Starting in April the scheme will allow local authorities to
receive a proportion of increases in local business rate revenues to
deal, the child tax credit and the pension credit.
The chancellor said:
'Because all their business rates income went to central government,
in the past local authorities had no direct financial incentive to
encourage new business creation. Now under our business growth
incentive scheme local authorities keep a proportion of the
additional business rate income generated by new business creation.
'Based on historical data we estimate that in total as a result of
this measure local authorities could gain up to£1bn over the
next three years - a further incentive to encourage local indigenous
'And a boost for business in every town, city and region - every
community across the country benefiting from more business and more
1. The local authority business growth incentives proposal was
announced by the chancellor in the Pre-Budget Report 2002 and will
take effect from April 2005. The government will publish the results
of the second consultation on LABGI shortly, following responses from
a range of stakeholders including local authorities and business
2. Based on historical data, and depending on the exact form of the
scheme, it is estimated that the scheme could divert up to£1bn
in additional business rate income to local authorities in England
and Wales. Possible gains in individual English regions have been
East Midlands 60
North East 50
North West 130
South East 110
South West 85
West Midlands 150
Yorkshire & the Humber 120
SPEECH BY THE RT HON GORDON BROWN MP, CHANCELLOR OF THE EXCHEQUER AT
THE SUSTAINABLE COMMUNITIES SUMMIT IN MANCHESTER
'It is a pleasure to be here in Manchester today.
The economic heartland of our country. Once remembered most for its
role in the industrial revolution, now the largest and fastest
growing city outside London. Home to six higher education
institutions and 90,000 students. Leading in high-quality research
with specialist facilities like the Daresbury laboratory.
And I want to congratulate Manchester on becoming one of our first
science cities nurturing world-beating businesses in hi-tech sectors
from biotechnology and pharmaceuticals to digital electronics.
Now I can genuinely say that the Treasury and I are privileged to be
associated with the challenge, led by the Deputy Prime Minister John
Prescott, of creating sustainable communitiesin our towns, cities
and rural areas.
And I want to start this morning by welcoming our distinguished
international visitors to Britain and by congratulating all the
* local authorities
* regional development agencies
* town planners
* community groups
* specialists in every field and from every continent
on the huge advances that have been made in our understanding of, and
action on, what makes for quality of life in our communities:
advances in the study and practice of geography, planning, the built
environment, the role of cities in regions and - my theme today -
understanding of the economic and social forces at work in poorer
And I want to thank you for the work you do, the service you give and
contribution you make.
The fact that you have all come together today; that you are focusing
on the role of regional development agencies, local government, local
communities; that you are discussing how working together we can
transform communities into sustainable communities; is a reflection
of how both economic policy and how regional and urban policy are
being transformed - and you might say humanised - and it is this I
want to talk about today.
I think most of you would agree that 50, 20 or even 10 years ago the
idea that the Treasury would be interested in issues like public
space, the design quality of public procurement, environmental
standards, devolution, regionalism and social exclusion would be
But we know that not only are these questions vital to successful,
economically vibrant communities but they are at the heart of the
agenda for social and economic progress.
The goals we seek should be high and stable levels of growth
employment and sustainable development.
So I now believe that Finance Ministers faced with the challenge of
environmental degradation and the need for sustainable communities
have to ensure that economic, social and environmental policies are
better in balance than ever before.
But there has been a second major change that Finance Ministers have
had to recognise - and it goes to the heart of what you have been
discussing in each of your sessions yesterday.
The old idea in regional economic policy was of help directed from
Think of Britain's first generation of regional policy, before the
war: essentially ambulance work getting help to high unemployment
areas - central government providing first aid.
And then the second generation in the 1960s and 1970s was based on
large capital and tax incentives delivered by the then Department of
Industry and then overseen by Brussels.
When you think back the policies of the 1930s were just about first
aid - to paper over the cracks of mass unemployment - and there was
little that was comprehensive or organised about the planning behind
When a Labour Prime Minister stood up in the House of Commons to
explain why four areas of the country had received first aid when
faced with unemployment and this region - the north-west - with
similar levels of unemployment had been refused he replied: 'there is
no logic in the conduct of human affairs'. At best it was rescue not
And so we moved to that second era of regional and industrial policy
- all advanced industrial economies trying to attract as much major
company mobile investment as possible.
But as with first aid and ambulance help for the depressed areas in
the 1930s, so too reliance of incoming multinational investment later
did not do enough to close the gap between the areas of high
unemployment and areas of low unemployment, and ensure both social
and economic regeneration.
That is why just as we have moved macroeconomic policy from simply a
concern about high and stable levels of employment to a concern also
about sustainable communities, even Finance Ministers are now
recognising that supply side or microeconomic policy must be about
more than first aid, more than reliance on external investment to
solve the problem, more about what I call the third stage of British
regional and urban policy where the new emphasis is about local
action and using all levers for regeneration.
An emphasis not just on encouraging inward investment - important as
it is - but on encouraging investment generally ---- building local
indigenous strength through encouraging local innovation, local
skills and local investment, and doing so at a local level in an
integrated way. And that is why both our regional development
agencies and local authorities have new freedoms and flexibilities
for local people to make decisions based on local needs.
So from the top down centralised systems of regional and urban policy
- the dirigiste systems of the mid twentieth century - the focus is
on local indigenous creativity.
It is based on the recognition that production need no longer be
based where the raw materials or ports are but where there are
skilled, adaptable, flexible labour markets. And that it is local
attention to skills, enterprise, business creation, innovation and
investment that will bring the most jobs, wealth and prosperity.
And so in this third stage of regional policy our emphasis is firmly
on people - their skills, their flexibility, their willingness to
change, their dynamism.
And so to reduce the persistent regional disparities - to help those
on the margins, those whom prosperity has passed by:
* we must continue to make the right long term choices about
stability and growth and in the next Parliament intensify the
economic reform agenda. And when the G7 Finance Ministers meet this
weekend we will look at how each continent can contribute to that -
Europe by economic reform, the United States by tackling its deficits
and Japan by financial sector change;
* we must ensure the finance necessary to back reform and
modernisation in local public services - the task of last July's
* and we must also, more fundamentally, tackle not just the
consequences of unemployment and poverty and its symptoms but the
underlying causes -- being aware more than ever before of just how
employment, skills and enterprise backed up by investment in
innovation and infrastructure are the route out of poverty and
deprivation for individuals, towns and cities and regions.
And while it is right in this third generation of regional policy for
central government to establish clear long term goals, the people
closest to the ground in the regions and our local communities should
be equipped and empowered with maximum local flexibility and
discretion to innovate, respond to local conditions and meet special
So what is the policy agenda that follows from our recognition that
policy should be geared to high and stable levels of growth,
employment and sustainable development; and that only a focus on
local people, their jobs, skills, enterprise and creativity is the
way to building strong sustainable local communities?
First, the Treasury and central government generally will continue to
devolve power away from the centre.
Leading the way, John Prescott has sponsored regional development
agencies, given them responsibility to promote enterprise,
employment, skills and regeneration in their regions - and the
resources to do so. They now have budgets worth in total£1.8
billion a year,£2.3 billion by 2008 with, I believe, unprecedented
freedoms - within a single budget without the old ring fencing - to
decide how to use these resources.
Now backed by a£100 million fund, the three northern RDAs are
working with business on what is called the 'Northern Way' ---
tackling the£29 billion gap in output between the North and the rest
of the UK and creating a corridor for jobs and growth from Newcastle
in the North, to Hull in the East, and Liverpool in the West.
Across the country, local authorities are being given additional
freedoms and flexibilities alongside new pilot Local Area Agreements
that enable local bodies - including councils, primary care trusts,
local police and private and voluntary organisations - to work in
partnership to target resources on local priorities.
And the true devolution of power also means going beyond regional and
local devolution to public authorities and devolving more power from
government altogether and into the hands of local communities.
Giving local people the tools to make improvements to their own
neighbourhoods through programmes like sure start, the new deal for
communities and the safer communities initiative.
Second, Finance Ministries must do more to sponsor and support
policies to regenerate local environments.
Following the recommendations by Lord Rogers, highlighted by John
Prescott yesterday, the Deputy Prime Minister and I have developed a
series of measures to renew run down local high streets and urban
* a 150 per cent accelerated tax credit to clean up contaminated land
and bring it back into productive use;
* 100 per cent capital allowances to enable owners and occupiers to
obtain full tax relief when creating flats for letting over shops and
other commercial premises;
* breaking with flat rate VAT by targeted VAT reductions to encourage
the renovation and conversion of existing properties to bring vacant
homes back into use; and
* measures to tackle the crime that hits businesses, particularly
retailers, in inner city areas;
showing that our objectives for growth and employment are not at odds
with but complementary to our objectives for environmental care and
As all of you who have travelled here today know, transport is
critical. And this will be discussed in other sessions at this
Good management of public spaces and high standards of design are key
to creating communities that are attractive, sustainable places to
live in, invest in and do business in. That is why, in the Spending
Review last July, we introduced a new target to make communities
cleaner, safer and greener - in recognition of the way in which what
people call 'liveability' can drive a neighbourhood up or down. And
through building regulations, planning guidance, our new Code for
Sustainable Buildings and the Community Infrastructure Fund we are
determined to drive up standards of energy and water efficiency,
increase housing density and green space and tackle flood risk, while
protecting and increasing the area of Green Belt.
To reverse decades of neglect, the Government has invested over£35
billion more in housing since 1997. We are implementing Kate Barker's
recommendations to increase housing supply. And because the
renaissance or our cities and communities depend on us addressing the
problems of low demand and the challenge to be more flexible, we have
not only established pathfinders to improve the choice and quality of
housing available - including refurbishing over 15,000 homes in the
north-west - but we are establishing within each region a single body
responsible for managing housing markets and housing investment.
Creating a society with opportunity for all demands that we get to
grips with the vicious cycle of deprivation in our most deprived
estates -- where worklessness, poor education, high crime and poor
housing are all linked and mutually reinforcing.
So we are investing more than£1.6 billion to improve our poorest
neighbourhoods through the new deal for communities, neighbourhood
renewal fund, neighbourhood management pathfinders and neighbourhood
wardens - all excellent examples of policy areas where local
communities are in the driving seat. Within a strategic national
framework, including challenging floor targets, local strategic
partnerships are being given both responsibility for deciding what is
needed in their area and discretion for deciding how it will be
And I particularly welcome the Deputy Prime Minister's announcement
at this conference that he will pilot the development of mixed
community estates in Leeds, London and here in Manchester - a
comprehensive strategy to overcome deprivation by mixing housing
tenures and incomes, regenerating housing stock to attract new
residents, and improving local public services and the local
Third, in pursuit of indigenous economic strength - the route to
sustainable communities in every city, town and rural area of our
country - Finance Ministries should do more to back local
enterprising people and local enterprising firms.
The facts we have to confront are shocking.
For decades many areas have been no-go areas for enterprise.
As late as 2000 the rate of business creation in our high
unemployment communities was one tenth of that in our prosperous
areas with all the consequences for fewer jobs, less prosperity and
less income for local authorities.
If the same rate of business creation prevailed in our poorest areas
as in our richest areas we would have over a hundred thousand more
small businesses in Britain.
But we have to recognise the problems faced by many people trying to
start up businesses in high unemployment communities and the need to
put in place the right incentive structure to stimulate business-led
When we considered the challenge we recognised that inner cities
areas cities and old industrial areas should not be seen as simply
'problem' areas but as new markets where businesses can thrive
because of the competitive advantages they often offer - with
strategic locations, untapped resources, a high density of local
purchasing power and the potential of their workforce. And we want
to remove all unnecessary barriers to unlocking this potential.
This has led to our policies for enterprise at the local level to
help firms start up, invest, hire and expand, including:
* encouraging investment through the Phoenix Fund, new regional
venture capital funds and the Small Firms Loan Guarantee Scheme - now
more generous to start ups;
* more help with hiring, employing and training - the special work of
the New Deal and training programme;
* support and advice for business - the remit of the new Small
* cuts in small business tax, corporation tax and capital gains tax;
* reductions in red tape by removing the independent audit
requirement on small firms, introducing a new flat rate VAT scheme
and removing or reforming over 400 separate regulations;
* and 2000 enterprise areas in the most deprived wards in the country
where we encourage home grown economic activity through stamp duty
exemptions, incentives for renovating business premises, fast track
planning and community investment tax relief.
Together, these measures offer a systematic and coordinated attempt
to create a stronger economic base in previously run down and high
And in the Budget we will do more to break down the barriers to
enterprise and spread an enterprise culture - with Britain now
putting in place the best incentives for small business creation,
backing a new generation of venture capital for expanding businesses,
encouraging every school to value enterprise... and building on the
success of enterprise areas we are now consulting with entrepreneurs,
business and local and regional government on what more we can do to
support, incentivise and remove the remaining barriers to enterprise
in our most deprived areas.
And to achieve this requires the devolution of more power to the
regions. So regional development agencies now have greater
responsibilities for boosting enterprise and science. And from April
the business link service will be locally administered by the RDAs -
improving the delivery, effectiveness and coordination of business
support at the regional level.
But the best ambassadors for this change are not me or you but local
Because all their business rates income went to central government,
in the past local authorities had no direct financial incentive to
encourage new business creation.
Now under our business growth incentive scheme local authorities keep
a proportion of the additional business rate income generated by new
Based on historical data we estimate that in total as a result of
this measure local authorities could gain up to£1 billion over the
next three years.
A further incentive to encourage local indigenous business creation.
Every community across the country benefiting from more businesses
and more jobs.
But encouraging enterprise is also about encouraging innovation and
And every successful region must encourage its scientists, its
inventors and its innovators.
We found in Britain when we looked at the gap between rich and poor
regions that some regions spend just 1 per cent of GDP on R&D
compared to 3 per cent in others.
In one region it was£650 per head on R&D in another just£100.
With the Government's 10 year plan for science - and the one billion
pounds of additional public investment in science over the next three
years - as the foundation, we are already moving from centrally
administered R&D policies to the encouragement of local technology
transfer between universities and companies and the development of
regional clusters of specialisms. And I believe we can do more to
encourage the development of new local science and industry
Regional development agencies are rightly taking the lead -
recognising the importance of science and innovation as drivers of
regional growth, and putting science and innovation at the heart of
their regional economic strategies.
Building on the model pioneered here in the North West, all regions
have now established science and industry councils to forge better
links between businesses, universities and other regional agencies
and support the development of hi-tech industry clusters.
And in the Budget I will renew our commitment to the best incentives
for research and development, with backing for science cities and for
stronger links between higher education and the hi-tech firms of the
Fourth, Finance Ministries must do as we, the Treasury, plan to do:
step up our efforts to boost employment and skills.
Sustainable communities are not just about places but about people --
as entrepreneurs, as skilled workers, as employed men and women.
It is about a Britain of ambition and aspiration where there is no
cap on potential, no ceiling on talent, to limit to progress. A
Britain of ambition and aspiration where because the aspiration and
ambition is so enthusiastically shared by all that all have the
chance and are challenged to do well.
So any solution based on renewing economic activity must tackle the
persistent, often chronic, problems of employment and employability.
When we came to power, seven years ago, our new programme - the New
Deal - was not only based on the principle that work was the best
route out of poverty and the need for rights and opportunities to
work to be accompanied by new responsibilities and obligations to
work, but the new deal and our new tax credits were designed to offer
special help to people and areas left behind.
As a result of the New Deal and our other employment programmes, 2
million more people are in work than in 1997. And it is a measure of
the achievement of the New Deal - for which I thank business small
and large, local authorities, voluntary and charity groups and the
public services - that in the 1980s 330,000 young people were long
term unemployed, today the figure is just 6,000.
But this is not the time to relax our efforts but to step them up.
And after eight years of a national programme I am more convinced
than ever that if we are to get more of the long term unemployed and
inactive back to work, and more successfully fill local vacancies we
need to match our national framework of incentives and sanctions with
more local discretion and flexibility.
If we raised employment rates in the three northern regions to the
level in the South East, for example, nearly half a million more
people would be in work - a huge prize. And we would be closer to
full employment than ever, making our goal of full employment come
true not just for the country as a whole, but even for previously
So it makes sense for local job centres with local knowledge to
develop programmes more sensitive to, and tailor made for, local and
regional conditions and to have greater local powers and new
resources to match vacancies to jobs more quickly, to meet local
employment and skills needs and of course to help all those out of
work realise their full potential.
And just as we have tackled unemployment, so too we must tackle
inactivity. 90 per cent of people coming onto incapacity benefit
want to get back to work. Our task as a government is to help them
to do that, building on the successful pathways to work approach,
through an active, positive strategy offering incentives backed up by
responsibilities so people can meet their own aspirations. The
Secretary of State for Work, Alan Johnson, is today setting out
details of reforms based on obligations as well as opportunities to
give more incapacity benefit claimants the opportunity to work.
And in the Budget, reforms in maternity rights - higher pay, more
time off, better children's benefits - will be matched by closing the
loopholes that prevent mothers benefiting from these new rights.
Improving employment means improved employability. And because some
regions have 12 per cent of the working population with no formal
qualifications compared to just over 5 per cent in others, at the
coming election we will make a historic promise: for the first time
guaranteeing to every single member of the workforce and every
unemployed man and women who is without basic skills, the resources
and the learning facilities to acquire the skills they need, giving
them the choices they need to make the most of their talents.
Building on the 100,000 individual success stories of those given
time off for training through the employer training pilots - the
majority of them women, the majority of them with no prior skills,
the vast majority of them successfully attaining their qualifications
- we are rolling them out to the whole country creating for the first
time a national employer training programme.
But we increasingly understand that policies to engage many thousands
of businesses and millions of adults with new opportunities for
skills cannot be run from central departments or agencies but must
directly engage with regional priorities, local needs and individual
businesses and workplaces.
Already 90 per cent of the learning and skills budget is devolved to
the regions and the new regional skills partnerships will play a key
role in setting priorities for expenditure and making the right
connections within each region between skills needs and the wider
productivity agenda, with regional development agencies and local
learning and skills councils working much more closely together.
So in conclusion I want to match the radical environmental, social
and quality of life improvement to which you are all contributing
with these major changes, economically, over the next few years in
our communities that will help enhance the quality of life:
* more people moving into jobs and more skilled jobs with the work
ethic reinvigorated in every community of Britain as we advance to
full employment not just in one region, but in every region;
* more people able to transfer their ideas and hopes into small firm
start ups and growing businesses as we encourage a new spirit of
enterprise and create a Britain of high and stable levels of growth
and sustainable development where enterprise is open to all.
* more people living in better quality housing in safe and
* all these measures underpinned by devolution of power and
responsibility - local people making local decisions about meeting
local needs - as the way forward.
And just as this conference has already shown that public space,
quality of life, the built environment and quality infrastructure can
help create world class communities, so too I hope I have shown that
new economic and employment policies can contribute to community
regeneration with Britain leading the world in its commitment to full
employment and enterprise for all.
More importantly I believe this conference shows that working
together - central and local government, business, voluntary
organisations and local communities - we can, and will, deliver our
aim that prosperity should be not for some but for all in every city,
every town, every community in our country.'