Government signs "city deals" to devolve growth and job creation powers

Out-Law News | 20 Sep 2012 | 12:58 pm | 2 min. read

The Government has signed agreements with the leaders of eight of England's largest cities in a move it claims will give the cities greater power to stimulate economic growth and create jobs in those communities.

Although each agreement "reflects the different needs of individual places", among the powers that will be granted under the new 'City Deals' include greater responsibility for local transport budgets and the ability to use tax incremental financing (TIF) to fund infrastructure improvements using the anticipated increase in locally-collected business rates.

The eight "largest and most economically important" English cities outside London – Birmingham, Bristol, Leeds, Liverpool, Newcastle, Nottingham, Sheffield and Manchester - were invited to bid for the powers that best reflected their individual needs at the end of last year.

The Greater Manchester arrangement, which will see its existing local authorities brought together in the form of a 'combined authority' able to take more strategic decisions with regards to public spending, was concluded in March while the other deals were announced in July.

"I'm delighted to sign over huge chunks of freedom to our great cities," Deputy Prime Minister Nick Clegg said. "Each of our eight core cities have come up with ambitious plans to help them grow and prosper. I look forward to seeing the results of this dramatic shift of powers from Whitehall to our cities."

By granting devolved powers to the 'core cities', the Government estimates that 175,000 jobs and 37,000 new apprenticeships will be created over the next 20 years.

Infrastructure and local government expert Alan Aisbett at Pinsent Masons, the law firm behind Out-Law.com, said that the deals were good news for potential investors. However he stressed the need for patience, pointing out that returns would not be immediate.

"What investors need to realise is that they are investing in the development of some of the country's most developed and economically viable cities," he said. "Private investors' monies will be vested all the way down the line to the ground level, so by thinking long-term investors can see these potential assets as something worth selling later on."

Each city plans new administrative arrangements as part of its plan. Leeds and Sheffield each will each form new Combined Authorities involving smaller local councils, covering West and South Yorkshire respectively, while similar plans involving the seven local authorities across the Newcastle economic area are also underway. Liverpool and Bristol have voted in directly-elected mayors, while Greater Birmingham and Solihull and Nottingham have established private sector-led governance.

The powers devolved by the Government will allow some cities to establish self-sustaining investment funds to fund local priority projects, reducing their dependence on central Government grants. Manchester has been granted powers to 'earn back' tax from the Treasury; while Newcastle, Sheffield and Nottingham will be able to use TIF to fund critical infrastructure through the anticipated increase in business rates as a result of those projects.

Birmingham, Bristol, Leeds and Sheffield have been granted the power to set their own transport budgets while Manchester, Leeds and Sheffield will take on responsibility for commissioning and managing franchise arrangements for local and regional rail services.

Sheffield will also take control of its own skills budget, allowing the city to better respond to what businesses need from the local workforce, while new 'apprenticeship hubs' in Bristol, Manchester, Leeds, Newcastle and Nottingham will allow local authorities to develop their own incentive schemes to encourage businesses to take on apprentices.