Dermot Finch

City Mayors: has their time come?

Until a few days ago, Birmingham and nine other cities were quietly drifting towards a little-noticed vote on whether they should have a directly-elected mayor. Initial expectations were that most cities would say "no".

But with less than five weeks to go until the vote on 3 May, it now looks like quite a lot of those ten cities could say "yes" - which would trigger a series of mayoral elections on 15 November, and possibly a bunch of Parliamentary by-elections after that.

Last month, a Populus poll for BBC West Midlands showed that 59% of Birmingham voters were unaware of the imminent referendum. But, weirdly, just over half thought Birmingham should have an elected mayor. The picture was similar across Yorkshire, where Leeds, Sheffield, Bradford and Wakefield are all voting: 62% of Yorkshire voters did not know about the referendum, but 53% said they would vote "yes". So, without really knowing anything about it, most people intuitively support the idea of an elected mayor.

This is something of a shock. For years, the main parties have been telling us that voters don't want an elected mayor. Despite the success of the London mayoralty, cities like Manchester and Leeds have not been that interested. High-profile fans like Michael Heseltine and Andrew Adonis have been banging the pro-mayoral drum for ages, but apparently to little effect.

Now, it looks like quite a few cities are up for a mayor:

• Birmingham was always the most likely to vote "yes" - that's now even more likely, following Liam Byrne's announcement last week that he will stand (on a joint ticket with former leader Albert Bore). Former Labour MP Sion Simon has been the frontrunner until now. Gisela Stuart is also in the running. Whoever wins the Labour nomination will probably become mayor.
• Liverpool will have its own mayor in May, after a Council "yes" vote earlier this year. Labour leader Joe Anderson is in pole position, unless Phil Redmond throws his hat in at the last minute. Salford is also due to pick its mayor in May. And Leicester has already got one.
• Bradford was an unlikely contender until now - but George Galloway's surprise win could change that. MP Galloway said yesterday he was "fully behind" the plan for more elected mayors, and his Respect party would put up "high-profile" candidates in Bradford and other cities.

Technically, the likelihood of a "yes" vote is pretty strong, because the wording of the referendum question is I think pitched in favour:

"How would you like [your city] to be run? By a leader who is an elected councillor chosen by a vote of the other elected councillors. This is how the council is run now. OR By a mayor who is elected by voters. This would be change from how the council is run now."

Politically, the chances of a "yes" vote are quite high too. Either because well-known MPs are now putting themselves forward, lending credibility to the mayoral model. Or because voters are so fed up of the mainstream Westminster parties that they want to elect their own maverick leader.

Every MP that is elected mayor (or police commissioner) will trigger a by-election this autumn/winter. Labour stands the best chance of winning these mayoral elections, but after the Bradford West result, Ed MIliband and co will be nervous about a flurry of by-elections.

Local politics just got interesting.

City Deals: Clegg promises real powers for cities

Nick Clegg is in Leeds today, to announce plans for a series of "City Deals" - extra new powers to boost growth in and around the Core Cities outside London - that's Birmingham, Manchester, Liverpool, Newcastle, Nottingham, Sheffield, Leeds and Bristol.

So far, the Coalition has set up Local Enterprise Partnerships (38 of them) and wants to see directly elected mayors in the 12 biggest cities outside London. But no major new powers have been on offer for LEPs or mayors, so neither has been taken very seriously.

Clegg's announcement today could change that. He will set out specific details about how the Government will devolve new powers to the eight Core City LEPs - but only if the LEPs promise a "step-change" in governance, and deliver "stronger and more accountable leadership". The Government would like to see directly elected mayors in Birmingham and other cities, but mayors are not essential to these City Deals. Instead, the Government will encourage each of the eight LEPs to come up with their own "tailored models" of stronger leadership.

The menu of possible new powers for LEPs include:

• Single capital pot, for local infrastructure (instead of lots of different funding streams)
• Fast-track access to tax increment financing, to deliver new infrastructure
• Business rate discounts for local businesses, and an incentive to pool business rates across a LEP
• Devolving local transport funding, and increasing LEPs' control over rail and bus services
• Devolving housing (Homes & Communities Agency) funding to LEPs
• City Skills Fund to tailor FE provision to local skills needs

Greater Manchester is the LEP that is most ready for these new powers - it already has a statutory Combined Authority in place, covering all ten authorities. Birmingham & Solihull LEP is not as firmed up, but Birmingham now has a real incentive to vote "yes" to a mayor in May's referendum. Liverpool might also go for an elected mayor.

The full details of these new City Deals will be published in a report from the Cities Policy Unit (based inside the Cabinet Office) called Unlocking Growth in Cities.

Mayor opportunity

Boris has been the star here in Manchester, launching his mayoral re-election bid for 2012. Labour by contrast was more muted in its support for Ken last week. Meanwhile, the prospect of mayors in other cities outside London is drawing closer - this could be a handy mid-term opportunity for Labour.

Boris Johnson should be very grateful to Tony Blair. Had Labour not introduced the London mayoralty in 2000, he would still be MP for Henley and a junior minister. Instead, he is the biggest star of the Tory party - apart from Cameron, maybe.

Boris has attracted the most enthusiastic crowds here in Manchester, and must surely walk it to re-election next May. Speculation is already mounting about his plans after 2016. He said yesterday that he would not stand for Parliament while he is mayor, but the opportunity of another stint as MP is still wide open post-2016. And a go for leadership of the party - which must be a worry for Osborne's ambitions.

Labour, meanwhile, appears to be sleepwalking to defeat in London. There is little energy behind Ken Livingstone, and an open assumption that he will lose. I've even heard talk recently of plans to deselect him, and install another candidate - maybe David Lammy.

Multiple mayoral opportunities lie outside London - in cities like Birmingham, Liverpool and Newcastle. Leicester has already got its mayor. Eleven other cities will vote next May on whether to have a mayor, and elections could take place as soon as autumn 2012.

In Birmingham, Labour's Gisela Stuart is about to put her name forward - alongside Sion Simon and former city leader Albert Bore. Brum is the most likely to vote yes, but that's not yet certain. There's a big risk that all 11 cities vote no.

David Cameron is a big fan of mayors, but his party has yet to field a single candidate in Birmingham (or any other city). Ed Miliband isn't a fan - his constituency Doncaster had a bad experience with its mayor.

For Labour, mid-term mayoral elections could be an opportunity to embarrass Cameron - not least in Birmingham. Miliband should be actively campaigning for a yes vote in May - but I doubt whether he will seize this mayor opportunity.

Local Government Resource Review

Eric Pickles has just made this statement, setting out the terms of reference of the Local Government Resource Review. I wrote about this in January. As expected, business rate reform is at the heart of the Review - with plans to allow councils to retain business rate revenues from April 2013 onwards...

"I would like to make a statement on the work of the Local Government Resource Review.

The current dependency of councils on central grant allocations makes planning difficult, weakens accountability, and stifles local innovation. In the future, I am keen to move to a radically different system of funding and support for councils that is built on strong incentives, is driven by local decision making and breaks this dependency.

I have therefore set up a review of local government resources that will consider how we can recast the distribution of business rates and Formula Grant to deliver a more effective income stream for councils. The focus will be to free up as many local authorities as possible from dependency on central government funding, as well as develop better incentives for local authorities to promote economic growth in their areas and to benefit financially from that growth. The first phase of the Review will
deliver proposals for reform by July 2011.

The Review will consider the way in which local authorities are funded, with a view to giving local authorities greater financial autonomy and strengthening the incentives to support growth in the private sector and regeneration of local economies. It will look at ways to reduce the reliance of local government on central government funding, increase local accountability and ensure that the benefits of economic growth are reflected in the resources authorities have.

The review will include consideration of changes to the business rates system, and focus in particular on:

a) the optimum model for incentivising local authorities to promote growth by retaining business rates, whilst ensuring that all authorities have adequate resources to meet the needs of their communities and to deliver the commitments set out in the Spending Review;

b) the extent to which these proposals can set local authorities free from dependency on central funding;

c) considering how to fund authorities where locally raised funding would be insufficient to meet budget requirements and control council tax levels, as well as councils who do not collect business rates, such as upper tier authorities, recognising that some parts of the country are currently more dependent on government funding;

d) reviewing the scope for greater transparency and localisation of the equalisation process;

e) the position of councils whose business rate yield would be significantly higher than their current spending;

f) how to ensure appropriate protections are in place for business, within a framework of devolving power to the lowest level possible;

g) how to deliver Tax Increment Financing proposals against a context of greater retention of business rate revenues;

h) how various aspects of the business rate system, including business rate revaluation and reliefs, should be treated;

i) examining the scope for further financial freedoms for local authorities, while standing up for and protecting the interests of local taxpayers, and

j) the wider implications of rates retention for related policies, including the work of the Commission on the Funding of Care and Support and the Government’s other incentive schemes (the New Homes Bonus and the commitment to allow communities to keep the business rates for renewable energy projects).

The Review will take account of the responses made to the questions in "Local growth: realising every place’s potential". It will also conduct extensive engagement with interested parties, including businesses of all sizes, to ensure that all views and perspectives are taken into account. In developing the proposals, the Government is clear that businesses should not be subject to locally imposed increases in the burden of taxation that they do not support.

Following the announcement at the Spending Review and through introduction of the Welfare Reform Bill that Government will localise Council Tax Benefit, the Review will also consider the design of the new scheme (to be launched in 2013-14) and what flexibilities local authorities should have to help keep overall council tax levels down.

The first phase of Review will conclude by July 2011, followed by the necessary steps to implement the concluded reforms. The second phase of the Local Government Resource Review will commence in April
2011 and will focus on Community Budgets. It will be taken forward in parallel with the continued roll out of these Budgets. Detailed Terms of Reference will be published shortly."

Regional Growth Fund + business rates reform = rebalancing?

One of the Coalition's key policy goals is to "rebalance" the UK economy - to move away from excessive dependence on the public sector and financial services, and encourage more diverse private sector growth across the whole of the UK.

In the Local Growth White Paper last October, Nick Clegg said: "Our ambition is to foster prosperity in all parts of the country...Opportunity must not be confined to particular postcodes...Instead, we must rebalance our economy, ensuring that growth is spread and prosperity shared."

That's easier said than done. Rebalancing the UK is a very ambitious goal, especially with spending cuts and tax rises about to bite hard. Today's Cities Outlook report from the Centre for Cities highlights just how difficult rebalancing will be. While buoyant cities like Bristol and Leeds are well-placed to drive the recovery, others like Liverpool and Sunderland - heavily dependent on public sector jobs - are going to struggle.

So what's the Coalition doing to rebalance this uneven growth picture? Two policies are worth a mention.

Ministers are very keen to talk up the Regional Growth Fund - £1.4bn spread over three years, starting this April. The Fund is aimed at areas with growth potential that have been hit hard by public sector job losses. The first round of bids have now been submitted, with a second round due soon.

Lib Dem Cabinet ministers - Clegg, Cable, Alexander - are taking a very close interest in the Regional Growth Fund. They want to use the Fund to tackle unemployment in vulnerable constituencies like Sheffield. But the Fund is going to be massively oversubscribed, and a £1.4bn pot of money won't be enough to rebalance the whole of the UK economy.

More radically, the Coalition has started considering a major reform to business rates. The Local Government Resource Review - due to be launched imminently - will look at whether business rates should be fully or partially retained by local authorities.

Ministers like Eric Pickles would like to see prosperous areas keep more of their business rate revenues, and become much less reliant on central government. Struggling areas, with a smaller business base, will continue to need injections from the centre.

Taken together, the Coalition's reforms are unlikely to rebalance the economy as smoothly as Ministers would like. On the contrary, growth could become even more uneven, with London pulling further ahead of places like Liverpool and Sunderland. Rebalancing the economy was a brave promise to make - delivering results by 2015 will be critical to the Coalition's success.

More city mayors

I'm a big fan of elected city mayors, and pushed hard for more of them when I was CEO of the Centre for Cities. Here's why I think they're a good idea...

Our biggest cities need directly elected mayors, with real tax-and-spend powers. Big city mayors would re-engage millions of voters, and provide more effective leadership for our most important economies outside London.

Labour created the mayor of London more than a decade ago, but failed to deliver English devolution outside the capital. An excessive reliance on targets left Labour looking top-down and distant. The rejection of directly elected regional government in 2004 allowed critics to say that regional development agencies were unaccountable. Attempts at local devolution were too incremental and too technocratic. The Tories became the party of decentralisation, and the Liberal Democrats took control of a host of English cities, including Sheffield, Newcastle and Hull.

Mayors are a touchy subject for Labour. Most members and councillors prefer the existing system of indirectly elected city leaders. Ed Miliband won't have a very good impression of mayors: in his Doncaster constituency the first one resigned in disgrace; the second has been placed on special measures.

One common objection to mayors is that they are mavericks rather than ‘proper' politicians. Well, maverick personalities and proper politicians are not mutually exclusive. London has been run by two mavericks since 2000, and most people now agree the London mayoralty is a good idea.

Labour's manifesto included a cautious nudge towards more mayors, with plans only for referendums on directly elected mayors in conurbations like Greater Manchester, Leeds and Birmingham. Miliband wrote the manifesto, and couldn't be persuaded to go any further.

But the coalition now plans to create a new wave of directly elected mayors in the 12 largest English cities outside London. These mayors could be in place as soon as 2012.

Labour should go further and propose directly elected ‘metro mayors' with real tax-and-spend powers. That means a mayor for Greater Manchester - not just Manchester city council - with control over business rates and transport, housing and skills funding.

The case for directly elected metro mayors is strong. They would attract much better candidates and higher turnouts than regular local elections - 45 per cent of Londoners voted in the 2008 mayoral election, much more than normal local elections. Armed with a direct personal mandate, they would directly engage millions of voters and provide strong leadership, accountability and strategic vision. And armed with real financial powers, they would be able to drive their city's recovery locally.

City mayors are now a big opportunity for Labour. They could give Labour a number of high-profile wins outside of parliament, and help the party rebuild its local base.

The next wave of mayors should be focused on the biggest metropolitan areas outside London - Greater Manchester, Merseyside, Leeds city-region and Greater Birmingham. They should have real financial powers, including direct control over housing, transport and skills funding, and the ability to raise revenues locally, including the whole of the business rate.

If mayors are good enough for London, why can't Greater Manchester and Greater Birmingham have their own mayor too?

This article appears in the current edition of Progress Magazine

Dear Vince

In June, I went along to Vince Cable's first major speech as Business Secretary at Cass Business School. His number two, Mark Prisk - the Business & Enterprise Minister - was sitting dutifully on the front row, nodding away, as Cable answered questions (including from me) on the switch from regional development agencies to local enterprise partnerships.

Today, it is revealed that Prisk was actually rather uncomfortable with the transition to LEPs. In a letter dated 14 September to Cable, leaked in today's Times, he says that LEPs could be a "failure in large parts of England", and that the introduction of LEPs has caused "strong concerns" among business leaders.

Here are a few clips from the letter:

"There is a strong view amongst the business community that many LEPs lack the ambition to make significant economic impact, undermining our agenda for growth.

Key messages I have been made aware of include: a lack of credible business representation, negotiations dominated by local politics, and a lack of a clear focus on economic growth.

John Cridland [CBI deputy DG] specifically was concerned that the process has not been transparent, business engagement was poor overall and exacerbated by a tight timescale. He and other senior business leaders from Tesco and Ford have expressed their concern that, in their view, the policy is in danger of failing to aid economic growth.

I believe there is considerable friction from the business community on this policy and how it is being implemented. At worst, the danger is that the CBI and others become detached from this policy heralding likely failure in large parts of England."

Ouch. Not exactly nodding agreement.

BIS announced a first wave of 24 LEPs last week, from a pool of 62 applications. The successful first wave includes Greater Manchester, Leeds City Region and Liverpool City Region - plus some rather odd ones like Hertfordshire (which includes Mark Prisk's Hertford & Stortford seat).

I'm a fan of LEPs in principle. But as I wrote in Regeneration & Renewal recently, the switch from RDAs has been rushed and as a result almost two-thirds of the proposals are not up to scratch. Therein lies the bulk of business concerns.

From cuts to growth

The Coalition needs to get the balance right between cuts and growth. So, if last week was all about cuts, this week is all about growth.

After the scary Spending Review (£81bn cuts, £29bn tax rises), the Coalition is desperate to highlight its more positive agenda. This week we've had the National Infrastructure Plan, quite strong growth numbers, and today the Local Growth White Paper...which includes some well-trailed proposals, all designed to trigger growth in a more local way.

Nick Clegg is taking a personal interest in this stuff - he wrote the foreword to today's White Paper, and was in Manchester today announcing the Regional Growth Fund. Like Hezza and Prezza, this DPM is using his position to champion growth beyond London.

The list of announcements includes directly-elected mayors in England's 12 largest cities. A first (and rather messy) wave of 24 new local enterprise partnerships, to replace RDAs. An expanded £1.4bn Regional Growth Fund, to stimulate private sector growth in areas that are too reliant on govt jobs. Tax increment financing, to support new investment in infrastructure. And new incentives to promote house-building.

The Govt has much less cash to throw around. Local council budgets will be cut by a total of 27% over the next four years. The Regional Growth Fund will amount to less than £500m a year for 3 years - way less than the RDAs' budget, which peaked at just over £2bn a year. Local enterprise partnerships will have to fund their own running costs, and will not receive preferential treatment. The New Homes Bonus will have a £200-250m pot each year to incentivise new house-building across hundreds of local councils.

But today's package does include a truly radical move - on business rates.

Up until the mid-80s, local councils used to raise and retain their own business rate revenues. Since that power was removed by the Thatcher government, business rates have been recycled through the Treasury - and a disconnect has opened up between local councils and their business base.

The Coalition is now thinking about giving back to councils the power to keep their local business rates. Not all councils will benefit at once, though - the White Paper (p 28) talks about increasing the number of eligible councils over time. And they won't keep all their business rate revenue - there will still be an element of so-called equalisation. Even so, this could be a truly radical move - much more significant than the switch from RDAs or a pot of regional funding.

Step forward Minister for Decentralistion, Greg Clark - he will consider local business rate retention as part of the upcoming Local Government Resource Review, which kicks off in January.

Pickles confirms new wave of city mayors

Eric Pickles used his conference speech yesterday to confirm his support for a new wave of elected city mayors. Within the lifetime of this Coalition, we could end up with big city mayors in not just London but Birmingham, Manchester, Newcastle, and more.

Here's what Pickles said:

"We'll allow councils to pool budgets across the public sector...We want elected mayors to trailblaze such initiatives. I believe elected mayors in cities will be embraced by the public if they have real powers. It's time for Home Rule for our cities, from Birmingham to Bristol, from Newcastle to Liverpool."

That's a pretty strong endorsement of city mayors, and a clear signal that we're going to get more of them.

The Coalition Agreement includes a commitment to introduce more elected city mayors: "We will create directly elected mayors in the 12 largest English cities" - but Ministers have said very little so far.

Pickles didn't have to mention mayors in his speech yesterday. The fact that he did so, in such clear terms, rather suggests that he means it.

A new wave of big city mayors would mark another major radical change to local government under this Coalition - just as regional development agencies disappear, to be replaced by local enterprise partnerships.

It's not yet clear how or when the Coalition will switch 12 city leaders into mayors. But it does now look like it's going to happen. My guess is some time in 2012, with a confirmatory referendum afterwards rather than before.

Here in Birmingham, Tory council leader Mike Whitby is the incumbent. Other mayoral contenders include former Labour MP Sion Simon - and although he's effectively ruled himself out, ex-CBI chief Digby Jones may consider running. I also think outgoing BBC Trust chair, Sir Michael Lyons, might fancy his chances.

Councillor Whitby had a great chance to put his case to conference here yesterday. During the localism session, Eric Pickles kept calling on Whitby to make a contribution. But Whitby was nowhere to be seen - apparently, he was holed up nearby writing his short speech. Oh well, next time Mike...  

TIF - how it happened

I've found out the story behind Clegg's announcement on tax increment financing (TIF) - and it's quite revealing.

First, there's a strong Sheffield angle. Second, the Treasury's gone a lot further than it originally intended. And third, this looks like a clear policy win for Clegg. Read on...

Clegg's keynote speech on Monday included confirmation that local councils will get new powers to borrow against the future increase in business rates, to fund key infrastructure and capital projects. As Clegg himself said, boring but important.

I understand that Clegg made his mind up on this only a fortnight ago, after a meeting with a few city leaders - who have been pushing on TIF for ages. He was immediately convinced that TIF had to be delivered.

There's a strong Sheffield angle. The Lib Dems only just clung onto Sheffield after the May elections, and city leader Paul Scriven narrowly failed to win his own Parliamentary seat - next door to Clegg's own Sheffield Hallam seat. With Forgemasters still very much a hot issue, Scriven has been looking for a big favour from Clegg - and TIF is it.

The Treasury has been looking at TIF for a couple of years. Last year, Labour housing minister John Healey and then Chief Secretary Yvette Cooper together invited expressions of interest in TIF. And in this year's March Budget, Alistair Darling set aside £120m to kick start a series of TIF pilots called Accelerated Development Zones - councils would have dipped into this fund, to start paying off the early-years debt associated with TIF schemes. But then the election intervened.

This week's announcement is much more radical. The Treasury is now promising to legislate to allow councils to borrow against future business rate revenues. It looks like this borrowing will be firmly on-balance sheet, and will therefore score as public sector borrowing. If so, that's a big concession from Treasury - who until now have resisted any call from TIF on the PSBR. Borrowing on-balance sheet will allow councils to access much more reasonable interest rates.

This rather technical mini-drama highlights Clegg's influence behind the scenes. Within a week or so, he has managed to extract a low-profile but significant concession from the Treasury. TIF won't change the Coalition's fortunes overnight, and most voters won't notice it. But it is going to happen. A small step, potentially big result.

Compare that with Clegg in opposition. City leaders may have lobbied him on TIF, and he may have been sympathetic - but he would have been able to do nothing about it.