How we make our cities & towns more effective engines of growth – my joint article with Lord Adonis

We will only be able to develop the middle-income jobs we need to tackle the cost-of-living crisis if our cities and towns are more effective engines of growth. To achieve this we need stronger local government supported by more effective central government, both working in stronger partnership with the business and education communities.

Businesses are being held back by an acute skills shortage. We have too few growth companies, in particular companies which export. The UK lags the US, Germany and France in terms of productivity. And our infrastructure is inadequate for a developed 21st century economy – particularly in transport and housing.

Improving the economic performance of our city regions is a particular challenge. While more than 95 per cent of net new private sector jobs have been created in city-regions since 2010, nearly all of these were created in London. The UK’s next nine largest cities accounted for just 10 per cent of net private sector jobs created. Furthermore, too few of these jobs are the well-paid, high-skilled jobs that we need to be creating. Outside of London, our major cities are almost all below average in their per capita income, in stark contrast to Germany and France, where regional cities are relatively stronger in job creation and pay. Nor is it the case that the relative size of London relative to the national economy accounts for the difference; Paris is more dominant- in GDP share and population- in France than is London in the UK.

John Healey and Les Newby have today produced an excellent and timely report, published by the Smith Institute. It is a major contribution to the debate around how we build a strong and balanced economy.

The report provides three clear insights into how we can strengthen local economic leadership. It draws on an extensive analysis of the role and achievements of Regional Development Agencies (RDAs), and also the early experience of Local Enterprise Partnerships (LEPs) since 2010.

First, our local economies cannot withstand another major upheaval of the local growth infrastructure. There has been too much change in recent years which has hampered growth around the country. One of the first acts of the Coalition was to abolish the nine RDAs, a move which the business secretary, Vince Cable, described as “Maoist and chaotic”. Evolution, not revolution, is the right way forward.

Second, there needs to be a much bolder and simpler offer of devolution to city and county regions than what has been on the table so far. LEPs have had to grapple with a myriad of funding pots and initiatives available to them. As fledgling bodies, initially given no funding at all and relying heavily on private sector board members who volunteer their time, this has meant their limited capacity has not been put to good use. LEPs will not be given access to a more simplified funding pot until 2015, five years after they were created. But as the report makes clear, even this funding is heavily constrained by central government departments and remains far more limited than what was available to RDAs before they were abolished. The significant single pot resources available to RDAs, and the independence to target them on local priorities, were especially important in boosting their clout and effectiveness, and enabling them to lever in resources.

Third, not enough has been done to strengthen partnerships between local authorities and independent LEPs – and the business and higher education leaders represented by LEPs – focused on clear economic priorities. These insights informed the interim conclusions of the Adonis Growth Review, which proposed to strengthen LEPs and encourage the formation of Combined Authorities, bringing together LEPs and local authorities at the city region level, with responsibilities for transport, infrastructure and wider economic development. Following the publication of these proposals, Ed Miliband and Ed Balls wrote to LEPs and local government leaders inviting them to consider and suggest specific reforms within a stronger local framework, to improve local economic leadership and devolve powers and funding.

John Healey and Les Newby’s report provides a bedrock of evidence which will help inform these new, stronger local growth partnerships. It could not be more timely.

Ed Balls is Shadow Chancellor of the Exchequer and MP for Morley and Outwood

Lord Andrew Adonis is Shadow Infrastructure Minister

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Posted May 9th, 2014 by Ed

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