I want devolution to be a success. It would addresses many of the legitimacy challenges which central government faces, and done well would create much better incentives for growth. But I see four big risks which devolution advocates need to address: 1.Devolution expands the welfare state Pushing power down to regional government creates the scope for a fresh start on many problems, particularly incentives for economic growth. If local areas can see the benefits of infrastructure being built, because their government can retain some of those benefits locally, it will go a long way to creating goodwill for data centres, nuclear facilities and FDI. But they’re also a chance to start again on social policy. If areas have to pay for the constant expansion of the welfare state out of their own pockets, then they might think twice about it. My worry though is that if we design the system badly then it’ll just recreate all the worst tendencies of the centralised welfare state. Particularly if fiscal devolution isn’t set up so areas carry the consequences of financial mismanagement. Westminster has to be prepared to let parts of local government fail badly, and go through significant fiscal contractions, or the system will just create endless moral hazard. And in areas where that’s unrealistic, we shouldn’t be pursuing devolution. For example, funding social care locally out of council budgets has been a huge political failure, and there’s a strong consensus that it shouldn’t be the job of local government to finance care spending. Need is distributed relatively randomly throughout society, and it’s an area where the public have a strong sense that fairness is important. Because of this, my colleagues at Re:State have come up with an excellent alternative model for a prefunded social insurance system for social care, pooling risk at a national level. Social care is an example of where a local approach has failed, there are similar areas we should avoid devolving so we don’t just shifting a large welfare state to local areas to continue funding. 2.Devolution gets confused with redistribution. I expect that governments in the foreseeable future will want to do much more financial redistribution away from London to the regions. Not just to get “good growth in every postcode”, but to try to equalise or ‘level up’ economic opportunity across the regions in part by increasing transfers from London’s economy. Even doing this in isolation would be a mistake - the economy already has massive inter-regional transfers, though most are done through the NHS, welfare system and other public services rather than grants to local government. But even there, there is significant redistribution. Continuing the trend of taxing the South East more to pay for the rest of the country will deepen the divide politically. And it risks killing the growth engine of London so that it can no longer support the rest of the country even at current levels - London isn’t competing with Manchester and Glasgow for investment, but with Paris, New York and Tokyo - if it loses that race then we all lose out. But if more inter-regional redistribution is done in conjunction with a big devolution programme, then devolution will end up tarred with the same brush, and it will feel like ‘devolution for them but not for us’. 3.Devolution gets caught up in national efforts to improve local government Andy Burnham’s leadership has started with lots of moves to improve local government, but driven by Westminster. Policies like unilaterally capping bus fares, cutting business rates for some businesses, and committing to act on garish shop signage are all decisions about issues which should be made locally, not in Westminster. Burnham can’t go from being the Mayor of Manchester to the Mayor of Great Britain, he has to let other areas make decisions for themselves. That isn’t just a point about local legitimacy, though I think that’s does play a role. On lots of issues, we’ll make better decisions locally than nationally. Take Canada’s federal Housing Design Catalogue - the standardised housing designs made to smooth planning decisions at a national level are unattractive because they’re a compromise trying to have as wide an appeal as possible. If you make decisions about the built environment locally, they’re likely to be more tailored and thoughtful. 4.Devolution loses a cross-party consensus If some combination of issues 1-3 come about, many people may feel devolution has been a failed policy. But even if that doesn’t happen, and the outcomes are mixed, any of these scenarios and more seem likely to see the breakdown of the cross party consensus in favour of devolution. An increasingly patchy landscape of regions with strategic authorities and regions without them will make governance pretty tricky. Lots of areas don’t want a mayor. On balance I think they should all want one, and it’s worth trying to standardise the regional tier in the medium term. But imposing it against people’s will, particularly if it also seems to come with big costs, will likely mean the end of the strong cross-party consensus in favour of devolution that we’ve enjoyed for well over a decade. You can already see challenges between national and regional leaders that we didn’t used to have, for example the governments insistence that the retained income tax model for fiscal devolution can’t be used by conservative and reform mayors to give local rebates. More of these breakdowns along political lines seem likely in the future.