Local Growth: Where Next?

Posted by Dr Peter O’Brien, 11th July 2013

Now the dust has settled following the Comprehensive Spending Review (CSR 2013) and the publication of Investing in Britain, where exactly are we with Local Growth policy in England? And where might it be heading next?

In its 2010 Local Growth White Paper, the Coalition Government’s approach to Local Growth was based on three principles: shifting power to local communities and businesses; increasing confidence to invest; and focused investment. Subsequently, the Government has, to a large degree, simply stopped doing certain things whilst centralising innovation, skills, science, and trade and investment, which were in the toolkits of the now defunct Regional Development Agencies (RDAs).

The abolition of RDAs and Regional Spatial Strategies formed part of a concerted move away from regional governance and a shift towards ‘functional economic areas’. Since 2010, the Government has promoted the creation of 39 Local Enterprise Partnerships (LEPs) – between Local Authorities and the Private Sector – launched the Regional Growth Fund and Growing Places Fund, agreed 8 City Deals, 24 Enterprise Zones and removed £7bn of ring-fenced Local Authority funding. However, when set against cuts to total local government expenditure, which amount to 43 per cent, Local Authorities are understandably struggling to help drive sustainable Local Growth.

In an attempt to boost the supply side, the Coalition Government has also introduced a series of changes to the planning system so that it “works proactively to support economic growth” by speeding up the planning process, particularly in relation to major infrastructure projects.

On infrastructure, the Government faced criticism for cutting public sector capital budgets in 2010 (e.g. in the Business and Local Government Departments). CSR 2013 represented a belated attempt to ‘(re)invest for growth’, although planned capital spending in 2014/15 will be £10bn less than that earmarked by the previous Labour Government.

CSR 2013 also provided the latest chapter in the Government’s narrative on how LEPs will promote Local Growth in practice.

There are 39 LEPs in England, and although each is different, there are similarities between certain LEPs, which will shape their success or failure. In particular, some LEPs to date have had minimal resources and capacity at their disposal to boost Local Growth. Findings from a recent survey of all 39 LEPs, conducted by CURDS and University College London, suggest that two challenges confront LEPs. First, the growing expectations that face LEPs may crowd-out and distort their organic growth as private sector-led, locally-owned/valued and sustainable institutions. Second, the variability of and competitiveness between LEPs, stoked in part by Government, could be their ‘Achilles heel’, as the whole LEP family – judged by the failure of some LEPs to deliver Local Growth within a flat-lining national economy – either becomes discredited and or the collective moves at the pace of the slowest.

CSR 2013 saw the announcement of the new Single Local Growth Fund (SLGF). In his report, No Stone Unturned, Lord Heseltine called for a “major rebalancing of responsibilities for economic development between Central and Local Government”, and proposed a Growth Fund of £12bn per annum over four years. George Osborne’s creation of a £2bn annual ‘Single Pot’ (equivalent to total RDA Budgets in 2009/10 or 4 per cent of the HS2 Budget) has left many disappointed.

The SLGF is clearly not a panacea, but it could make some difference, and its impact will multiply when aligned with EU Structural Funding, other funds and if it levers in additional private investment. The sense of frustration with the SLGF lies in the fact that the reality has failed to match the Government’s rhetoric on devolution/decentralisation. CSR 2013 provides more evidence of local areas having to ‘earn autonomy’ and to gain the trust of Whitehall.

There is also unease at the ‘hoops’ local actors have had to jump through to ‘demonstrate’ their ability to manage Government resources, as well as the cumbersome competitive bidding framework the Government will use to allocate £2bn to 39 LEPs. LEPs will get on with preparing their Local Growth Strategies, EU Structural and Investment Fund Strategies and bids to SLGF. However, the gap between Heseltine’s vision and CSR 2013 could halt the momentum in certain local areas.

With LEPs, City Deals, Combined Authorities, City Regions, Core Cities, Key Cities, Enterprise Zones, etc all part of the growing lexicon of Local Growth the landscape risks becoming cluttered.

There is likely to be rationalisation amongst some LEPs, and a streamlining of the relationships between different players. Reaching consensus amongst the main political parties would help to cement a more permanent place (post 2015) for LEPs and other sub-regional arrangements. The initial signs are positive. A period of relative stability, genuine devolution and a mature relationship between Central Government and localities would go some way to improving the next phase of the Local Growth agenda as we begin to emerge out of austerity.

Dr. Peter O’Brien is a Visiting Fellow at the Centre for Urban and Regional Development Studies (CURDS), Newcastle University. He was formerly the Director of Tyne and Wear City Region and Head of the North East LEP Interim Secretariat.


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