Callum Price is Director of Communications at the Institute of Economic Affairs, and a former Government special adviser.
I am not the first person to observe that Andy Burnham’s version of Manchesterism seems a long way away from what many would take to be its original meaning. Manchester Liberalism, or the Manchester School, was the philosophy of Richard Cobden and John Bright, the great nineteenth century liberal reformers who together made the case for free trade in the face of rising protectionism in the nineteenth century.
The Member for Makerfield’s ‘business-friendly socialism’ and ‘end to neoliberalism’ seems to cut in a slightly different direction, to put it mildly. But listening to the Prime Minister-in-waiting’s speech this week, there was some cause for optimism for those who might prefer Bright over Burnham.
He proclaimed that ‘it is time for Whitehall to accept that growth cannot be ordered from the top down’. This is of course exactly right, growth cannot just be ordered from on high, it is the product of people exchanging, innovating, and investing. Friedrich Hayek is applauding from beyond the grave (it’s a shame Burnham didn’t share this pearl of wisdom with Starmer).
Not only that, but Burnham also promised to ‘create a more streamlined state with a clearer purpose’. Music to the ears of anyone who doesn’t think a state that accounts for almost half of the entire economy is desirable or sustainable.
Let’s put aside for now the cognitive dissonance required to match this rhetoric with his clear desire to nationalise the utilities – the exact opposite of streamlining the state – and instead focus on an area he is clearly putting at the centre of his agenda: devolution.
Burnham evidently believes there is a lot of value that can be created by devolving power out of Whitehall. He correctly identifies that we are a relatively centralised country, and leans on not only his record as Mayor of Manchester but on the records of his Mayoral counterparts to make the case for putting more power in the hands of local decision makers.
There are two main arguments for devolution. The first is that decisions should be made as close to the people and areas they will affect as possible. This is an extension of Hayek’s knowledge problem, that central planners can never gather or process the vast, dispersed, and constantly changing information required to efficiently manage an economy. The Hayekian ideal is that as many decisions should be taken out of the hands of any central power at all and left to individuals, but when there are decisions that need to be taken at a collective level doing so as close to the people who know the ins and outs of that decision is desirable. One can see the advantages to having people in Newcastle deciding on the specific allocation of transport funding in the specific area north of the Tyne than officials in Whitehall.
Burnham clearly agrees with this, and has lived it, having been one of those local decision makers himself.
The second main argument for devolution is the competition and experimentation it can produce, or as articulated well by my colleague Dr Valentin Boboc: ‘devolution creates benefits precisely because it produces differences.’ If different regions are handed real power over their areas they can try things at a smaller scale, like new regulatory arrangements or tax structures, to boost growth in their locality. If they find something that works, other places can follow. And the reverse is true too, if they try something that fails others know what to avoid. As a result, as in any competitive market, better systems can be found and developed across the country.
However, Burnham himself doesn’t seem so hot on this side of things. In the current system Mayors mainly get given a pot of money to spend by central government. This achieves the advantages set out in the first argument, moving decision making closer to the places affected, but not the second. It does not give the regional administration the real ability to change things in a more serious way. This might work politically, Burnham never had to worry too much about the need to raise much money and the political difficulty that comes with that. But if he couldn’t raise taxes, he couldn’t cut them either – say to attract more people and businesses to Manchester. Nor could he have built a more attractive regulatory regime that would make it easier to start a business that could go on to create jobs and wealth in the local economy.
Instead, he has pledged a Number 10 in the North.
It does not yet seem clear how or if this will reduce Britain’s centralisation, and risks just moving some of the centre elsewhere. As Dr Boboc put it, ‘devolution routed through a second prime ministerial command post is delegation, not devolution’.
Burnham, like his predecessor, has pledged a focus on growth. But growth won’t necessarily come from shifting decision-making power around, as beneficial as that might be in other ways. Fiscal and regulatory devolution would be a more radical step, and may allow for competition between regions and innovative, pro-growth strategies led at a local level. But that means a more full-fat devolution of the kind that can cause its own political problems.