Columnist

Teesside deserves more than cashback devolution

Ben Houchen had a better idea two months ago.

In June, the Tees Valley mayor proposed creating a regional wealth fund. 

The idea was straightforward: rather than simply spending additional locally generated tax revenues as they arrive, pool some of that money in a fund and invest it over time in local services, infrastructure and assets that can benefit the region for years to come.

Now, as the Government prepares to give mayors a greater stake in locally generated tax revenues, Houchen has another idea: give the money back to residents through a tax rebate.

But should he be allowed to?

Devolution should give local leaders much greater freedom over how they pursue the needs and priorities of their places.

But that does not mean devolved public money should come without conditions.

There is a legitimate role for the Government in ensuring public resources are used to create public value, while leaving local leaders to decide how best to achieve it.

And there is something much more powerful available here than cashback.

A £100 rebate gives somebody £100 to spend once.

The same money, pooled across a region, can help create something that lasts: cheaper and better buses; affordable homes; renewable energy; childcare; skills programmes; thriving town centres; or infrastructure that supports new businesses and jobs.

Crucially, money can also become more valuable when it is pooled.

Individually, a small rebate can ease the pressure on a household budget.

Collectively, those same resources can create assets and services that no household could buy alone, generating benefits at a scale and over a period of time that an individual payment cannot.

Done well, those investments put money back into people’s pockets too.

But they can do so repeatedly: cutting the cost of getting to work, lowering energy bills, reducing housing costs or increasing people’s earning power.

They can also create assets and institutions that Teesside owns collectively and from which future generations can benefit.

This is the real opportunity presented by fiscal devolution.

For decades, local and regional government in England has been expected to deliver economic development, while remaining heavily dependent on short-term grants handed down from Whitehall.

Greater control over locally generated revenues offers something different: the financial capacity to plan, invest and build wealth for the long term.

Houchen’s earlier wealth fund idea was closer to the mark.

There may now be broad political agreement that England needs more devolution.

But that consensus conceals a much bigger argument about what devolution is actually for.

Is it about recreating the politics of individual tax cuts at regional level?

Or is it about giving places the collective financial power to build things together that none of us could afford alone?

Dr Tom Lloyd Goodwin is deputy chief executive at independent economics think tank Centre for Local Economies

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