Armstrong EffEctivE dEvolution r83 *National Institute of Economic and Social Research. E-mail: a.armstrong@niesr.ac.uk. This paper has benefited from significant and substantive comments from Jim Gallagher (Universities of Glasgow, St Andrews and Oxford). Disclaimer: The views, judgements and policy proposals expressed in this chapter are those of the author, but not necessarily those of the critical commentator, Gatehouse Advisory Partners, Llewellyn Consulting, the Federal Reserve Bank of San Francisco or the National Institute of Economic and Social Research. EFFECTIVE DEVOLUTION Angus Armstrong* Executive Summary Brexit creates deep challenges for the UK’s structure of governance; not least concerning the degree and manner in which powers are devolved within one of the most centralised countries in the world. Departing from the EU is likely to exacerbate regional inequalities and possibly social divide, while at the same time leading to further centralisation of powers, at least in the short term. Most Brexit analysis looks at the reorientation of the UK’s external relationships, but the most signifcant impact may be on its internal constitutional affairs. While it is generally agreed that the UK needs more devolution, there is little discussion about how and why it sometimes succeeds, but also sometimes falls short of expectations. Ever since Adam Smith it has been known that economic prosperity, justice, and social cooperation are mutually reinforcing. Therefore, policy must be built around community and a sense of belonging, rather than a collection of anonymous individuals. The Core Design Principles set out by Elinor Ostrom provide a framework to transform governance structure at every level from the smallest communities all the way to parliament. Necessary institutional changes include giving local authorities much greater control over revenue-raising powers and therefore the services they wish to support. National legislatures must have the power to borrow for investment without limit, but with sole responsibility for repayment, to enhance local political accountability. A statutory body should be established, including representatives of the devolved assemblies and English regions, to address regional disparities, and there should be a much stronger regional presence in decision-making by HM Treasury and the Bank of England. Introduction Governance within the UK has changed profoundly over the past twenty-two years. Citizens of Northern Ireland, Scotland, and Wales have voted by referendum for their own national legislatures. More powers have been gradually devolved, culminating in the Scottish Parliament and Welsh Assembly, obtaining permanency within the UK’s constitutional structures (unless citizens vote for dissolution). Some constitutional experts suggest that the permanency implies that the UK has become either a quasi-federal state, or at least a unitary state with federal characteristics. 1 Regional Development Authorities in England were abolished in 2010, and replaced with Local Enterprise Partnership and City- Regional devolution deals. Brexit creates some deep challenges for the UK’s structure of governance. First, some of the poorer areas that voted Leave will probably be most adversely affected. This may lead to further disillusionment and divide. Second, the UK Parliament has reclaimed some powers from the national legislatures through the EU Withdrawal Bill leading, at least temporarily, to more centralisation