Published on 16 May 2024
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Here’s how to power up local government: put a Treasury in every region

The Treasury has too much power over local government. But creating Treasury-like bodies could ensure each region has the necessary resources, authority and accountability processes to address locally determined priorities and reset the relationship with central government, writes Craig Berry.

England has three main modes of local and regional government. A mode of governance is not simply about levels of authority or jurisdictional boundaries, although the modes do align with geography to some extent. More specifically, it denotes the dominant features of governance: the kind of problems institutions focus on, and the norms of policy practice that arise as a result.

The first mode is public services delivery, grappling with the classic dilemma of maintaining volume and standards within restricted budgets, while private sector partners fail to produce promised benefits. The second mode is supporting economic development, using targeted public funds and planning powers in the hope of ‘unlocking’ private sector investment and job creation at the micro level.

The third is probably not what you think, and this post argues that we need both more and less of it.

Public services versus economic development

Some places are getting more powers related to the first mode. The combined and mayoral authority model has facilitated the devolution of some (poorly funded) NHS services, and a partial reclamation of public transport provision from the failing private sector/central government constellation.

However, from well-funded regional development agencies sitting alongside local authorities, and then local enterprise partnerships with fewer resources but more policy authority, to city-regional mayoral bodies that institutionalise ‘boosterism’ but remain an awkward presence in most places, the second mode has become a bigger part of the local government landscape.

On the one hand, this is problematic, partly because the first mode is being starved of resources, partly because the second is associated with new forms of central government conditionality, and partly because it detracts from the ‘place-making’ role of local authorities.

On the other hand, however, it is correct that local government encompasses a range of different (and conflicting) responsibilities – just like central government does. The problem is not that they co-exist, but rather that they co-exist very messily, under austere conditions, as different actors with competing authority and inadequate powers jostle for prominence across both modes with little incentive to manage trade-offs and develop synergies.

The third mode

This mess is a product of the third mode of governance at the local level in England. It should be familiar, because it is the same one that dominates governance at the national level. The UK’s Treasury-centred constitution means the country’s economic and finance ministry exercises just as much authority over how localities are governed as it does over the Whitehall machinery in central government, cutting across the first and second mode.

In recent years, the Treasury has taken an axe to local government budgets with little attempt to understand the consequences. It has been instrumental in the recentralisation (and marketisation) of public services such as secondary education, maintains authority over the minutiae of infrastructure spending in all areas, and micro-manages local authority budget allocations.

Similarly, the Treasury remains the key player in the design and oversight of the city-regional combined and mayoral authority models. It has done so to facilitate its favoured approach to funding local economic development – local government bodies competing for discrete pots of funding – while restricting efforts by junior Whitehall departments to support local industrial strategies.

Treasury-centred governance has advantages. The department is an effective coordinator and standard-setter across Whitehall. It ensures that economic growth is prioritised within policy decisions. Its staff are very good at what they do.

There are serious disadvantages too. The Treasury is almost relentlessly focused on the short term at the expense of supporting a coherent economic strategy, not least because it is organised around delivering budget wheezes biannually. The department’s decision-making is opaque, with officials rarely engaging with stakeholders.

And it has a chronic lack of expertise in many of the policy areas where it acts as supervisor. The flipside of having staff who are very good at being Treasury officials is that they are often not very good at anything else (a lesson local leaders often learn only when they take on Treasury secondees hoping this will enhance their governing capacity).

The insistence on – but impossibility of – micro-management from Horse Guards Parade has another consequence. Financial mismanagement in local government is not an aberration of Treasury control, but instead is enabled by an over-centralised model whereby the department allocates funds to mayors who play the Treasury’s game to win money pots, but then escape effective scrutiny in how they are managed.


For many critics of centralisation, the solution is obvious: devolve more policy powers to local and regional government. Rewrite the constitution. Pre-austerity funding levels must of course also be restored.

Devolving power is more complicated in practice. Local government structures are designed around the existing array of responsibilities, and capacity to take on a great deal more cannot be assumed. That’s why even Labour metro-mayors in most areas have embraced dead-end ideas like investment zones, which involve local authorities relinquishing powers in the hope of persuading large corporations to relocate some operations to their region.

Furthermore, demanding more money alongside more powers leads inevitably to questions around fiscal devolution that we aren’t ready for. Devolution advocates understand this, hence the proposal to restore depleted budgets rather than, say, localise corporation tax. But it means that the decentralisation agenda rests upon the continuing centralisation of fiscal policy.

The five great challenges the next government will face – adapting industry to decarbonisation, increasing productivity, rebuilding public services, fixing a dysfunctional housing market, and forging a new settlement with the EU – will only be met successfully through action at the national level. Local and regional government can be a partner in devising and delivering national plans, but many areas will sometimes have to accept the subservience of their residents’ immediate interests to those of the population as whole.

The status quo is not an option. But we have not yet discovered the model that will right its many wrongs without creating new governance problems.

Too much Treasury, not enough Treasuryness?

There are three main reasons the Treasury adopts the manner of disapproving parent regarding local government. First, it believes it has a monopoly of expertise on economic growth. Second, it has a constitutional responsibility to protect the public finances, scrutinising public expenditure at all levels.

Local government is seen as a problematic variable in both of these regards, but this is arguably circumstantial rather than inherent. The third reason points to a more fundamental problem: the Treasury is simply too far from local government, both geographically and institutionally.

If this can be overcome, the first two conditions would be alleviated too. The Treasury needn’t agree in full with how local authorities seek to grow local economies to recognise that this aim is being prioritised, and it can recognise the credibility of value-for-money assessments upheld in other parts of government even if approaches vary.

It would be naïve to expect the Treasury to move quietly aside. The aim should be to bring the Treasury closer to local government (an aim not achieved by moving a few workstreams to Darlington). What is required is a more regularised form of interaction between the Treasury and local government, facilitated by the creation of Treasury-like agencies in every area.

This does not have to mean an expansion of the existing Treasury’s workforce and geographical footprint, like a rebooted Government Offices for the Regions (abolished by the coalition government in 2011). It would ideally be a bottom-up process, with local government creating functions that the Treasury can recognise as representing an essential Treasuryness in every area. This could facilitate a mutually beneficial form of cooperation and a platform for genuine devolution – potentially including additional tax and borrowing powers, and providing a vehicle for Gordon Brown’s proposal for regional block grants – that is more likely to align with the Treasury’s objectives.

An open marriage

The case for breaking up the Treasury has never been convincing. ‘Treasury says no’ is too often a convenient excuse for policy failure in other parts of government, and there is clearly some merit in questions of economic performance and public finances sustainability being assessed alongside each other (although this is not to suggest the existing Treasury does this particularly well).

The Treasury may have enduring traits, but for the most part it does the job elected political leaders wants it to do.

Of course, institutional arrangements do matter. The far more radical transformation in this regard would be for the marriage of economic and fiscal policy to remain within a single institutional architecture, but for local and regional government to formally contribute to how these powers are exercised. A decentralised Treasury network would strengthen bottom-up accountability, inching England towards federalisation.

Recreating something like the Treasury at the sub-national level would be an opportunity for the best policy staff to develop their careers locally, and play vital coordinating roles, rather than languishing in under-powered corporate policy teams, or the silos created by generations of policy churn. A network of Treasury-like bodies across each region would be the ideal institutional environment for frameworks such as universal basic infrastructure and universal basic services – by which the centre ensures each area has the resources and powers to deliver specific priorities that are determined locally – to operate within.

If the idea jolts, it shouldn’t. It has been a key element of Scottish devolution. And it has something in common with the governance system that has developed gradually among Greater Manchester authorities as they pioneer budgetary and fiscal devolution within England.

This is not a panacea, rather a pragmatic approach to the urgent task of constitutional renewal. There would be contestation over how to institute local Treasury agencies due to the disorderly nature of local government structures. But the mess isn’t going to clean itself – this can be part of the antidote, facilitating co-operation within areas as well as a more collaborative relationship between centre and local.

Image: Government Offices Great George Street, London, England. By Carlos Delgado, CC BY-SA 3.0

The views and opinions expressed in this post are those of the author(s) and not necessarily those of the Bennett Institute for Public Policy.


Craig Berry

Affiliated Researcher

Dr Craig Berry is an experienced academic researcher and policy practitioner. He is a political economist with expertise in economic policy, including industrial policy, and welfare provision, principally pensions. His...

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