Cities unshackled from Whitehall's dead hand

It is a truth almost universally acknowledged that Britain suffers from too much centralisation. "Zipf's Law" - a rule of thumb for predicting the size of cities - suggests the second-largest is usually half as populous as the largest. The UK shatters this rule. London is more than three times bigger than its nearest rival.

Britain's lopsidedness is reinforced by how the country is run. Tax largely flows to the centre, with the merest sliver - just 1.7 per cent of GDP - to be gathered at local level. The distorting effect is indisputable. Anyone with ambition gravitates to the capital. National elections enjoy twice the turnout of their local equivalents.

The new Conservative government's remedy to the geographic imbalance is the "Northern Powerhouse" championed by George Osborne. The chancellor, a native of the south representing a seat in the north, wants to be remembered for more than just budget cuts. This week, hailing what he calls "a radical new model of city government", he promised Manchester increased control over billions of pounds spent in its metropolitan area.

Mr Osborne's scheme is a promising start. Other conurbations will gain similar powers if they reform their governance by adopting elected mayors. Manchester's deal is a reward for being ahead of the curve. Under a visionary chief executive, Sir Howard Bernstein, 10 local authorities grouped themselves into a single combined authority and already co-ordinate decisions across areas of mutual interest.

Telling local government how it should run itself is not the acme of localism. Nine cities have already rejected the idea of an elected mayor in referendums three years ago (Manchester's leaders were subsequently persuaded to change their mind). Mr Osborne's insistence on clearer accountability is right. The prize on offer from devolution is not so much financial as attitudinal. However disbursed, the funds for health, housing and skills will shrink for years to come. Far from portending a shower of new money, devolution means ceding control over - and responsibility for - where the axe will fall.

This is welcome, if somewhat grim. Voters facing depleted public services need closer access to decision makers. But thankfully devolution is about more than just apportioning pain. Manchester will retain some business taxes above a threshold (although not set the tax rate) and thereby gain a greater stake in the local economy. At present, UK councils are as likely to bemoan as welcome local growth. Greater prosperity merely leads to less help from central government. Local authorities are left carrying the cost in terms of overburdened infrastructure and irritated locals. Unlike their continental cousins, Britain's municipalities are notorious for slamming the door in the face of new development rather than rolling out the red carpet.

Changing such an ingrained mind-set will take more time. Britain needs to lose its discomfort at the "postcode lottery" of services varying by local area. Uniform public provision is simply incompatible with local democracy. The chancellor will also need to be bolder. Councils are still financially shackled. Even council tax, the one levy they control, is heavily circumscribed by a needless obligation to call a referendum if it is increased by more than 2 per cent.

Whitehall cannot have it both ways - spending cuts allocated locally, taxes dictated by the centre. To control their own destiny, cities must also control more of their own taxes. If Mr Osborne wants the powerhouse idea to take off, he should do more to set the cities free.

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