Andy Burnham's Devolution Plan: A Path to Economic Growth?
Andy Burnham, the newly elected MP for Makerfield, has proposed a bold devolution plan that promises to reshape the UK's political landscape. His vision involves a significant transfer of power from Whitehall to various regions across the country, including Greater Manchester and other city regions in England, as well as Scotland, Wales, and Northern Ireland. The goal is to stimulate economic growth and bridge the regional wealth gap.
The Power of Devolution
Devolution, as practiced in Scotland, Wales, and Northern Ireland, has been a topic of interest for economists studying its impact on economic growth. However, the results have been somewhat underwhelming. Despite extensive devolution in these nations, there is no clear evidence of increased economic growth rates or a significant catch-up with the UK average. The GDP per capita in Scotland, Wales, and Northern Ireland in 2023 remained largely unchanged from 1998, with Scotland at 93%, Northern Ireland at 83%, and Wales at 74% of the UK average.
Manchester's Success Story
Burnham points to Greater Manchester as a success story, arguing that devolution has lifted economic growth in the region. Since 2009, Greater Manchester has been granted more powers through successive devolution deals, including transport, housing, and strategic planning. Official statistics show that Greater Manchester has outpaced other English city regions, including London, in terms of growth and productivity since 2015. However, some analysts question the reliability of these figures, suggesting that high growth spots in residential areas could be due to data errors.
Economists attribute Greater Manchester's success to its ability to attract investment, particularly in housing, transport, and planning. The Greater Manchester mayoralty's control over housing strategy, investment funding, and affordable housing programs has played a significant role in this success. The Bee Network, a bus system under the mayoralty's control, and the encouragement of private sector investment in Manchester city centre have also contributed to the city's growth.
A Broader Impact on the UK Economy
The concept of devolution extends beyond individual regions. Many economists argue that the UK's economic growth has been hindered by the concentration of economic activity in London, while other cities in the Midlands and the North of England have lagged. This disparity is evident in the productivity gap between London and other UK cities, which is more extreme than in European economies like France, Germany, Spain, and Italy, where second-tier cities are closer in productivity to their capital cities.
The Resolution Foundation suggests that closing the gap between London and other UK cities would not only boost local economies but also improve the overall performance of the UK economy. By increasing economic activity and long-term potential growth, devolution could contribute to a more balanced and prosperous nation.
The Cost of Devolution
The question of cost arises when considering the financial implications of devolution. Burnham's plan to strive for equivalent living conditions across Britain draws inspiration from Germany's 'basic law'. However, he emphasizes that he will adhere to current fiscal rules and the Labour manifesto, limiting the government's borrowing and tax-raising capabilities.
In conclusion, Andy Burnham's devolution plan presents an intriguing approach to addressing regional economic disparities. While the impact of devolution on economic growth has been mixed, the potential for a more balanced and prosperous UK economy is significant. As Burnham navigates the challenges of implementing his vision, the UK may witness a transformative shift in power dynamics and economic performance.
