02.02.15
Taking responsibility for local economic recovery
Guest blog by David Boyle, co-director of the New Weather Institute co-op and think-tank, which imagines working and community lives that are ‘more humane, more reasonable and more effective’. In this article, he tackles the conceptual barriers between local and national thinking on economic recovery.
The trouble with economic recovery is that someone else always has to do it: the bankers, investors, industrialists or mandarins. What about the rest of us – and what about the places we live? Are there no economic levers they can pull to improve their lives?
One of the reasons they think they don’t have levers is that Whitehall has bred local government to the belief that economics was its own fiefdom. There could be the occasional grant or deal, but only within strict controls. The idea that there were things that local government could do to manage their economic destinies remained anathema.
The problem is that national policy-makers tend to regard strategy, and macro-economic strategy in particular, as the pinnacle of their achievement. They are nervous about local economics because it looks too small-scale and because it looks a little too like plumbing, and it is not explained in language that the Treasury can immediately categorise and respond to. Their measures of success do not recognise resilience as a goal. This is the hurdle that needs to be crossed before these resilient approaches can become mainstream – and before they can get the help they need to accelerate.
The problem is more urgent because of the emergence of policy instruments like City Deals, which allow cities to draw down the powers they need to fulfil ambitious economic projects submitted to Whitehall. The difficulty is that officials have no experience in ultra-local economic development, and tend to find it hard to categorise.
This is partly because policy-makers believe they are already operating locally, though their definition of local is also on a very different scale. Their institutions tend to be geared for supporting much larger places and organisations, which often actively frustrate the efforts of the ultra-local economics sector.
Now Manchester is to get new powers, and the same powers have now been agreed for Sheffield – but what will the cities do with these powers when it comes to economic revival? Or will they just let the Treasury decide economic policy on their behalf?
The trouble is that there is no communication, and little understanding, between the economic localisers and the mainstream national policy-makers, who are very sceptical about local economics – at least anything more local than LEPs.
My new book (with Tony Greenham), ‘People Powered Prosperity’, is the result of a project, funded by the Friends Provident Foundation, to translate between the two worlds. We interviewed a range of leading economists, including the Treasury, to see what causes the logjam between central economic policy-makers and the energy of local economic activists.
It sets out a new narrative for very local economics, based on local financial and enterprise institutions, which might be embraced by national politicians – and by the Treasury. It is a potentially important intervention to kickstart a vital debate: why mainstream policy-makers are so suspicious of revitalising local economies, the only basis for the real devolution of power.
We concluded that there were a number of conceptual areas getting in the way of communication, some based on ambiguities in the approach favoured at national level. These were:
- The problem that so much public policy is devoted to helping people leave impoverished areas, yet we know that most will not actually leave;
- The market anomalies are local but the levers remain national, and therefore imperfect; and
- The ultra-local or ultra-small approach to local regeneration lacks a generally accepted or recognised name (though ‘economic resilience’ is increasingly used).
The book includes a foreword by Danny Alexander and also proposes two reforms. Firstly, the Treasury must develop a body of practical knowledge about ultra-local economic solutions and local economic resilience. It must set up an ultra-local policy and delivery unit, learning the lessons from the experience of those local authorities in urban and rural areas which are succeeding in developing working solutions to their economic difficulties.
Secondly, small business now earns 51% of value-added in the UK economy. They should therefore be getting a similar proportion of the business investment available in the UK. If they are not doing so, it is a sign of serious market failure and we need to provide the intermediaries and institutions to make this possible. In the interim, the government needs to track these numbers regularly – comparing profitability and investment by size of business – and to report on them.
About the author
David Boyle is co-director of the New Weather Institute, and co-author of People Powered Prosperity. He is a former editor of Town and Country Planning and was the government's independent reviewer for the Barriers to Choice Review at the Treasury and Cabinet Office.
FOR MORE INFORMATION: www.newweather.org/projects/towards-a-people-powered-prosperity/