed to understand the needs of local businesses and tie investments to local growth strategies.
  • Implement City Deals in a flexible way
    City Deals will need to be regularly reviewed to check that they are addressing the right issues and operating effectively. Whilst the ‘deal’ concept may have wider applicability, the special focus on cities as the chief engines of growth must not be diluted. There is a lack of capacity in Government to negotiate deals on a local authority by local authority basis and so more generic offerings may be more feasible to extend devolution, as envisaged by the London Finance Commission. The bigger cities have significant organisational capacity but this is not necessarily true of other areas that may negotiate Deals.
  • Overcome other barriers to growth
    Viability is by no means the only barrier to development. There is still a need for local authorities to be more focussed on economic growth, to produce economic strategies for their areas, and to ensure that they have an up-to-date Local Plan setting out how they will meet their community’s need for homes and jobs.


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