What English Devolution means for Local Government Procurement

On the 16th of December 2024, a 118-page English devolution white paper was published, outlining the key provisions expected in the upcoming English Devolution Bill.

This article breaks down the contents of the white paper, and what English devolution will mean for public sector procurement teams and suppliers to government.

Skip ahead to read about:

• What is the English Devolution White Paper?
  
  • Creation of Strategic Authorities
  • Creation of Unitary Authorities
  • More powers for Mayors
  • Reform to funding
• What might devolution mean for local government procurement?
• Case study: procurement post-consolidation
• Conclusion

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🌳  What is English Devolution White Paper?

The English Devolution White Paper outlines the government's ambitions to embed 'devolution by default' throughout England.

Championed by Deputy Prime Minister Angela Rayner, the government argues that devolving power away from Central Government and into the hands of local authorities is a key component to catalysing economic growth.

The scale of devolution and council consolidation proposed in the paper arguably represents the biggest proposed change to Local Government since the 1974 Local Government Act.

Proponents of the planned changes suggest that Local Government consolidation will bolster efficiency, increase local spending power and enable savings. Others argue that the plans will have neglible effects on growth.

So - what does the Devolution White Paper propose?

📌  Establishment of 'Strategic Authorities'

The White Paper looks to establish a patchwork of 'Strategic Authorities' across the entirety of England.

These Authorities would oversee approximately 1.5 million people, and would represent the highest tier of Local Government.

Each Authority would be created either voluntarily by agreement between local authorities, or by ministerial intervention in cases where proposals run aground.

Each Authority would be headed by elected mayor, invested with newly enhanced devolved powers.

For more on the powers of mayors, click here.

Six such Authorities are styled as 'Establish' Strategic Authorities, and will be granted even deeper economic powers - these include the already in-place Greater Manchester and West Midlands CAs, but also the Liverpool City Region, West Yorkshire, South Yorkshire and the North East initially.

📌  Consolidating County & District councils into 'Unitary Authorities'

The government plans to restructure existing two-tier Local Government areas (comprising county and district councils) into single-tier 'unitary authorities'.

These unitary authorities are expected to serve populations of at least 500,000 residents.

Unitary authorities will handle Local Government services such as education, transport, social services, waste management, housing, and planning.

The government argues that transitioning away from the current two-tier system will promote efficiency and financial stability.

📌  More power for mayors

As mentioned, the White Paper looks to grant elected Strategic Authority mayors with greater powers across key policy areas.

This would include over:

• Transportation (e.g. the ability to introduce bus franchise networks)

• Housing & Planning (e.g. to set regional housing targets, accelerate the approval of housing projects, etc.)

• Economic development (e.g. the ability to create 'Local Enterprise Zones', Local Growth Plans, and direct local economic development funds)

• Skills, Employment & Education (e.g. the ability to utilise devolved education & vocational training budgets)

• Funding control (e.g. the ability to influence local business rates and introduce local taxes, subject to approval)

Proposed new powers would also extend over healthcare, policing, the environment and more.

The government argues that devolving more powers to locally elected mayors is a proven way to boost local economic development, bolster accountability and decentralise power away from Westminster.

📌  Restructing local funding streams

The White Paper looks to streamline the currently complex Local Government funding arrangement.

Established Strategic Authorities would be granted a single 'Integrated Settlement' funding pot, to be used at their discretion.

Non-Established mayoral Strategic Authorities will be granted consolidated funding pots covering different policy areas, like local growth, housing etc.

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As of 2023, there were 317 councils in England.

If the government sticks to a strict minimum of 500,000 residents per Unitary Authority and 1,500,000 million residents per Strategic Authority, the maximum number of unitary authorities and strategic authorities would be 138 and 46 respectively (given the current population of England).

Whilst these figures are unexact - and the exact number of unitary and strategic authorities has yet to be confirmed - this upcoming change could represent an almost halving of the number of councils across England.

For more details on the English Devolution White Paper, we recommend reading the Institute for Goverment's 'Nine things we learned from the English devolution white paper' article.

So amidst this radical shake-up, what might the implications be for Local Government procurement?

💷  What does English Devolution mean for Local Government procurement?

If implemented, the White Paper could have just as much an impact on how local procurement operates as the 2023 Procurement Act.

Though 'procurement' isn't referred to in the White Paper itself, the proposed changes to Local Government structure, funding and powers will almost certainly have ripple effects for how procurement is conducted at the local level.

Here are our early predictions for how procurement might be affected by the White Paper:

🔮  Fewer buyers, larger contracts?

The introduction of Unitary and Strategic Authorities will drastically reduce the number of Local contracting authorities in England.

This means procurement spending will be consolidated into fewer, larger authorities, often covering larger geographic areas.

Combined with the greater devolved powers granted to these authorities, procurement teams may find themselves able to embark on larger, bigger budget procurement projects.

In the long-term, larger suppliers may stand to gain from this.

Suppliers generally will also be faced with a much less fragmented Local Government marketplace. Instead, they will need to engage with a smaller pool of concentrated buyers.

🔮  Short-term confusion

The transition to the Unitary and Strategic Authority model will undoubtedly cause some confusion during the initial transition period.

Procurement teams may opt not to embark on long-term procurement projects if, say, they are uncertain which new Unitary Authority their district or local council may fall under.

These may represent some short-term disruption for suppliers who are heavily dependent on the Local Government market.

Existing contracts and agreements with existing councils will almost certainly need to be reconsidered in light of restructuring.

🔮  An opportunity for SMEs?

Amidst the transition period, SMEs could stand to benefit.

Councils will need fast, affordable solutions to address the challenges of reorganisation, creating opportunities for smaller suppliers who can move quickly.

The 'one-size-fits-all' approach typically favoured by larger suppliers won't be as appealing under the new circumstances.

🔮  Funding is restructured - but still constrained

The White Paper proposes to simplify how funding is allocated across Local Government.

Nevertheless, the White Paper does not offer a significant boost in the size of this funding (pending Spending Reviews).

Presuming funding levels remain the same as they are today, suppliers should expect cost-cutting pressures as new councils attempt to balance budgets while restructuring.

Core spending power will be homogenized, meaning suppliers cannot rely on specific councils always having available funds.

Moreover, suppliers may find that previously well-funded councils now have restricted budgets due to servicing large debt burdens inherited from newly consolidated councils.

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Focusing on this latter prediction more closely: what does the data tell us about how consolidation and devolution reform impacts real procurement spending?

We used Tussell to investigate.

📊  Case study: how does devolution reform impact procurement spending?

We've used Tussell's market intelligence platform to look at the procurement spending of the councils that consolidated on April 1st 2023.

Invoice data shows that when 8 councils merged into North Yorkshire Council, procurement spending fell by 15% (from £491m the year before the merger to £421m the year after.)

Source: Tussell

Analysis of Somerset Council shows a similar 15% drop in procurement spending in the year after 5 councils were merged into a unitary authority.

Source: Tussell

However, the data tells a different story in Cumbria.

When two new unitary authorities - Cumberland Council and Westmorland and Furness Council - were formed in Cumbria on April 1st 2023 procurement spending rose.

Combined, these two unitary authorities spent 18% more on procurement in the year following their formation. 

Source: Tussell

So, what does this tell us?

Devolution and consolidation have measurable impacts on the spending power of local authorities.

Whether this equates to bolstered or diminished spending power is determined on a case-by-case basis.

In totality, Local Government procurement spending increased by 11% in England between FY 22/23 and FY 23/24. 

Of the councils that consolidated on the first day of FY 23/24, the two Cumbria councils slightly outpaced this growth while others' procurement spending significantly shrank.

Source: Tussell

🌅 Conclusion

There's a lot of disagreement regarding how effective the English devolution project will be and what it will mean for local government, services, and public sector sales.

However, data from Tussell shows that the public sector - and local government - markets are growing.

And, whilst the path forward may be uncertain, the devolution project represents an opportunity for buyers and suppliers alike to form new, better partnerships that better serve local populations. 

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