Localis analysis of the 2020 Spending Review

Joe  Fyans, Head of Research

So, nine of the longest months in living memory after the Spring Budget and Levelling Up is still firmly the agenda. Indeed, much like that last budget, beneath the big-ticket items lurks a residual austerity, evident in a pay freeze which does little to convert clapping into hard cash for key public sector workers beyond the NHS. All in all though, you could be forgiven for not realising that £200bn had spent in the interim between yesterday and March. The UK central state remains committed to a pumping-out of investment unseen since Terry Wogan was on weekday mornings, and why wouldn’t it? The problems, after all, remain essentially the same.

The defining economic problem of modern Britain is slow-to-no growth, caused by major gaps in productivity; between regions and between firm sizes. To raise productivity, in our non-London/SE regions and in our small-to-medium sized enterprises, we must invest. Furthermore, as we spelled out in Hitting Reset and repeated ad nauseum, a historic under-investment has created a deficit to be made up in England’s regions. The chancellor is throwing around big-ticket money because big-ticket money is what it will take to close the productivity gap and start to grow the economy in a meaningful way. This was the idea before we had amassed an eye-watering national debt, and it is now even more crucial, as both growing and adapting the economy to the world after COVID becomes the goal of governments everywhere.

To do this, though, will require more than just the money allocated. As this crisis has proven time and time again, simply having the money doesn’t matter much if the money ends up in the hands of inexperienced or incompetent agencies of delivery. Local government was given enough yesterday to survive in the short-term, and there is promise for funding the kind of programmes around labour markets and local infrastructure in which local government could play a key role. Whether the lessons from the pandemic are learned, particularly those around the value of local expertise and management over central contracting, remains to be seen. Taking a look at the supplementary documents provided to the spending review, below is a brief overview of the kind of money involved and what has been said about who will be in charge of spending it.

Funds galore

So, to the money itself. The Levelling Up Fund, at a fighting weight of £4bn, seems to, at the very least, move away from the ‘bidding for pots’ model that has drained so much time and energy for local government to bidding for one pot. This pot will be the new, cross-departmental Fund for England, investing in “high value local projects up to £20 million, or more by exception”. Being cross-departmental, this fund is not allocated to any department at this time, instead to Treasury reserves, which speaks to a general shift in the way the Treasury deals with the rest of government and the rest of the country, also apparent in the Green Book Review. Now, high value local projects up to £20 million, or more by exception, will not a successful economic turnaround make. As part of a broader package though, this kind of money can fulfi a significant part of the Levelling Up promise by raising the quality of life and the quality of environment across the country. Things like successful town centre regenerations are deeply meaningful to people’s day-to-day lives, and the idea of funding for such things being extended beyond the ultra-safe bets of London and the South East is a positive one.

For some time now, the Shared Prosperity Fund has been used as an all-purpose deus ex machina for advocates of any given policy with even vaguely localist allusions. Whatever your problem was from 2017 to 2020, you were certain that the Shared Prosperity Fund would be designed to directly solved it. The details that we were given yesterday narrow it down somewhat, but not very much. The fund, coming in at around £1.5bn a year will be used to (deep breath) supplement and tailor national programmes to invest in communities and places’ social infrastructure, invest in local business innovation and invest in local skills and employment programmes. This is just the portion that will go to those places “most in need”, with another portion set aside for tackling labour market barriers to low-participation groups. These are all vital tasks for public investment, and the price tag attached is undeniably serious.

The “job of delivery”

Yet there remains a good deal of vaguery on the delivery end of these funds. In all the discussion of the Levelling Up and Shared Prosperity funds, there is much talk of ‘local areas’, of ‘places’ and of ‘communities’ but nary a mention of councils or local authorities. This is no small thing, as the documentation is very precise on this issue when talking about other aspects of local finance and the specifics of how this type of money is spent will make all the difference.

As we have argued very recently, investment in social infrastructure like community assets and cultural/sporting facilities can pay far-reaching dividends. For this to work though, the money must be directed in a bottom-up way, with communities deciding what their priorities are, not through an investment package from on-high which engages in short-term ‘transformation’ but not in the long-term and patient financing that is needed to build civic capacity.  When we talk of money invested in skills programmes tailored to local needs, will this take the form of the LGA’s Work Local model, or will the roll-out of skills programmes mirror the disastrous local roll-out of public health policy this year, where the local state was entirely ignored in many instances? Who is in charge of the selection criteria when ‘investing in local business’? Furthermore, how will those areas ‘most in need’ be determined? The history of the pandemic so far gives us cause for concern over the answers to these questions (see our forthcoming Vital Signs for more on this).

For the new National Infrastructure Bank, the Prime Minister’s foreword to the strategy is clear: local authorities and metro mayors will be able to apply for infrastructure money. This is heartening, and the inclusion of local authorities shows further signs of a volte-face from the days where a mayoral combined authority was seemingly the only legitimate form of local democratic accountability in the eyes of Whitehall. Promises of major packages for intracity transport, with proper transport funding settlements for several combined authorities coming next year, may raise some eyebrows in London. A depoliticised investment bank for local infrastructure has long been needed, called for from all corners of the political arena. Indeed, the need for investment outlined in the two funds is also an area of long-standing consensus. The challenge for localists in and around government in the coming months is to ensure that the local state is factored in to this investment, so that it can properly achieve the goals that SR20 set out for it.