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Britain must become a federal state if the regions are to survive

Time to move more power to the provinces. Mark Andrew, CC BY-SA

Britain faces an economic divide between North and South and the government and opposition are at loggerheads over how to address it. George Osborne wants to build a high-speed rail link and the Labour Party has made it clear that we need to strengthen regional agencies. Both get it wrong – devolving power to Britain’s regions is the way to strengthen them.

This summer saw the publication of Andrew Adonis’ Growth Review on how to deal with Britain’s badly lopsided and under-productive economy. Commissioned by the Labour Party, many of the report’s ideas will form part of their long-term plans for economic growth, should May 2015 see the election of a Labour government.

For those interested in economic rejuvenation in Britain’s dispossessed regions and nations, the report contains some good ideas and proposals. These range from how to enable companies in the same area to work better together through sharing knowledge and technology, to improving technical education and increasing the country’s skilled workforce.

The strengthening of regional institutions for economic development is a particular emphasis. And it’s good to see a senior Labour Party figure – probably for the first time since Robin Cook was Shadow Minister for Trade and Industry in the early 1990s – make a strong case for industrial policy.

Lack of lateral thinking

Unfortunately the Adonis report is at least as important for what it doesn’t say as for what it does. As the report’s contents have already been covered, there’s no need to traverse that ground again. Rather, the report’s omissions and its lack of lateral thinking are what concern us here.

Adonis and his colleagues are interested in extending and strengthening the current regional institutional apparatus – Local Enterprise Partnerships and Combined Authorities – as vehicles for driving economic rejuvenation. This is to be welcomed, but their proposals are hardly radical. Given the deep structural problems that confront the political economies of the North, the Midlands and in varying degrees, most other parts of Britain, the report’s recommendations will be insufficient to pull the rejuvenation trick (and sustain development from then onwards).

Four big omissions

The failures of the report coalesce around four major issues on which its authors are deafeningly silent. The first concerns democratic participation in the institutions that will help drive local economic development. The report – quite rightly – gives “a view from business” (to which a whole chapter is devoted). But, in tune with the New Labour priorities that dominate the report, one searches in vain for a “view from organised labour” or from community organisations.

While the report’s researchers interviewed representatives of manufacturing companies, banks, universities, colleges, management consultancies and local governments, the only trade union agency that anyone appears to have bothered with was Unionlearn, the TUC’s skills training initiative.

But significant change inevitably challenges vested interests. Consequently, unless a democratic consensus among all interested parties on both the means and ends of economic transformation is built at local and regional levels, the likelihood for conflict during the transformation process will be high.

Also missing from the report is engagement with other centrally important problems that current arrangements fail to address. For instance, it does not discuss the potentially vital issue of who – institutionally – coordinates how industrial policy is formed across regional institutions that neighbour each other.

As a result, it fails to say who should adjudicate the conflicts of interest that will inevitably arise between them (say, between the Greater Manchester and Liverpool Combined Authorities). In other words, the report fails to say who will be responsible for the region-wide economic planning and coordination that will be necessary.

Additionally, the report does not acknowledge that under its proposals, local economic development will continue to rely largely on funding controlled by central government. This is because even the entire local business levy (which the report proposes to make available for development purposes) is unlikely to generate the level of funding necessary given the enormity of the economic problems that confront some of the regions. Power, in other words, would fundamentally remain with central government.

For the report’s authors this is unproblematic. It is so because they fail to appreciate that however successful their proposals might be, they would still be vulnerable to the ideologies and budgetary preferences of whatever party was in office in Westminster (just as the Regional Development Agencies – founded in 1998, abolished in 2012 – were). As the British state has no written constitution, their proposed initiatives would have no guarantee of long-term continuity and stability.

The ultimate problem with the report, however, is that its authors do not understand (or refuse to countenance) that the “smarter” state they desire cannot be achieved while Britain is dominated by decisions made in Westminster. And the proposals do little to transcend this.

Britain is lumbered with a pre-modern state. Building a smarter state thus requires the formation of something new and different. The better economic future that Adonis and his colleagues envision cannot be delivered without the re-formation of Britain as a genuine federal state – a state grounded on a written constitution and delivering “maximum devolution” to its English regions as well as its nations.

This article draws on a forthcoming paper, “The upas tree: the overdevelopment of London and the underdevelopment of Britain” which is due for publication in the journal, Renewal, in the autumn.

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