A Note To Andy Burnham
Dear Andy,
You will take office in a unique position: the first Prime Minister who both promises devolution, and is likely to mean it.
This note is intended to help with ideas for maximising the opportunities - both for the country, and you personally.
British Exceptionalism
Let’s start by noting that, when it comes to devolution, we have a language problem.
The very word “devolution” suggests Parliament ‘devolving’ powers that are rightfully theirs. No other democracy in the world uses the language of devolution, for in most places, power starts with the people, so it is assumed it will be exercised close to them.
This is intended as a practical note, but it’s worth understanding why we are where we are - and it all comes down to what didn’t happen in Kennington in 1848.
In that year, a vast wave of revolutions swept across Europe, starting in Sicily and eventually encompassing virtually every country, big and small. The core demand was a written constitution. In 1848, new constitutions were adopted in Switzerland, France, the Netherlands, Austria, Prussia and much of Italy.
Britain avoided revolution thanks largely to its more sophisticated police force, set up in the 1830s. When thousands of Chartists faced off against 70,000 constables, the constables came out on top. Though it might be because rain was forecast that day, as fewer Chartists turned out than had been expected.
Thus, even the authoritarian monarchies of Prussia and Austria at least had the experience of writing down ideas around popular sovereignty. In Britain, power stayed firmly with the Queen in Parliament.
For centuries, this didn’t matter. British Governments were very willing to devolve power, so Britain had some of the most dynamic and innovative local councils on earth. But that all changed with Margaret Thatcher, who saw local councils as a threat and rapidly gutted them.
Today, we’re in the position where central Government raises 96% of all taxes. No other country in the OECD raises more than 90% of taxes centrally, and the only others that raise more than 70% centrally are Ireland, New Zealand, Norway, and Estonia. The largest of these countries has a population only about half the size of London.
There’s almost something comical about the way the Treasury has vastly more fiscal control than any other finance ministry on earth but - like an obsessive who cannot let go of a hobby that has spiralled out control - seeks ever more power, at the expense of anything actually getting done.
If you are to succeed, you’re going to have to face down the Treasury.
CHANGE THE TERMS OF THE DEBATE
One off the most exciting things about the desire for change that you represent is that you create a moment to fundamentally change the terms of what is possible.
People - like me - who believe that regions need to be able to spend their own money often talk about “fiscal devolution”; which again uses this language of Parliament graciously granting the power.
But let’s, instead, build taxes that are raised locally and spent locally into the system from the start.
For this to be possible, we need a moment of change. Luckily, the opportunity to do this exists in the wider policy agenda that I think you’ve already identified.
You’re arriving in Westminster boxed in by Keir Starmer and Rachel Reeves’ mad commitments not to raise any meaningful taxes or borrow more or cut spending. (Not totally sure what they thought was going to happen as a result, but there we go).
You inherit their manifesto but you also bring with you the idea of replacing Council Tax (which is bonkers, based on 1991 valuations), stamp duty (one of the world’s stupidest taxes), inheritance tax (one of Britain’s most unpopular taxes) and Business Rates with a completely new property tax system.
This new system can do two things: raise what you need centrally but also be designed so that part is set locally and raised locally; providing regions and local Government with their own source of income. The starting point can be calibrated so that each gets what they get now but with the opportunity to flex from there.
Local borrowing
With local taxes, regions need to be given the power to borrow money. Now this is where you have the hardest part of your job but - with your track record of speeches and interviews - only you can do it: you need to enable local Mayors to be able to borrow money.
Why? Well, how does virtually every French town and city with a population of greater than 150,000 have a tram network? They borrow against future land, ticketing and tax revenues. But - crucially - these borrowings have got to be seen as completely separate to UK gilts, otherwise they get wrapped up in net public sector debt and have to be controlled by the Treasury.
We’re an immensely long way from that being possible right now.
Even if Leeds borrowed money to build a tram, everyone knows that the UK Government is all over every the detail and will step in the second they perceive anything going wrong. They know the UK Government won’t allow it to fail and will bail it out if it goes wrong.
As a result, it’s treated as UK Government borrowing. As the fiscal rules don’t allow more capital spending than has already been allocated, the result is that if Leeds gets a tram, someone else loses out. And because of this, the Treasury is so paranoid that.- actually - no-one gets anything.
As a former Mayor, you have to be super clear: “I am giving Mayors the powers the need. But from now on, their money is theirs”
You’ve got to convince the bond markets that a dedicated green bond to build a tram line in Hull to support economic regeneration, funded by increased land value taxes in Hull, is not actually UK Government debt. Only you - with your experience as both a Treasury Minister and Metro Mayor - could do it.
Oh, and while you’re playing with tax, do have a look at the French idea of a local business tax hypothecated for transport investment. It’s a great way of giving investors and the supply chain confidence in a long term pipeline, which keeps costs low.
Central Government Funding
I’ve heard you say in interviews that central Government wastes vastly more than local Government. How right you are! At the heart of this is the Treasury. I know you’re already reading this letter, but do take two mins to read my most popular blog post from last year. It explains that the gargantuan, cataclysmic waste of HS2 is caused directly by the Treasury’s approach to financial management.
We’re in a real bind.
Investors don’t trust Britain because the Treasury - in its desperate, obsessive desire to cut down on waste - constantly chops and changes, with the result that everything costs vastly more than it needs to.
Transport needs dedicated long-term funding to give both managers and the supply chain the confidence to invest and bring down our ludicrous costs.
Luckily, you don’t have to reinvent the wheel (if you’ll pardon the pun): there’s a template ready on the shelf.
The Swiss have created dedicated Rail and Road Infrastructure Funds, with a proportion of a basket of taxes hypothecated directly into a fund which is used for transport investment. Because the fund is topped up by a mixed basket of taxes, it’s stable - which gives the supply chain confidence that the projects will be there - and gives managers the ability to make long-term decisions.
The crucial thing here is that transport does not need more money. It just needs a mechanism to commit us to spending money that we always bloody spend anyway. Our costs are around 30% higher than European benchmarks across all categories of transport investment, which means we spend tens of billions each year on - efffectively - nothing. Bring our costs down with certainty and the can be invested in growth.
Power to the People!
Everything in this note is about taking power out of Whitehall and moving decisions to the people with the expertise to make them: local councils, Mayors, railway managers.
The system will resist.
I don’t mean to blow smoke up your arse, but only you (a former Whitehall special adviser, and a former Cabinet Minister, and a former Metro Mayor) could do it. No-one else has enough knowledge of both sides.
Best of all, this agenda provides you with the political protection you need.
Your popularity in Manchester has many roots but part of it undoubtedly stems from your ability to blame Westminster for things that don’t go well. Moving to Westminster exposes you to becoming the one who’s blamed. In our half-arsed devolution settlement, it’s easy to find things that genuinely are Westminster’s fault.
By actually devolving power, you can simply flip the line that’s worked so well for you. When things go wrong in the future, you can just say “It’s not my fault you voted for the wrong Mayor”.
Social media is full of people saying that you’re going to fail because you will face exactly the same set of challenges as Keir.
Well, not necessarily. If you use property tax reform to escape the fiscal cul de sac that Keir and Rachel drove into and you use devolution to spread the blame, you will be in a very different position to a Prime Minister who seemed to be able to do nothing but was blamed for everything.
Good luck!
All the best,
Thomas
