Economic prosperity

Prosperity, People and Place

Author: Tom Shakespeare - Oct 1, 2008

Local authorities can do very little to contribute to economic competitiveness and prosperity. Why? It’s not because they are incapable of doing so, as is popularly suggested. Nor is it because they do not have the powers to implement local economic strategies. Quite simply, the reason why local authorities can do very little to affect economic growth and competitiveness in their area is because successive governments have, year upon year, removed the financial autonomy and capacity of local government to do so. Therefore, to address the problem posed in the title there are two questions which must first be addressed: How do local authorities make the most of their current limited freedoms to promote the economy of their area?

How can the capacity of local authorities and their partners be improved?

Devolving power in an overcentralised nation

Cities and towns:

The UK is the most centralised nation in the developed world. The most important way local authorities can contribute to economic competitiveness and prosperity is by simplifying investment streams and returning financial buoyancy back to local authorities. One way to do this would be to allocate the regeneration funding streams to back to local authorities according to a simple formula based on the inverse of their average earning levels.

Councils should then focus on a number of approaches tailored to their particular needs and idiosyncrasies. They should be able to select from a ‘toolkit’ of approaches, picking and choosing which are most appropriate for their area. Amongst the toolkit should be a number of options for setting the groundwork for business and also improving the workforce. One way to set the groundwork for business would be to improve business conditions. This could include providing business parks, advice services to small and medium-sized firms and decontaminating and restoring land. It is also important to support existing local industry as local areas should know best about the particular industries which would suit their area. Transport infrastructure is also of vital importance. Distance is not the problem; accessibility

is, and this requires the co-operation of councils and other partners. Improving the town centre is also an effective contribution to regeneration, and there are numerous case studies to demonstrate this. Giving a town or city a unique selling point adds to the identity of a city, and more green spaces for example could help to attract a better workforce.

In order to improve the workforce, Councils should be able to put money into job-club schemes similar to the New Deal, and should be allowed to achieve this however they see fit. They should also be allowed to organise national job searches if they so wish. They could fund initiatives to identify areas that are short of labour and encourage businesses based on the specific labour shortage. They could also assist with people’s job searches elsewhere.

It should also be perfectly legitimate to provide the services and environment that appeal to highly-skilled workers by spending regeneration money on the arts, as well as other tourist facilities which would make a difference to the appeal of a place. Education is also suitable target for regeneration money: better quality education will attract a higher-skilled workforce. And then they could, if it is deemed appropriate, use regeneration money to cut taxes: lower taxes will attract more people and hence raise the economic potential of an area. Many local authorities are already involved in many tools from this ‘toolkit’. However, the key factor is that local authorities decide what to spend the money on based on the unique features of the local economy, without having to jump through centrally dictated hoops.

The rural economy:

The rural economy is all too often ignored but is of vital importance to many sections of society. Many of the points raised above for cities are also applicable to more rural areas. However, further consideration should be given the idea that councils should have the power to invest in the maintenance of rural facilities such as post offices and local shops, both of which can contribute to the local economy and add to the pull-factors of an area. Furthermore, with recent DEFRA schemes withdrawing funding from rural areas, it is of increasing importance that local authorities fill the void.

Cross-boundary working

The level at which most economic activity operates is not at the regional level, but rather at various sub-regional levels. Yet Regional Development Agencies (RDAs) do not reflect this. Local authorities working in partnership should be able to bid down for RDA powers to reflect the fact that the various levels of the economy are not fixed into a single, rigid area. Multi-Area Agreements (MAAs) are one way of working in partnership, but partnership working should not be exclusive to the MAA framework.

Making the most of a bad situation

Why should regeneration be local? There are fundamental reasons why economic development should take place at the local level. Most importantly, economic regeneration and development should take place at the level at which economic patterns operate. This includes the consideration of transport links, the local labour market, demographics and proximity to other similar industries.

Economic prosperity

What can be done?

Given the financial barriers on local authorities to significantly contribute to economic competitiveness and prosperity, there are limited avenues local authorities can pursue. Having said that, many councils have had successes in promoting economic development, and some have managed to meld the government’s rigid developmental framework into more meaningful forms. And there are a few things which can be done within the current framework:

- Have a clear understanding of the strengths and weaknesses of the local area and make a coherent plan.

- Push various bodies, including central government for more funding and development.

- Negotiate funding with various interested parties, private and public, on the costs for clearing up contaminated sites, and clearing ground for development.

- Actively publicise the strengths of the local area to potentially interested investors, and work in partnership with other neighbouring councils to achieve this.

- Foster stronger partnerships with other relevant councils and bodies, and share resources to achieve shared goals.

The question over the role of local authorities in stimulating economic growth and prosperity goes to the heart of the debate about the relationship between central and local government.

There is a strong argument that local authorities should play a much more central role in the economic developments of their localities. The question is: does the government have the courage to follow the facts through to their logical conclusion?

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