The sound of one hand clapping

The government’s rhetoric on the Big Society, and its legislative sibling the Localism Bill, suggest a desire to transform our social and political architecture. Local areas are to be (at least on paper) far more control to determine local priorities and deliver improved outcomes and citizens are being asked to play a far greater role in what happens in their communities.

 

However this ambition to establish a new settlement between central and local government and to redesign the relationship between citizens and the state appears to be limited to social and political reform. There is little to suggest that the Coalition government has the same radical vision for reforming our economic landscape, despite Eric Pickles’ statement that “a recovering economy needs local remedies [1]”. 

I quite agree. It seems absurd to think that you can hope to achieve social and political reform without giving local areas control over their economies too. To me this seems a bit like clapping with one hand. How else can civil society, the public sector and the private sector seek to stimulate enterprise (social and commercial) and address local needs? The fact is that our economic architecture is hopelessly outdated to respond to the challenges we face and the opportunities that Big Society and localism might bring. 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?

 

How can we expect true localism and the Big Society to flourish without giving local communities control over the levers to determine economic policy?

A senior government advisor recently admitted to me that economic policy was currently under-developed in the Big Society narrative. He suggested that no one had yet ‘done the heavy lifting’ required to flesh out the theoretical and practical implications of Big Society on our economy. Whilst I don’t fully accept this – numerous thinkers and practitioners have explored these issues and suggest a range of possible solutions – I think that it’s pertinent that this is the view of at least some of those in government. One needs look no further than the work of the new economics foundation[2], Phillip Blond[3], Centre for Local Economic Strategies[4], our own thinking at Urban Forum[5] and indeed earlier work by Ivan Illich[6] and E.F. Schumacher[7], to find precisely the sort of heavy lifting that’s needed.

 

The government would no doubt point to Local Enterprise Partnerships (LEPs) and the Regional Growth Fund and their plans to give local authorities control of business rates revenue as evidence of economic reform. However this amounts to no more than tinkering at the edges of our economic architecture, when what’s needed is something far more ambitious and transformative. The development of new Local Enterprise Partnerships (LEPs) has bordered on a farce and gives me little confidence that they will foster new approaches to economic development and build a local enterprise culture.

 

Banks provide a good 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). Regulation can either create conditions for local provision to flourish, or it can encourage mergers and acquisitions that inhibit local provision. 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.

 

Small steps are being taken, but we need to be much more ambitious

There are signs of small steps in the right direction, such as; giving councils control of business rates, planning reform to give neighbourhoods greater control over development, changes to feed-in tariffs for renewable energy production and the Localism Bill’s community rights. The introduction of a general power of competence will also enable the most forward thinking areas to make progress. But there are more fundamental barriers to true economic localism. The review of local government finance should be an opportunity to rethink things, but I fear a lack of appetite within central government will curtail any truly ambitious thinking.

 

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 that would help reform our economic architecture to support local enterprise.

 

Bank reform is urgently needed as I have been saying for some time[8], but it is by no means a panacea. We need to look at ways to value and protect independent retail on our high streets, to better regulate global finance and the power of corporations, as well as looking at ways to simplify our tax system (which is not a euphemism for dismantling it). We need to find ways to factor in the externalities of private enterprise – so the profits are pocketed by individuals and institutions and the burden of paying for the negative impacts borne by the state. In short, must find ways to address state and market failure, with a more sophisticated appreciation of the true cost and value of things.

I do not claim to have all the answers – even the few solutions I’ve suggested are ideas I have appropriated from others – but I believe strongly that until we have the stomach for radical economic reform we will be chewing on the gristle of Big Society.

 

Toby Blume

Chief Executive 
Urban Forum

Twitter: http://twitter.com/tobyblume/ 

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3 thoughts on “The sound of one hand clapping

  1. Fine post. Unpicks the state of play adroitly. Strikes me that the big society, has created a rock for its own back. It’s oversimplistic mantra of a transition from big state to big society, limits the potential for the state to input into local economic success. Local economies as (our work at CLES you refer to), clearly highlights how a successful local economy is about a sophisticated relationship and innovative local network between public, private and social economies. To have the ‘big society’- a key driver of government policy, implicitly and increasingly explicitly denigrating the role for the local state is folly, and no good will economically come of it. I am not arguing for a big local state in this. I am arguing for a smart state, which is empowered and confident in ensuring it plays a role in steering local economic destinies and local economic success. This requires more networks and relationships and smart policy which works with social and commercial economies, empowering them to do more themselves and in partnership. As you say, the ‘big society’ needs to find local economics, and in so doing needs to talk up the local state. Only then will we get new local economic remedies at a scale required to deal with the deep rooted and decades long set of local economic problems , which many communities face.

  2. Thanks Neil. I think a smart state sounds good and a smart local state even better! we’ve had many generations of centralisation and only small steps towards devolution – despite all the rhetoric and almost a complete absence of economic devolution.Defining the problem is probably the easy part….defiining and implmenting the solution is going to take a lot more effort than my measly blog! 🙂

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