Watching the development of proposals to form new Local Enterprise Partnerships (LEPs) may have been mildly entertaining as a tale of political intrigue, jockeying and power struggles, but it does little to instil confidence in the future. Regardless of whether the final figure of LEPs that are approved is 22 (as Local Government Chronicle’s Alister Hayman suggests) or just two, these new entities – tasked with delivering economic development – are unlikely to deliver what’s needed from the outset.
Despite evidence of some ambition to transform our political and social architecture, through the localism agenda and the Big Society programme, there is little to suggest that the Coalition government has the same radical vision for reforming our economic landscape. It seems absurd to me to think that you can hope to achieve social and political reform without giving local areas control over their economies too. The sad irony is that the Lib Dems election manifesto included a number of proposals that would have helped stimulate local economies and provided the foundation for economic localism. Local Income Tax and Regional Stock Exchanges are just two Lib Dem ideas that have gone AWOL in the Coalition’s plans.
With local authorities under tremendous pressure to cut their budgets by around a third, and without them having the levers to effect economic change, it would hardly be a surprise if councils chose to shore up their creaking financies with the Regional Growth Fund. In the current climate the country can ill afford to fritter away the £1bn Regional Growth Fund when so much now depends on stimulating enterprise and economic growth to fill the gap left by state funding.
As Eric Pickles reminded us last month "a recovering economy needs local remedies." Quite so! But unless we change the economic architecture to be more locally responsive, how can we develop truly effective local remedies? Everyone seems to be agreed that we cannot simply do ‘the same but less’, and that we need to change – so why does there seem to be so little appetite for radical economic reform?
Banks provide perhaps the best illustration of how ill-equipped our economic policy is to respond to the challenges of Big Society and localism. Banks are supposed to deploy ‘surplus’ capital to where it is needed and, for many years that’s what they did. The growth of global banking institutions now provides little real connection to localities and we have lost the value of a bank manager who knows his customers and can provide access to loans without the need for complex and inefficient formulaic risk-pricing models. We need local banks, connected to their communities, which understand the local economy (and the people seeking finance). The regulatory system can either allow and encourage local provision, or it can facilitate mergers and acquisitions and growth. This is not about an interventionist approach versus a laissez-fair approach. It is about supporting a locally-focused economic policy instead of a global one.
Economic localism would ensure that as local areas begin to determine their own priorities, aspirations and needs, they would also have been given control of the means to reflect these priorities in their local economies. Minor concessions over business rates are small fry compared to what’s needed. Our ambition for economic reform needs to be at least as radical as the vision for social and political reform.
How we think about economic development needs a LEAP forward, not a LEP.
Written by Toby Blume
Wednesday, 13 October 2010