A Pandora’s Box of regional issues

The regional devolution debate is opening a Pandora’s Box of issues. Integrated ticketing, more services and lower fares might sound great, but would local voters want to pay higher council tax to fund it? Probably not, but it seems the only way that bus franchising in Manchester can be financed.

There might be some crumbs of comfort for the bus industry following the Chancellor’s devolution announcement for the Greater Manchester Combined Authority (GMCA) and his agreement that it could have London-style bus franchising powers. I don’t think the GMCA will be able to afford it.

Next year the party that wins the general election, or is the lead party in a coalition, is going to be faced with some incredibly tough decisions over public expenditure. In 2010 the Chancellor of the Exchequer said he was going to wipe out our budget deficit by 2014/15. He hasn’t done. In fact, he’s got nowhere close, and the scale of the spending cuts required in the spending review after the election will make the spending cuts imposed during this parliament look like a tea party.

I’ve seen figures suggesting that, compared with the annual cuts of 25bn we’ve seen so far, the cuts that will have to be imposed in the next spending review will need to be around 48bn a year – that is, 48bn a year on top of what has already been cut.

Some departments will be spared cuts completely – health, education and overseas aid. Which means that the cuts for the “unprotected” departments will be disproportionately higher – cuts of something like 33% of their budgets, I’m told. The Chancellor has failed to make any serious inroads into the deficit, and this year alone the deficit will be a staggering 100bn, which makes George Osborne the most fiscally imprudent Chancellor in British history, outstripping even Gordon Brown.

Of course, despite the scale of the cuts that still need to come – assuming the next Chancellor doesn’t raise taxes or address the problem in some other way – ministers will want to project as much of the capital programme as possible, meaning that the bulk of the cuts will once again fall on the revenue side of departmental budgets. For local authorities – and for the Greater Manchester Combined Authority – this is serious news as it surely means that their funding from central government will be slashed yet again.

So where will the GMCA get its money from to pay for London-style bus franchising?

We all know that the cost of subsidising bus services in the regulated London market is very high, and I can’t see how, given the continuing dire state of the country’s finances, allowing the GMCA to indulge in this kind of endeavour can be justified.

This is the price that central government pays for committing itself to devolution. It can lose control. To be fair to Manchester, if it wants bus franchising, why should the government stop it?

Perhaps this is more a matter between the GMCA and its local electorate, with Westminster and Whitehall being told to keep out. Local authorities can raise extra cash through higher council tax if they can persuade the local electorate that the benefits of bus franchising justify this. Trouble is, I don’t see how local politicians will ever really be able to explain what bus franchising is all about and why the apparent benefits justify a higher council tax.

“Integrated ticketing, more services, lower fares” they will say. Sounds great doesn’t it? “Oh, but I’m afraid you will have to pay extra for it through local taxes, because the government isn’t able to pay for these benefits itself.” I wonder what the electorate will think of the benefits of bus franchising then? This devolution debate is opening a Pandora’s Box of issues.