Rewiring the State is underpinned by the desire to allow central and local governments to remain within self-imposed, entirely unscientific, and hugely damaging fiscal rules. Resilience has been replaced by the idea that communities must be totally self-reliant.
Rewriting the state outlines a substantial part of Burnham’s programme for government – released less than two weeks after he became PM. One thing is for sure: he isn’t hanging around.
This paper outlines Burnham’s political and economic philosophy and will be central to his style of government over his term as Prime Minister.
Rewiring the State – key themes
“The [UK] government is committed to delivering good growth in every part of the United Kingdom, with places able to set their own ambitions and integrate services to meet people’s needs. This is because economic progress goes hand in hand with social progress underpinned by democratic accountability.”
This paragraph highlights the five key themes. These are:
- The concept of ‘good’ growth
- That this is a project for the whole of the UK
- It is built on the idea of public sector cost savings and doing things better (and more cheaply)
- It is firmly place-based
- It is based on the idea of subsidiarity
This is a predominantly English paper: as it should be, as most of these matters are devolved. However, it states that there is a desire to extend these benefits to the rest of the UK. The paper says that the PM will work with the “First Ministers of Scotland and Wales, and the First Minister and deputy First Minister of Northern Ireland, their governments, and local leaders, to explore how the whole of the United Kingdom can benefit from local empowerment.”
Key highlights
On travel:
- The plans to integrate buses but also rail
- Increase active travel routes
On housing and planning:
- Support for Majors to access and have more control of current funds for affordable homes and home insulation
- Mayoral intervention powers in the planning system
On public services:
- More integration (shared services) and more joined-up service delivery
- More devolved funding for public services
- Future “reforms to the highest cost services: adult and children’s social care, homelessness, and special educational needs and disabilities”
On finances:
- Control over more local tax revenue
- An overhaul of regional government funding
- Replacing central government grants with locally funded tax receipts
- Local power to introduce “Overnight Visitor Levy”
- Rebalancing of central government-funded public investment across England
- Local Government Pension Schemes to be involved in supporting local communities
On employment:
- Vocational pathways for under-19s
- Local powers to procure and provide tailored and specialised support for the long-term unemployed
Institutions:
- Strengthen local government, increasing capacity and capability
- Every area should have or be in the process of establishing a strategic authority by the end of 2027
- Stronger role for the Local Audit Office
- A smaller and more strategic central government
- Review of ‘arms-length’ public bodies
Taken together, the paper can be seen as a mini-manifesto.
A nod to economic resilience
Primarily, it is a reworking of the idea of ‘subsidiary’ (which we fully support) that decisions affecting people should be made close to them or by them. This is at the heart of a resilient economy.
It highlights that local/indigenous knowledge is very useful and often ignored by central formal institutions — filled as they are with distant decision-makers and ‘tick-box’ processes. Again, the concept of local knowledge aligns with a resilient economy framework that supports local communities in tailoring and adapting solutions that work best for them.
Rewiring the State is a bold vision for a new institutional structure for regional government in England and a step change in the role of much of central government too. It seeks to embed local knowledge in the decision-making process for more of the services provided at the local level.
In many ways, this paper harks back to the late 1990s and the BEACON councils and shared services agenda of the Blair government.
For a few months in 1999, I worked in the Department of Local Government and watched firsthand how awkward it was to see ‘high-flying’ Local Authority Chief Executives work with London-based career civil servants. There will be a huge cultural and operational challenge in merging the institutional designs of very different types of organisations.
Concerns and issues
If the UK faced minor challenges, needed small tweaks, or was performing close to its full potential, this paper would be ideal. However, the economic, ecological, and social issues facing the UK are significantly larger than this paper is designed to address. Will shifting funding from central to regional government solve the ecological crisis or dramatically improve wellbeing and the financial position of many households and businesses across England? This is highly questionable.
We would argue that the central government should not be retreating from local communities but should be increasing its role, especially in funding. Only the central government can create new net financial assets, and this crucial fact seems to have been ignored by the new Burnham administration.
The concept of good growth – instead of economic resilience
The central economic focus is: “Supporting local leaders to drive growth.” We have two concerns here. The first is our well-worn argument that economic growth (as measured by GDP) is not the solution, but the problem. Communities, regions, and nations must focus on resilience, not material growth for its own sake.
It is therefore dishes from the same menu that governments have been dining on since the mid-1970s: chasing the unicorn that growing the economy in a different way (‘sustainably’ or ‘good’) can remove the damage that our current form of economic growth demands.
It is a short document, so it is impossible to expect it to cover everything, but we are very disappointed that it doesn’t mention local, regional, or national resilience. Neither does it mention the ecological crisis.
To attempt to restructure every ‘postcode’ without focusing on decarbonisation is close to ‘greenlash’, the concept that governments have succumbed to the ‘backlash’ from the far-right and abandoned mild climate and environmental targets.
The paper discusses how the UK government plans to improve “people and place”. It is 2/3rds of the way in aligning with a wellbeing economy. It just misses out the “planet”, the bit that the other two rely on.
Second, we are worried about the race to the bottom that will be forced upon England’s regions. The idea that ‘good growth in every postcode’ should be built upon local competition is straight from the neoliberal, supply-side manual.
With everyone focusing on growth (as measured by short-term flows), we expect to see regions across England undercut each other to attract firms.
First, by offering businesses cheap labour:
“This will include empowering mayors to offer a high-quality locally tailored technical or vocational route from age 16, underpinned by control of the budget for 16- to 19-year-olds. It should build on the new regionally-shaped technical and vocational pathways from age 14 that mayors will develop, with an expectation that mayors source high-quality work experience.”
And secondly, by offering lower taxation or nice juicy financial incentives to relocate:
“We will support mayors to foster local innovation ecosystems, devolving a substantially increased share of later-stage innovation funding to local leaders so they can back opportunities with the greatest potential for local growth.”
The policy paper gives communities the power to enact these types of business incentives. Should England expect more ‘free ports’? Probably.
This type of competition is a classic case of the ‘fallacy of composition’: what is seen as good for each region is bad for the country as a whole. That’s the potential for the race to the bottom.
Fiscal devolution
The paper briefly outlines plans for the devolution of tax powers to local authorities:
“We have therefore agreed to overhaul the way regional government is funded, starting by replacing grants from central government with a share of local income tax for every mayor beginning in 2028, such that where a region grows its tax base, it benefits from the increased receipts”
And
“This will sit alongside greater retention of the revenue from business rates for local councils and strategic authorities. The long-term certainty of funding via taxation will provide more flexibility and enable greater investment to fund interventions that will deliver a return. We will consider how these growth incentives can be balanced with the need for fairness between places, recognising that there will be different starting points across the country.”
We support the political argument that locals will make better decisions on who and what to tax and how to spend that tax revenue than the central authority. This is one of the building blocks for resilience. However, when you are forced to raise income to pay for the services you provide, local authorities will be encouraged to go after the softer targets, local shops and businesses, and residential property. So giving local communities the decision on which services to cut isn’t the foundation for a resilient economy.
Fiscal devolution is, in fact, likely to provide significant insecurity for Local Authorities or Strategic Authorities. Forced to raise income from their communities rather than from the central government will mean a whole new round of fiscal austerity.
The core argument in the paper is that local authorities, and by extension, local communities should have as much control as possible. This extends to the financing of local authorities.
It is at heart a Federalist agenda. But federalism only works when there is a central fiscal authority ready to continue creating new financial mechanisms through government spending more than it taxes. In essence, running a fiscal deficit. Without active central state deficit spending, the plan fails.
Although the paper doesn’t mention fiscal rules or the need for the central government to balance its budget, it clearly alludes to them.
Burnham wants to reduce day-to-day spending, and supporting local communities to be ‘self-reliant’ frees up fiscal space for the central government. The paper is designed to look like a bottom-up plan that provides control to local communities. But in fact, it is centrally planned regional austerity.
If the region doesn’t grow, neither does the day-to-day spending. In 2026, the UK as a whole is likely to grow by only about 1%. How many regional authorities will see their economy shrink? What has the Labour Government started?
To be clear, there is no mention of extra funding. The process is:
- Streamline the civil service and central government
- Pass on any savings to regions (primarily through public infrastructure grants) and
- Leave local communities to cover all of the day-to-day spending by running balanced budgets (spending = taxation + borrowing)
When the currency issuer (the UK government) stops providing day-to-day spending, “greater funding freedom” means a lot more risk and will negatively impact households and businesses across all regions of England. The least well-off face the majority of the pain. The polar opposite of a resilient economy.
In conclusion
Overall, the document spells out that the plan is to replace funding from a currency-creating government (the UK) — which creates new net financial assets when it spends — with funds that already exist within communities.
Therefore, the state will retreat from directly funding essential public services. English regions will rely on a flow of funds that will ebb and flow with the economic conditions (all of which will be bad and will get worse over the next five years).
This will supposedly take the pressure off the government by slightly reducing the amount it spends (and therefore borrows), and should this happen, the ‘saving’ will then no doubt be spent on areas like defence.
But this will not pan out as the government’s economic advisors think. As the central government spends less, private-sector incomes fall. So then does the national and regional tax revenue. The economy shrinks (or doesn’t grow). And debt to GDP rises. Then Burnham misses his fiscal targets. And finds no new money for anything.
In conclusion, Rewiring the State ignores the significant challenge of the ecological crisis. It does nothing to reduce either income or wealth inequality across England’s regions – save for some ‘infrastructure rebalancing’. And it continues the extractive, rent-seeking nature of capitalism.
This is an early missed opportunity to focus on economic resilience. Providing state funding to achieve wellbeing-based targets — decided and implemented by local communities — rather than focusing on growth would ensure a much more sustainable framework for Burnham’s new agenda.
William Thomson
Political Economist & Co-Founder, Resilient Economy CIC
