Posted by:29 October, 2009
As recent figures from the Office for National Statistics reveal we are still in recession. Furthermore, as the reports from the Joseph Rowntree Foundation and the Industrial Communities Alliance reveal, unemployment and inequality is rising. A Local Government Association report in March also pointed out that 41% of Local Authorities were experiencing an increase in demand for services for the unemployed or those at risk of unemployment and 57% were experiencing an increase in demand for social housing.
We are now and in the future, going to have more social need and demands on public services, just as the proposed cuts start to bite. We are in a horrible absurdity – in a time when demand on public services is going up and likely to rocket - there is going to be less capacity and a reduction in supply of funding for projects and programmes to help soften the effects.
With no signs of a focussed Keynesian stimulus on frontline services fuelled by tax rises, there is now a growing consensus around a recognition that we just need to get by on ‘more for less’. However, let’s be frank, this is not going to work on its own.
‘More for less’ whilst helpful as regards to driving greater levels of innovation, and cutting down bureaucracy, is likely to be hopelessly inadequate to a significant increase in social need. It will not be enough to avert a new wave of social and urban decline, and all its consequences.
We cannot trust ‘more for less’ to squeeze out more from a reducing purse. In all likelihood, we are going to need to start averting the problems and getting ‘more’ to frontline services and activity in the short term.
I am not arguing agin the whole concept of ‘more for less’. Initiatives such as ‘total place’ are important as a means of assessing the total contribution of the public economy and assessing how more can be done, with a declining overall public sector spending purse. There is also the need for progressive procurement processes and a greater understanding of the beneficial multiplier effects of public spend, as indicated in work undertaken by CLES and APSE.
However, there is a real need to lift our heads up and frame this era around a broader discussion and prioritised debate around paying for much needed local services. In the absence of short-term political will to achieve more through taxation - what is open to local government and localities faced by rising demand for its services and less money to provide them -how can it get more?
It’s not going to be easy, but here are two things we need to look at.
More of a local state: More local power and resources
At present, we have an inadequately ‘tooled up’ local government to deal with the issues on the front line. We need more powers and resources to local government so they can tailor local economic, skills and welfare policy which are bespoke to local circumstances and allows them to shape their own economic destiny and avert decline.
I agree with the New local Government Network in their recent publication –Capital Contingencies, in which they argue for a need to increase the amount of money available to Local Authorities through new funding mechanisms to aid infrastructure.
However, alongside infrastructure, we also need more powers and resources deployed locally to allow local government to harness wealth creation so it can invest more in welfare, skills and education.
More commercial investment
This is not just about the public sector, it is time to see the commercial financial markets doing more. They, like us in the public sector are interested in averting decline. This week, I was at the launch of the New Economy Working Papers, published by the Commission for the New Economy and heard a presentation of a paper on the equity market in Manchester and the North west, co written by my one of my CLES colleagues- Adrian Nolan.
In this paper, it is clear that in thinking about the local economy, Local authorities need to improve their approach to capital markets, but more importantly commercial investment needs to change its attitude.
We need more ‘patient capital’ which sticks around and is more responsive to localities and does a lot more than be spatially footloose and hone in on fast returns. For example, the research found that the average financial deal size in the North West is the lowest across all the regions at £290k, compared to a £790k national average and £2m in London.
Furthermore the introduction of a Community Reinvestment Act as advocated by Urban Forum, and others supported by CLES research, is a practical change which can assist in addressing financial deserts and financial exclusion in communities.
Overall, new behaviours and culture from investors and the capital markets are required as well as new legislation to support this change.
Lets not sleepwalk into a belief we will be OK through a narrow strategy of ‘more for less’. The scale of need is going to be too large.
Local government needs an empowered context for public services with financial levers coupled to investment markets which deliver more!
From Neil McInroy
Neil McInroy is chief executive of the Centre for Local Economic Strategies . He has recently returned from a series of visits around the world to see how economies can be boosted by action from local authorities.