National Audit Office raises questions as Whitehall navigates "uncharted territory" of English devolution

New report calls on government to give better detail on city region power structures and spending

By Jim Dunton

20 Apr 2016

Public spending watchdog the National Audit Office has urged central government to clarify accountability arrangements for the 10 English areas which are set to gain new powers and funding under the devolution agenda.

The first city devolution deal was struck by the government and the new Greater Manchester Combined Authority in 2014, with the region set to gain a range of new education, transport, welfare and housing powers in exchange for bringing in a directly elected mayor.

Further deals have since been struck with nine more areas, including the Sheffield City Region, Tees Valley and the North Midlands.

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In a new report, the NAO questions the government's ability to demonstrate that the deals will achieve the benefits intended, and also warns that the departments which are key to making the deals work – Communities and Local Government; Business, Innovation and Skills; and HM Treasury – are among those facing the biggest budget cuts between now and 2021. 

The devolution agenda is overseen by the joint DCLG and BIS Cities and Local Growth Unit, working closely with the Treasury. The unit now has 155 staff, but the November Spending Review confirmed that the Treasury faces administrative spending reductions of 28% over the current spending review period; while DCLG will have to make 30% reductions; and BIS must find 17%.

The NAO said: “The range and variation in policy areas included in deals must mean that the future service roles of government departments may be variable in regards to differently devolved parts of the country, with implications for the capacity and capability they will require in the longer term,” 

"Charting undiscovered territory"

Elsewhere, the spending watchdog warned of a growing departmental reliance on local accountability arrangements, such as external auditors and legal duties placed on council officers. The report said it was not clear whether DCLG’s accountability system statement – designed to provide parliament with assurances on how decentralised funding is spent – was effective in providing value for money.

And the NAO said that while an analysis of the city region deals to date showed that there were opportunities to stimulate economic growth and reform public services by allowing greater local flexibility over service delivery, spending and policy oversight remained a concern.

In particular, it said there were unresolved questions over balancing the new local powers with parliamentary accountability as central government hands more power to local authorities.

Comptroller general Amyas Morse, who heads the NAO, said that despite several iterations of deals, the government’s approach to English devolution still had an air of “charting undiscovered territory”. 

“It is in explorer mode, drawing the map as it goes along. Some of the opportunities and obstacles are becoming clearer, but we still do not have a clear view of the landscape or, crucially, an idea of the destination,” he said.

“Devolution deals provide important opportunities to reform public services. As with any experiment, some elements will work better than others. 

“It is in the interests of both local areas and the government to know which programmes have the biggest impact for the money invested. Localism is not a reason for failure to learn from experiences or to spread best practice.”

The report calls on the government to “clarify the core purposes of devolution deals as well as who will be responsible and accountable for devolved services and functions”.

"Break-neck speed"

Public Accounts Committee chair Meg Hillier said English devolution was “happening at break-neck speed” and more in-depth analysis – as well as more detail from ministers and departments – was required.

“Devolution does not absolve government of accountability,” she said.

“As more money is devolved it is vital that there is clear tracking of where and how effectively it is spent. It is not enough to say the details are still taking shape. the big questions need to be answered, including who taxpayers can hold to account. 

“This is especially important when complex public services, like health, are devolved but where national service standards are to be maintained.”

A DCLG spokesperson said the NAO's report “recognises the huge progress” made with the devolution agenda.

“We agree there is much more to do and we will continue to talk to areas so everywhere that wants to take part in the process can do so,” he said.

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