Leadership1 publisher3 min readPublished
Ministers study recall and a new auditor for mayors in line for income tax revenue
Ministers are weighing a new select committee, an audit body and even recall for England's mayors as more income tax revenue heads their way. For combined authorities, the scrutiny attached to that money now matters as much as the size of the tax share.
The Board Room · Leadership desk
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What happened
- A white paper on "rewiring the state" is due later this month with detailed plans to hand more income tax revenue to regional mayors.
- Rachel Reeves floated the idea in her Mais lecture earlier this year, and Andy Burnham's government adopted it as a big part of its growth policy.
- The Audit Commission, whose specific task was overseeing local government spending, was abolished in 2015 and its role split across several bodies.
- Equalisation payments should stop high income tax areas such as London pulling ahead of other regions, the Institute for Fiscal Studies said.
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Why it matters
- contradiction Hillier wants existing committees to judge the spending through departmental lines to ministers, so a new Westminster committee would compete with hers for the same oversight job.
- constraint Accountability routed up to ministers keeps mayors' spending within Whitehall's reach, limiting how far the income tax money is really devolved.
- exposure Recall would put an individual mayor's job at risk mid-term over spending choices, on the same footing as rule-breaking MPs.
- decision Ministers have to choose how wide a regional funding gap to tolerate, and each step toward equalisation trims the growth reward richer areas keep.
The options under discussion put the checking in different hands. A Westminster select committee and enhanced reporting rules keep scrutiny at the centre [2]. A new audit body for local and regional government would rebuild a dedicated function that has been spread across several bodies since 2015 [10]. Recall is the only idea that gives the judgement to voters in the area, as already happens to rule-breaking MPs [3]. According to the Guardian, it has so far only been mooted [3]. The report does not say which options ministers favour, or whether the income tax transfer will wait for any of them.
Meg Hillier, who chairs the Treasury select committee, has the clearest stated position [7]. "It would be reckless to hand out new powers without ensuring there are transparent mechanisms to hold mayors to account for their decisions," she said [9]. Her preferred design does not need a new committee. "One way to do this is to establish clear lines of authority running through departments and up to ministers, which will allow existing select committees to judge this work," she said [8].
That design sits uneasily with the policy it is meant to police. Hillier described one of the prime minister's key ambitions as being "to take spending power out of Westminster and hand it to local leaders" [11]. Lines of authority that run up to ministers bring that spending back within ministers' reach. Whoever answers to a committee for the money will want a say in how it is spent. In my view, the white paper has to choose whether mayors answer mainly to Westminster or to their own voters, and that choice will set how much of the new revenue is theirs to direct [4].
The second design question concerns the money itself. The Guardian reports lengthy discussions in government over how to reward mayors for growth while keeping their funding stable over time [13]. David Phillips, the IFS's devolution expert, made the incentive case and its limit in one breath. "With more skin in the game of economic growth, mayors will be more incentivised and empowered to support growth through local policies and investments. But careful design will be needed to prevent richer areas' funding unfairly pulling ahead," he said [14]. Equalisation for areas such as London narrows the gap between regions, and in doing so it also shrinks the reward a mayor keeps for growing the local tax base [12]. Phillips put the choice to ministers directly: "The government must also decide how big a gap in funding it is willing to see between 'winners' and 'losers' in the years ahead" [15].
Sequencing is what a combined authority can plan around this quarter. Burnham has made clear he wants to accelerate devolution, with his new No 10 North office focused on the regional side of growth policy [16]. If the tax share is settled before the scrutiny body, I'd expect the rules that follow to be drafted with the first disputed spending decisions in view, and to be tighter as a result. Officials remain concerned about how to make mayors fully accountable for the extra cash between elections, according to the Guardian [6].
What to watch
- Whether the white paper names a scrutiny body for mayors, and whether it is a new Westminster committee or Hillier's Treasury committee.
- Whether recall moves from a mooted idea into the white paper's published proposals.
- How the white paper treats equalisation payments for high income tax areas such as London.