Economic renewal through devolution? Tax reform and the uneven geographies of the economic dividend

Abstract

The economic governance of the UK is currently in flux with various devolution agreements being negotiated across the country. This article examines the changing political economy of the UK enforced by Wave 1 City Deals, to analyse the claims made by devolution proponents that there is an 'economic dividend' to devolution. The argument is made that scant evidence exists to suggest that these reforms respond to the deep-seated pathologies of the UK economy. Instead, the Northern powerhouse discourse serves to disguise the implementation of a tax and investment settlement which regressively concentrates taxation revenue in the more affluent parts of the country. These reforms though are a political expression of a certain understanding of wealth creation which privileges low tax taxation, inter-territorial competition to promote it and a belief in the major UK cities to drive the economic recovery. It is a strategy likely to produce very uneven geographies of growth which will exacerbate uneven development; ironically so given the 'Northern Powerhouse' rhetoric through which it was reasoned.

The metagovernance of English devolution

“…Central Government has allowed local areas to retain 100% of 'their' business rate revenue and the authority to lower rates (although not raise them). This ensures both the concentration of available governmental capital in those areas already experiencing growth and the facilitation and incentivisation of competition between neighbouring areas (Bailey 2017). Such reforms thus make their fiscal capacity predicated upon their success in securing growth.…”

“…The theory of 'agglomeration' or urban clustering as a method of generating growth has ostensibly informed this period of capitalist restructuring in the UK as well as the spatial scale of the city-region itself (Beel, Jones, and Rees-Jones 2016). However, the uniformity of the theory's applicability has been the source of enormous contention (Lee 2016;Martin et al 2015;Fothergill and Houston 2016;Hildreth and Bailey 2013), with many believing that the theory is neither based upon an accurate diagnosis of the UK economy's ills nor a solution to them (Martin 2015;Bailey 2017). Furthermore, the concentration of governmental capital in the major cities (or 'engines of growth') through business rate reformagain, justified through the Northern powerhouse agendahas actually blunted the mechanisms of regional redistribution and threatened to exacerbate uneven development (Bailey 2017).…”

The State of the UK funeral industry

“…The spatial distribution of local cuts show that austerity’s impacts have been concentrated in areas with higher demand for local government services and welfare provision (Lowndes and Pratchett, 2012; Lowndes and Gardner, 2016; Gray and Barford, 2018), while taxation revenue has been aggressively concentrated in more affluent parts of the UK (Bailey, 2016). This unevenness has been exacerbated by the Conservative government’s ‘smarter State’ policies, whereby implementation of austerity measures has continued in combination with an ambitious programme of fiscal devolution, producing what Lowndes and Gardner (2016) term ‘super-austerity’.…”