Andy Burnham’s radical devolution plan, promising the “biggest rebalancing of power our country has seen,” aims to unlock higher economic growth across the UK. His proposal, outlined in a recent policy speech, seeks to shift authority from Whitehall to all parts of the UK, including Greater Manchester and other English city regions, as well as further extending powers in Scotland, Wales, and Northern Ireland. The central question for economists and policymakers is whether this extensive decentralisation can truly deliver the sustained economic uplift Britain needs, as Burnham stated, “We will never get growth up to the level Britain needs unless every single postcode in the land is set up to contribute to it.”
The Current Devolution Landscape
The UK already operates with varying degrees of devolved power. Scotland boasts extensive autonomy, with its parliament holding powers covering health, education, local government, environment, justice, and policing. Holyrood also has powers to set most income tax rates and some control over welfare. The Welsh Senedd’s powers are more limited, including running the NHS in Wales, education, local government, and housing, with some tax powers but no justice or policing. Under the 1998 Good Friday Agreement, the Northern Ireland Assembly has significant devolved powers over health, education, and housing.
English city regions, notably Greater Manchester, have seen progressive devolution over the past decade, albeit less extensively than the nations. Manchester holds authority over transport, housing, skills, and health spending, with powers granted in successive deals since 2009, including an uplift in transport, housing, and strategic planning powers in 2014.
Devolution’s Impact on Nations: A Mixed Record
Most economists who have studied the impact of devolution have not identified any significant increase in overall economic growth rates in Scotland, Wales, or Northern Ireland over the past quarter-century. Official statistics reveal that the GDP per capita – a measure of productivity – of Scotland, Wales, and Northern Ireland in 2023 was broadly similar relative to the UK average as it was in 1998, with Scotland at around 93%, Northern Ireland at 83%, and Wales at 74%.
However, analysts caution that this does not necessarily signal economic failure. It is possible, they suggest, that these nations might have experienced economic decline relative to the rest of the UK if they had still been centrally governed. External factors like Brexit might also have had a disproportionate effect on some parts of the UK, making it harder to separate out the direct impact of devolution.
The Greater Manchester Case Study: A Blueprint for Growth?
Burnham has argued that Greater Manchester serves as a case study in how devolution can lift economic growth. Official statistics suggest that Greater Manchester has grown faster than other English city regions, including London, since 2015. Furthermore, impressive productivity growth has been observed in the city of Manchester and the greater Greater Manchester region since 2020.
While some analysts have questioned the reliability of these recent productivity figures, partly due to high growth spots in residential areas and potential data errors, many economists generally think Greater Manchester has performed better than other UK city regions over the past 15 years. This performance is partially attributed to the devolution of powers, particularly on transport, planning, and housing. The Greater Manchester mayoralty is empowered to set the city-region’s housing strategy, direct housing investment funding, and coordinate affordable housing programmes. Devolution has also enabled increased investment by encouraging companies, particularly multinationals, to create jobs and drive local growth. Economists also point to the Bee Network of buses and the encouragement of private sector investment in Manchester city centre.
Andrew Carter of the Centre for Cities think tank notes a recognition among the Greater Manchester leadership that “the future of Manchester is a big city that is offering lots of different opportunities, but particularly to higher value added activity.” He adds, “They’re prepared to do what is required – build the housing, support the expansion of the university, support research and development, try to introduce a transport system which really supports all of that kind of stuff. And as a result you become more attractive to investment, whether it’s foreign or domestic.”
Wider UK Economic Implications
Many economists argue that a key factor holding back the overall UK economy has been the heavy concentration of economic activity in London, while cities in the Midlands and the North have remained relatively weaker. Evidence suggests that in other European economies, such as France, Germany, Spain, and Italy, their second-tier cities are considerably closer in terms of economic productivity to their capital cities. Analysts point to the much greater level of devolution in those countries as a reason for this.
The Resolution Foundation has argued that closing these gaps between London and big UK cities would not only boost jobs, incomes, and prosperity in those regions but would also improve the performance of the national UK economy, both by lifting the overall level of economic activity and increasing its long-term potential growth rate.
The Cost of Ambition
Burnham’s pledge “to strive for equivalent living conditions in all parts of Britain,” borrowing from Germany’s “basic law,” implies a substantial financial commitment. Boris Johnson’s Conservative government’s “levelling up” objective, which established a £5bn fund, is seen by some analysts as having failed partly due to insufficient state resources and investment. The post-reunification plan to bring East Germany closer to West Germany’s productivity, for instance, cost around €2 trillion in state spending between 1990 and 2014, equivalent to £70bn a year.
However, Burnham has also stated his intention to stick to the “current fiscal rules” and the existing Labour manifesto. This commitment would likely impose limits on how much his government would be able to borrow or raise tax to finance such extensive devolution, potentially creating a significant challenge for delivering on his ambitious economic growth targets.
