Devolution: The Great British Break Up

06 October 2016 -

Greater powers, reduced budgets and complex politics – what devolution will mean for UK managers

Andrew Bounds

“What Manchester does today, the rest of the world does tomorrow,” stated Benjamin Disraeli, a sentiment as fitting now as in Victorian times. Then, the city innovated in industry; now, it is leading a revolution in government.

In April 2016, Manchester became the first place in England to combine control of health spending with that on social care since the creation of the NHS in 1948. Next May, Greater Manchester will elect a ‘metro mayor’, who will have a big say over public services.

Eight other UK conurbations have signed similar devolution deals. Manchester’s devolution is significant for England, which, because of the strong grip of London, is one of the most centralised countries in the world.

Only 5% of public spending is raised locally – through council tax – and only a fraction more is controlled locally. So, with public services under strain nationwide, the Manchester experiment gives managers a glimpse of a devolved future.

“Everyone is watching Manchester,” says Marie Mohan, UK chief executive of Common Purpose, an organisation that brings public-sector and charity managers together with business people so they can learn from each other.

“Some are hoping it will succeed. Some are hoping it will fail,” she adds.

Mohan says there is an element of jealousy that Manchester has achieved such a strong settlement – and she also admits “there’s a perception that Manchester is a bit arrogant”.

Even some in the Greater Manchester conurbation fear it may have been over-ambitious, and that the main reason Whitehall is loosening its grip is a simple one. As the note left by Labour Treasury minister Liam Byrne in 2010 read: “Dear Chief Secretary, I’m afraid there is no money”.

Unwilling to hand out big central grants, the Conservative government has forced councils to rely more on their own resources.

By 2020, local authorities will retain any increase in business rates. Currently, they are pooled by Whitehall and redistributed.

Greater Manchester’s 10 councils have £1.7bn less to spend in 2016/17 than they did in 2010/11, a cut of almost half to its non-ring-fenced budget.

This has inevitably created opposition. “Some people see devolution as a cover for cuts,” says Mohan.

Certainly, the public sector has to make do with less. But that creates opportunities for new ways of thinking – and collaborating, she says.

Lord Smith, leader of Wigan council, one of the 10 local authorities that make up Greater Manchester, says that devolution is a recognition that the public sector has to adapt.

“We have used devolution as a means to reform public services,” he says, talking in Manchester’s glorious town hall, designed by Alfred Waterhouse at the height of the city’s wealth. As chair of the Greater Manchester Health and Social Care Strategic Partnership Board, Lord Smith is in charge of integrating health and social care, which have combined spending power of £6bn across 37 organisations.

The new organisation aims to stop duplication and end situations where elderly patients are stuck in expensive hospital beds because local authorities do not want to spend money. The board also wants to combine public health budgets to stop people getting ill in the first place.

More than two-thirds of early deaths in Greater Manchester are caused by behaviours that could be changed, such as smoking or failing to exercise. Nearly 25% of the city’s population have a mental-health or wellbeing issue that can affect everything from health to employment, parenting and housing.

“At the end of five years, if we did nothing, we would be £2bn a year short,” says Lord Smith. “We have to shift resources around. We also have some of the worst health outcomes in the country. We think health is influencing our economy and stopping it from reaching its potential.”

>Wanted: a new outlook

The hardest thing will be breaking down silos. Manchester has received £450m from the government to help implement the plans.

Lord Smith says: “Some authorities are asking, ‘What’s my allocation?’; they want a tenth of the money. But this money is for transformation. We want to support projects that will bring down costs wherever they are.”

Frontline staff are being encouraged to come up with innovative solutions, and to bid for the funding to implement them. The city has already set up a seven-day GP service to relieve pressure on accident-and-emergency departments, and improved its dementia care.

Growing the economy is a key theme of the devolution bid.

In 2009, an economic commission identified the conurbation’s strengths and weaknesses. A quarter of children in the city live in poverty, and its economy generates £20,000 per head, against an average of £25,000 nationally.

The commission argued that, to stop Manchester underperforming, it would need more control over its fate. It was an early example of public-private collaboration for the good of the city.

Mike Blackburn, north-west regional director at BT, chaired the commission. Blackburn is not just responsible for BT’s operation, but also, as chairman of the region’s local enterprise partnership (LEP), for how tens of millions of pounds of public money are spent.

LEPs are private- and public-sector partnerships charged with delivering economic growth. The challenges have made him a better manager, he says: “I do a lot more listening than speaking. Some people have better ideas than me.”

The key for Blackburn is tackling long-term unemployment in the conurbation. That would create a virtuous circle of more money collected in tax, and less spent on public services.

It requires “co-production” of services between Whitehall and Manchester, he says.

Challenge accepted

Almost uniquely, Greater Manchester and its 2.7 million people have rallied round the Manchester brand.

A recent report for the city council by consultancy the Hay Group said they backed Manchester city centre, since it had the “infrastructure and transport network to attract inward investment to the whole city region”.

When the Greater Manchester Council was abolished in 1986, the boroughs worked together as the Association of Greater Manchester Authorities, which delivered waste collection, economic development and a tram network.

In 2011, they formed a combined authority, with some powers pooled on a legally binding basis.

Authorities such as Trafford and Salford have been happy to accept that most investment will go to central Manchester, with a ripple effect lifting their areas.

Conservatives have buried differences with Labour colleagues who run the majority of Greater Manchester councils.

Mike Blackburn says that Manchester has a number of distinct advantages: “Manchester welcomes a challenge; the only way to get better is to challenge yourself. There is a sense of place, and of being part of a big region. So, when the Lowry arts centre in Salford was built, there was nothing around it. But people saw its potential and how it would pull things in from across the region.

“There is also an authenticity about the leadership in Manchester. There are dozens of leaders – company bosses – and, if you ask them a question, they all give the same answer.”

Jonathan Magee, director of local government consulting for Hay Group, and a co-author of the recent report on Manchester devolution, has seen the importance of that sense of place, whether you work for a business or a local authority: “There is a lot of networking. There is a group of leaders who may not have even met together in one place, but they are all working for the same ends.”

For local managers, all of this brings tremendous opportunities.

“Yes, they need to know their own disciplines, such as marketing or HR, but they also need to know what’s happening outside,” says Magee.

Mohan also identifies collaboration as key: “People from big organisations only know their department. One reason they come to us is to meet people from outside. We need people who can form cross-boundary relationships.”

Public-sector managers will need incentives to participate, she says: “The problem is that they are going to invest up front, but another service could see the benefit down the line.”

New ways of working

Alliance Manchester Business School has revamped its executive education programme to reflect the changes triggered by devolution.

Dil Sidhu, chief external officer, says it surveyed 180 recent students: “They wanted leadership on strategy in their area of expertise, but also wanted to find out what everyone else was doing in other industries.”

Public sector managers had a key role, he adds: “Before, it was a case of ‘they spend their budget and we spend ours’. Now, we need to get a bigger bang for the pound. Public-sector people do not necessarily like change, or doing more for less. They have to learn new skills and ways of working. They have had 20 years of doing things a certain way and now must do it differently.

“The key is how this is communicated by senior leadership. You have to start with ‘why?’ The answer: we get to hold on to the purse strings, effecting decisions that affect local people locally.”

Recent experience shows just how tricky devolution can be.

In the north-east, Gateshead has refused to ratify a deal. In East Anglia, Cambridgeshire has pulled out. Some regions object to the condition that they create an elected ‘metro mayor’ who spans council boundaries.

Others fear domination by bigger neighbours.

In Greater Manchester, healthcare is likely to be the biggest challenge. While the conurbation will remain as part of the NHS, with nationally agreed targets, leaders here will have increased freedoms and flexibilities to tailor the budget and priorities to local needs.

“NHS managers have traditionally looked up – to Whitehall,” says Mike Emmerich of Metro Dynamics, a consultancy that advises local authorities on devolution. “But can they look out – to the city they work in?”

Another question is whether a new set of leaders will emerge.

In Manchester, the succession question is most pressing. Sir Howard Bernstein, chief executive of Manchester City Council, and the man entrusted by George Osborne with making devolution work, is in his early sixties. Sir Richard Leese, leader of Manchester City Council, is 65 and has done his job for 20 years. He is unlikely to run for mayor.

The mayor will chair a board of the 10 city leaders: eight Labour, one Liberal Democrat and one Conservative. He or she needs to be a strong figure on the national stage – but also needs the support of a majority of the 10 leaders.

Andrew McFarlane, senior partner at Colliers property agents in Manchester, says: “The biggest risk is that there is a vacuum and there isn’t the same quality and depth of leadership.”

He compares it with Sir Alex Ferguson leaving Manchester United. Once perennial champions, the club has struggled since he left three years ago.

But Magee says new talent should be attracted in both the public and private sectors: “Manchester is a really exciting place to be, because you can influence a lot outside of your own organisation.”

Andrew Bounds is northern correspondent and enterprise editor at the Financial Times