From the TUC

More questions than answers on local growth … still

02 Nov 2010, by in Economics

Shambolic, toothless and chaotic were three words used by different business voices to describe the Coalition Government’s strategy in the run up to last week’s launch of the Local Growth White Paper.  It now appears that some Government ministers felt much the same.

So there was pressure on the Secretary of State to provide some sort of reassurance when he presented the new measures to Parliament.  Businesses, local authorities, MPs and the rest of us up and down the country waited for the coherence and detail that has thus far been conspicuous by its absence.

We were largely disappointed.

To understand this Government’s approach, it is worth reminding ourselves of their pointed criticism of the previous administration’s Regional Development Agencies.  The line of attack is threefold.  First, RDAs were top down and unaccountable.  Second, they did not represent natural economic areas.  Third, they were failures, given that disparities between regional economies failed to close.

Were the RDAs failures?  Vince Cable thinks so, he points out that despite £19bn funding over ten years “the economy is still as regionally unbalanced as before, if not more so”.   Of course, we can never know if or how much more unbalanced it would be without that RDA investment.  But, counterfactual arguments aside, it is worth asking that if the RDAs were such unmitigated failures when it came to promoting growth outside of the Greater South East, why is it that there was so much more of a consensus of support from businesses and others for those very RDAs in the midlands and north?  Probably because they delivered so well on a range of other activity within those regions, from dealing with the closures of the likes of Rover or Corus to investing in the technology and infrastructure that’s convinced global players like Jaguar, Siemens and Nissan to increase their investment in our industrial heartlands.  It’s worth remembering too that the most significant independent assessment of RDA performance, by Price Waterhouse Coopers, estimated that every £1 spent by RDAs generated £4.50 in local economies.

Given the shakiness of the Government’s attack on RDA performance then, are they right on the RDAs arbitrary boundaries, top down approach and unaccountability to local communities?  Well, maybe yes.  But then that makes many of the measures in the White Paper even more puzzling.

So far 24 Local Enterprise Partnerships (LEPs) have been given the go ahead.  The 38 applicants who lost out have been asked to come back with revised proposals, which will be agreed “in due course”, the Secretary of State would not be moved to offer timescales.  BIS have made clear that they expect revised bids to cover larger geographic areas.  This would be in keeping with the Government’s actions in the bidding process where Eric Pickles himself actively persuaded Kent, Essex and East Sussex to join up in a super-LEP much to chagrin of local councillors.  It seems that localism has its limitations and arbitrary regional boundaries aren’t always a bad thing, a point articulated particularly well here.

The new Local Enterprise Partnerships will be self-funding at a time when local government budgets are facing a cumulative 27% cut over the next four years.  Project funding will be largely dependent on competitive bids to the Regional Growth Fund’s pot of £1.4bn over three years, a cut of about two thirds to the previous RDA budgets.  The bids themselves will have to be signed off by the Deputy Prime Minister.  Meanwhile, many of the previous functions of RDAs, from inward investment to business support, will be put into the hands of central government .   It seems that a top down approach still has some merits then.

The Regional Growth Fund aims to foster private sector growth and job creation, particularly in those local economies “too reliant” on the public sector and where private sector growth has been weak.  Bids to the RGF will have to demonstrate that they have “financial backing from the private sector”, a key consideration when assessing bids.  But surely those very areas will struggle to attract private sector financial backing, a chicken and egg situation that many will find tough to crack.

Much has been made of the business make up of the LEP boards.  The Government have trumpeted this as a real breakthrough in business engagement, conveniently forgetting the largely business dominated boards of RDAs.  And while business engagement and participation on the board is crucial, the White Paper says next to nothing on engagement with a wider range of social, economic and environmental partners, including of course trade unions.  Accountability to local authorities is important but so to is some form of accountability to civil society, something which most RDAs worked on.

At the TUC we obviously support the OECD’s view that “trade unions have a key role to play in both identifying where companies and whole industries are in trouble and in considering how they best be supported”.  We believe that the trade union contribution to growth strategies, through flexible negotiation with employers, supporting displaced workers and providing intelligence is integral to successful regional growth strategies.  Sadly, little of this approach has survived the bonfire of the RDAs.

So what are we left with?  LEPs stripped of funding, functions and powers, chasing diminishing government resources while seeking significant private sector backing, being charged with the responsibility to develop local infrastructure and create the massive private sector jobs growth that’s needed to pick up the pieces from the Government’s slash and burn fiscal policy.

That’s some challenge.

I’ll leave with the words of John Denham MP, responding to Vince Cable in the Commons last week:

“I do not suppose that the Business Secretary has ever used hair-restoring lotion, but if he had he would have discovered that just because it says “Promotes Growth” on the bottle it does not mean that growth will happen. It is very much the same with his Department and this White Paper.”

One Response to More questions than answers on local growth … still

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