To address local disadvantage councils need the means to lead consistent strategies to make their areas competitive and sustainable in the global economy argues Matthew Clifton.
It is widely acknowledged, not least by central government, that local authorities are best placed to tackle economic disadvantage. Despite this, a recent OECD paper noted that “local governments have had very little to say in the implementation of any policies, labour market or otherwise.” Time and again Government-commissioned policy reviews find, however, that local authorities are best placed to tackle disadvantage.
Centralised command and control of the economy is simply not nimble enough to deal with local variation. To address local disadvantage councils need the means to lead consistent strategies to make their areas competitive and sustainable in the global economy.
A new report from the New Local Government Network has undertaken research that shows that the knowledge economy and knowledge-intensive businesses thrive within skills-rich mobile labour markets. A new analytical approach reveals that local authorities should prioritise action to reduce the economic distance between places, support labour mobility, and facilitate growth in knowledge intensive business services.
There are certain key factors that encourage economic development and steps can be taken to galvanise their effect. In particular, competitive advantage of sub-regions is derived from the gains of trade made where there is a successful specialisation of firms. Knowledge-intensive business services (KIBS) offer enterprise clusters with the adaptive capacity to cope well with a changing economic environment. Moreover, mobile populations respond well to the knowledge economy and knowledge-intensive businesses thrive with inter-regional migration.
Crucially, the connectivity of a place - namely networking opportunities, communications infrastructure, transport and skills strategies – can determine its level of integration within dynamic labour markets.
Although classical economic theory emphasises the importance of free flowing markets, traditionally goods and capital were assumed to be mobile while labour was considered to be static. Neo-liberal economic theorists advocated ‘free’ labour markets (ie. not subject to the power of the trade unions) but many did not assume that labour, like capital, would move freely. Communications technology, liberalised employment markets, cheap travel and the advent of mass European labour migration has blown away dated theory. These developments combine to deliver a socio-economic revolution with local opportunities to be grasped.
A range of measure could improve the connectivity of places within mobile labour markets. For example, the Government could offer tax relief on the cost of moving associated with employment.
Another barrier to the movement of valued skilled labour are low levels of ‘liveability’ associated with a good quality of life. Local authorities therefore should prioritise investment in cultural and leisure facilities as an integral part of their broader education and social remit.
There should also be a greater devolution of responsibility for transport.
Specifically, this might include devolving £380 million from the Bus Service
Operators’ to Local Transport Authorities. Local authorities should be able to borrow against revenue from bus fares in order to invest in transport services. And the powers of unelected transport commissioners should be devolved to council leaders to deliver greater local control and accountability over services.
To give strength to the local knowledge economy, the whole skills agenda should be devolved. The Department of Innovation, Universities and Skills (DIUS) is planning two new national quangos - the Skills Funding Agency (SFA) and the Young People’s Learning Agency (YPLA) - to succeed the Learning and Skills Council. A third national non-departmental public body will manage apprenticeships. These proposals could create an unnecessary tier of government bureaucracy and represent a missed opportunity to become more joined-up and responsive to local demand and employer needs. What is required is local responsibility and accountability for both pre and post-19 learning, skills and training.
For example, such devolution would encourage local authorities, colleges and schools should be encouraged to work with ICT companies. This would support the new 14-19 Diplomas and develop a more business-focused curriculum in information and communications technology, and encourage an interest in science and technology among young people.
The Government has consulted on a statutory economic assessment duty for upper tier and unitary local authorities. Of great importance is the ability of local government to facilitate regeneration partnerships and having the capacity to
respond to economic growth and population mobility. However, an assessment duty lacks ambition. The Government therefore should legislate for an active economic development duty for local authorities and back it up with the flexibilities and resources necessary to boost local enterprise and businesses.
One such new resource could be accelerated devolved funding to Multi-Area Agreements (MAAs). Where MAAs exist, local authorities have, to all intents and purposes, the capacity and authority to manage funding decisions. Accelerated devolution of funding drawn down from across all Whitehall public service agencies to MAAs would be entirely consistent with the Government’s approach set out in the Sub-National Review.
The Government could also seek to address differential disadvantage across the country by simplifying a complex array of support grants, incentives and schemes on offer to promote local economic development. Instead, the whole spectrum of different regeneration grants and schemes should be phased out. The equivalent funding should be combined into a single regeneration fund, distributed unconditionally on an independently calculated assessment of need. A no-strings-attached regeneration instrument is efficient. It would eliminate any disincentive towards locally-shaped projects, and eliminate the opportunity cost of bidding for government funds.
Centralised macro-economics have not been sufficiently effective at closing the disparity between regions. It is time for central government to trust the regions and localities to drive and shape their own local economic growth to ensure they are sustainable and competitive for tomorrow’s globalised society.
