Financial News

  • 1 July 2014, 13:14

Labour Plans Whitehall Power Shift To Regions

More power and cash would be handed from Whitehall to local councils as part of a drive to create "regional economic powerhouses", under Labour plans.

The proposals, which the party said could see more than 30bn devolved to the grassroots, are aimed at rebalancing the economy and close the gap in wealth between different parts of the country.

In a speech, Ed Miliband has called for the creation of more "combined authorities", so-called city regions - like that which already exists in Greater Manchester and Leeds - to tackle long-standing problems with skills, infrastructure and economic development.

The Labour leader said if his party is elected, the combined authorities would receive any extra income from business rates generated by growth to reinvest locally.

Although this would be "revenue neutral", offset by reductions in other grants, Labour says it would ensure any additional money would stay in the region.

The plan is one of a series of recommendations in a review into ways generating growth carried out for Mr Miliband by the former transport secretary, Lord Adonis.

The move echoes radical plans unveiled by former Tory cabinet minister Lord Heseltine, which called for a major shift in power and money to the regions.

Under the Labour plans, the 30bn which could be handed to local authorities, including combined authorities, and local enterprise partnerships over the course of a parliament, would include funding for housing, transport, business support, employment and skills.

Mr Miliband said: "The next Labour government will ensure city and county regions, like this powerhouse economy in Leeds, get control of business rates revenue so that any extra money raised here...can be invested here.

"I know the next Labour government cannot solve every problem by pulling levers in Whitehall.

"We can only do it by working with, harnessing the energy, the ideas and the dynamism of great businesses, cities, county regions."

Lord Adonis said his aim was to promote "a smarter, not a more expensive, state".

He said: "Growth is unbalanced. The link between growth and living standards has been broken, exports are weak, young people widely lack the opportunities they deserve and inequality is vast, both between people and between regions.

"England's business leaders and local governments need empowering to invest in infrastructure, skills and economic development."

Responding to the proposals, Adam Marshall, policy director at the British Chambers of Commerce, welcomed the call for more power and funding to be devolved from Whitehall but said accountability to local business needed to be strengthened.

He said: "Decisions on local growth are best taken when businesses and councils decide what arrangements work best for their areas, and deliver these accordingly.

"In a world where more funding and tax revenues are devolved, however, businesses need the strongest possible say over both local economic plans and how money is spent."

But Conservative Business Minister Matthew Hancock said: "Labour are planning tax rises on businesses, tax rises on jobs, and yet more government borrowing - risking wrecking our economy all over again."

Advertisement