Localis analysis of the 2021 Budget
by Joe Fyans, Head of Research
Is it localism of a sort when the Chancellor of the Exchequer, at the back end of an unprecedented national crisis, takes a break from delivering the budget statement to campaign for the Mayor of Tees Valley? If it is, it’s a sort of partisan localism etched through yesterdays’ announcements like a stick of rock. Local government has a keen new partner in economic development and growth moving forward, and it’s the national government. ‘Decentralisation’ is the watchword for our new economic geography, the exact fate of ‘devolution’ currently unknown. This is promised most directly in the literature for the Community Renewal Fund: local authorities can look forward to “a new, direct relationship with the UK government.” What does this repositioning tell us about the nature of the plan for levelling up and the vision of growth it subscribes to? Well first, let us scan some highlights and lowlights of yesterday’s budget.
Highlights and lowlights
Reading the Chancellor’s lips, it seemed pretty clear that there will be no new taxes and no tax rises. However, what went unsaid is the buck being passed down to councils in doing so. These will of course be forced to raise council tax to cover the hole in their budgets left by COVID-19. The Prime Minister is unconcerned, informing PMQs that people need “councillors who charge you less while providing better services”. Well that’s alright then. YouGov polling released this week, however, shows that Conservative councillors up and down the country are far more aware of the reality of the social care situation than those in government, and are in favour of reform and increased resource. Still though, the can is kicked, reminding me fondly of my early days at Localis back in 2017, when we were writing about the forthcoming Social Care Green Paper. Maybe next year. Business rates too, remain on ice for swathes of the economy, with the government footing a bill that at this point would surely have been better spent on replacing the tax with something workable.
On the other hand, the funding announced today for community asset bids is welcome indeed. Getting this money out as quickly as possible to the people who need it most, to recover and restore their local social infrastructure is vital. The need to support community bids for local assets has been recognised across the local government sector and in reportage by ourselves and others, the policy is a win for common sense. Slightly less heartening to the sector and its associated research institutions are the announcements around education, with a determinedly centralised skills system remaining in place. Still, anyone who watched the events of last year unfold in the heart of national government will be heartened to learn that they are now opening a swathe of management schools to pass on the expertise.
In terms of investment in place, let’s not look a gift horse in the mouth. Sizeable and sustained investment in place is being promised and the promises are being fleshed out. If central government is going to give that kind of money away to local delivery vehicles though, it seems it is going to want to be nice and close by while they spend it. A new economic outpost will be located in Darlington, from whence the levelling up mission can better be monitored and evaluated. At the very least, it shows a serious engagement to the project and at least a surface-level recognition of the discontent with what has been perceived for years as government by the south, for the south. Furthermore, it creates jobs and every single one of those is valuable right now.
A vision of growth?
But across the various well-trailed announcements, the music videos and the photos on the stairs, what kind of vision for closing the regional gap can we see across the detail of the budget and its documentation? Below, I’ll go through some key points of the two big funding prospectuses released yesterday, which, taken with the freeports announcement can roughly be surmised to a vision of local growth based on trying a bunch of stuff all over the place. Which isn’t necessarily a bad thing. There is no cast-iron way to rebalance economic geography after forty-odd years of chronic underinvestment, but it probably won’t be a very quick process.
This is worrying because levelling up is a project of electoral politics. This is not a controversial statement; it is widely acknowledged across politicians and civil servants that the goal of levelling up is to deliver material gains in response to the 2019 election result. The extent to which the project is connected to the electoral outcome increasingly appears to be troubling, but to put that aside for a moment: a five-year turnaround plan requires silver bullets. According to recent and detailed UK in a Changing Europe research, freeports have their upsides but silver bullets they are not. The other facets to the strategy then, the big funds, must be expected to deliver those visible, material gains to the high streets of the upper East Midlands and elsewhere within about, just to stick a finger in the air, 1,156 days of the prospectus announcement.
The Levelling Up Fund
The precise nature of the unifying vision of regional growth which informs the levelling up mission is often questioned. In the prospectus for the Levelling Up Fund, the means to its desired end are described as “supercharging our city regions”, “supporting our struggling towns” and “catalysing industrial clusters in the sectors that will drive the future economy”. The £4bn fund appears geared mostly towards the second of the three, aiming to support small-scale infrastructure projects that help, among other things, “bring pride to an area”. Bringing pride to an area – along with the employment opportunities that accompany the process – is a perfectly good reason to do something in a country with as dramatically uneven an economic geography as the UK. As we have argued previously, the devil is in the detail (or the delivery vehicles) of these funds, and how well they respond to the local need and context.
The prospectus provides clarity to some extent, and it is a relief to learn that local authorities will be the recipients of these grants. This is probably how it had to be – devolving funding to the regional level and trusting local authorities and Local Enterprise Partnerships to be able to assess the viability and local desirability of schemes on their own was never a particularly likely prospect from a state as paternalistic and heavily-centralised as ours.
Speaking of LEPs – we heard talk of new economic institutions, what of the old ones? If the evidence bases and plans worked up in many places’ Local Industrial Strategies are to be used for levelling up, the details on how are not clear. The prospectus mentions the need for alignment with LIS, but Local Enterprise Partnerships – who’s often mindboggling boundaries are the basis for these strategies – are notable across the board of budget-related documentation by their absence. The cursory mentions of LIS and LEPs raises a troubling thought, of the past five years of strategy-mongering and evidence-base building at LEP geographies, which has in many places been substantial and important work, is about to be cast aside. We at Localis have certainly retained a historical ambivalence to LEPs but one thing that history can tell us is that the creation of new economic institutions is a time-consuming and costly process, not suited for the kind of emergency response the country needs.
If LEPs are notable by their absence then the opposite is true for Members of Parliament, who are mentioned early and often. MPs will be expected to have at least one favourite bid from the authorities within their constituencies, and local authorities will be expected to consult their MPs on their plans. One sentence that will surely raise eyebrows of any senior council-watcher: “Where an MP’s constituency crosses multiple local authorities, one local authority should take responsibility as the lead bidder and local areas should work together to designate that lead bidder”. Sounds like fun.
The explicit involvement of MPs and the uneasy alignment of constituency and local authority boundaries present the greatest risk to the success of the fund: namely that a time when the economy is in desperate need of money pumped out and circulating, it instead remains locked in a pot (in Darlington, mind) behind a whole lot of political wrangling as local authorities scrabble over ‘lead bidder’ status and MPs are thrown into the position of “helping broker local consensus”. Stimulus is very much the watchword of this budget, but in this instance the selection criteria may stimulate a lot of fighting in meetings before it delivers any tangible results in places. It is therefore crucial that the expected timing for decision and funding of Autumn 2021 is stuck to by HM Treasury as a hard line and not allowed to drift while political fires are extinguished.
This is not to ignore the positive implications of the fund. The ability to submit ‘package’ bids of up to £20m represents a small but significant step away from scheme-by-scheme pot bidding, and the prospectus’ clear preference for the ‘shovel-ready’ should reward those many areas with unfunded but viable pipeline schemes without adding too much additional bureaucracy. The use of a composite indicator for infrastructure need is something we have recommended before, in our study for the Local Government Association on fiscal devolution, and is welcome. However, this has been called immediately into question by the presence in the top priority group of the chancellor’s own constituency and the lack of many Labour authorities seemingly in greater need from the top bracket. Despite claims to the contrary, the index has not been ‘transparently published’ – quite the opposite, the list is available for all to see but the calculations that place Richmondshire in greater need of funds than Barnsley are a mystery at time of writing.
Ultimately, the fund will be judged by what it delivers, not exactly how it plays out. If it turns out that the new monitoring and evaluation arrangements are massively overbearing and make life difficult for those councils charged with delivering projects, it ultimately won’t matter if the projects are delivered. The explicit involvement of MPs in the process may help foster a stronger and better-represented local state in England or may lead to an explosion of pork-barrel politics, but neither will matter much to most people if it can succeed in uplifting the local area and improving day-to-day life. The great risk, however, is that local economic development is degraded to nothing more than a carrot-and-stick system where people are punished at the local government level for the way their constituencies turn out MPs in general elections.
The Community Renewal Fund
The Community Renewal Fund, too, makes use of a composite indicator with as-yet unpublished methodological notes to determine priority, with one hundred places listed as in need. This fund is more of a bridge to the Shared Prosperity Fund, which will arrive in 2022 as the most talked-about shift in local government financing since the Poor Laws. The fund seems to run the gamut of the levelling up goals listed in the previous section, looking to fund pilot projects to invest in local business and skills, that might be doubled down upon in 2022 if successful.
This again, supports a ‘shotgun blast at a target’ approach to achieving regional growth: try a load of stuff, find out what works, keep doing that. Again, this is at odds with a politically-charged timeframe, but the Community Renewal Fund places less emphasis on the immediate benefits in its criteria than the Levelling Up fund. What this fund seems to focus on is capacity building, and relationship building, along the lines of the new institutional arrangement. In this document, LEPs do get a mention (although only in reference to other funds) and the tone in general is more collaborative and less proscriptive than the Levelling Up fund. There is much talk building to an impression of local authorities refining and expanding their ability to attract and direct investment.
However, let’s not kid ourselves, it’s a cash pot. It is in no significant way a break from the never-ending procession of small bidding contests which have been maligned across the sector as being a massive drain on time and capacity. Is it the beginning of a process, one which ends with local authorities given a more concrete and statutory footing on the grounds of investment and economic development? The language around partnerships between central and local government in the document certainly imply so. At the moment though, it is very much the kind of partnership where one partner has to prepare a series of competition-winning bids in order to access their end of the partnership.
To summarise, a lot of money is going to be thrown into a lot of directions, to the ostensible end of regional growth and delivering on the manifesto promises of 2019. The possible problem, fears of which yesterday’s details did nothing to allay, is that delivering on the manifesto promises within the life of a single parliament may well lead the government down a road of short-termism and clientelist decision-making that would undercut the overall goal of economic rebalance. But make no mistake, the UK Government is getting back into the regional development business.