Familiar to many, The Wire is a gritty and gripping drugs, policing and political drama set in Baltimore, Maryland. At first glance, you might think it is an odd place to start a thought-piece on the case for fiscal devolution in London, England. There are, however, good reasons for doing so.
In the award-winning series, successive mayors grapple with problems of failing schools, industrial decline, the quest for urban renewal and economic growth. How they go about this has lessons for the current UK government, which is on the cusp of announcing major reform to the machinery of Whitehall and town halls.
Many of the challenges to America’s cities will be familiar to local and city region leaders over here. Regeneration, affordable housing and better public services are all watchwords for our towns and cities. Mercifully, Britain’s social and economic ills are less extreme than those of the US. The British use of fiscal transfers helps soften the blow when one area of the country is experiencing decline. But taken too far, it can blunt growth incentives and the creation of wealth in those places that are able to deliver more for the economy as a whole.
On the other side of the Atlantic, Mayors have far greater control over their own cities’ financial and economic destiny than here. This is because business property and residential taxes in the US are largely locally set and retained. As a result, their city leaders enjoy powerful incentives to grow their tax base. In some cases, they may even choose to cut taxes to attract more homes and jobs.
In Britain, that powerful fiscal mechanism (of revenue raising and tax base retention) has been effectively removed. This has resulted in a profound disconnect between the impact of new building and development one the one hand and changes to the local tax base on the other. This hobbles our city leaders when they try and make the case for growth to their voters who may feel they experience the downsides from economic activity in their areas without many of the benefits.
The current government’s big idea – Rewiring the State – will apparently mark a sea- change in devolution policy. Done well, the prize will be worth having. Enhanced fiscal powers for London local government and indeed our other great cities are a crucial step towards empowering them and voters to be more open to development and growth. Housing, transport, skills and public services can benefit too from being organised and paid for a more locally and regionally. In the US, many city halls enjoy a level of granularity and responsiveness to local needs that central government could never hope to match.
If our government is to be believed, we are within striking distance of generational reform to local government finance. This could create a very positive cycle that encourages growth, delivers improved public services and in turn, facilitates the provision of more space for jobs and homes and a growing local tax base.
In Season 4 of The Wire, Mayor Clarence Royce, pointing at a building site, says, “…it’s developments like this one, planned residential towers with waterside retail space and restaurants that grow Baltimore’s tax base and help rebuild our city.”
We can but hope that when it comes to rewiring our state, the Prime Minister’s advisors are all avid watchers.