UK devolution push could reshape productivity and regional growth

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Highlights

Financial Times argues for radical UK devolution with local authorities controlling major service budgets, incentivized by performance-based rewards and penalties.
International examples like Italy show decentralised public health systems with stricter reporting outperform UK's centralised model in cancer survival and hospital capacity despite lower spending.
Potential growth clusters cited in Sheffield, Cardiff, and Newcastle would benefit from greater local control over housing, transport, and education, though near-term spatial inequality may widen.

Big bang case for public service devolution

As argued by the Financial Times, Burnham has an opportunity to distinguish his approach from earlier decentralisation drives by pursuing a more radical transfer of authority to local areas rather than another limited reform package. The central case is that local authorities should control spending decisions across major services, with incentives that penalise weak performance and reward better outcomes.

That model could create a regional policy laboratory in which different areas test approaches and others copy what works. Jack Newman, a research associate at the University of Manchester, says smaller regional systems allow mistakes to be contained and lessons to spread more quickly, while Gwyn Bevan, emeritus professor at the London School of Economics, argues that any successful devolution plan also needs a transparent central benchmarking framework so regions can compare results and learn from one another.

International comparisons are presented as evidence that decentralised systems can deliver better outcomes. Italy's more decentralised public health structure, combined with clear reporting standards, is cited as outperforming the UK on measures including breast and lung cancer survival rates, while also operating with greater specialist and hospital bed capacity despite lower healthcare spending.

Partial fiscal devolution could add revenue autonomy and sharpen local accountability, but the scope for that remains constrained because many UK regions rely on net transfers. That leaves wider public-service devolution and stronger economic rebalancing as the larger policy challenge for the incoming government.

Regional clusters seen as route to higher living standards

A more ambitious devolution plan is also linked to the goal of building stronger growth centres beyond London, rather than weakening the capital. The article argues that universities, transport links, urban density, cultural amenities and publicly funded research institutions are among the main ingredients that help regional agglomerations form and raise productivity.

Burnham is presented as recognising part of that agenda through support for universities as anchor institutions in local economies. Lowering key business input costs, especially electricity, is also identified as a practical way to support industrial concentration and investment.

Potential UK clusters already exist in sectors such as advanced materials and manufacturing in Sheffield, compound semiconductors in Cardiff, and offshore energy and batteries in Newcastle. Giving local areas more control over housing, transport and education could help those industries expand, while central government could still play a role through research and development funding and long-term financial backing from bodies such as UK Research and Innovation.

The article also notes that cluster-led growth is unlikely to produce literal growth in every postcode. In the near term, it could widen spatial inequality as cities pull ahead of smaller towns, but supporters argue that stronger overall growth would create better jobs in second-tier cities and eventually improve the state's ability to support places left behind.

Our earlier article on UK lenders backing Andy Burnham’s devolution agenda explained how major banks were positioning to finance more regional infrastructure as decision-making shifts closer to local authorities. We noted that lenders see faster local approvals as a way to unlock private capital beyond London, while also warning that councils may need stronger planning capacity and that higher borrowing costs could complicate delivery.

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