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Chancellor Gordon Brown today used a speech at the deputy prime minister's Delivering Sustainable Communities Summi...
Chancellor Gordon Brown today used a speech at the deputy prime minister's Delivering Sustainable Communities Summit in Manchester to highlight the government's£1bn local authority business growth incentives scheme.

Starting in April the scheme will allow local authorities to

receive a proportion of increases in local business rate revenues to

spend on their own priorities. It builds on the success of the new

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

business creation.

'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

estimated at:

Region £m

East 80

East Midlands 60

London 150

North East 50

North West 130

South East 110

South West 85

West Midlands 150

Yorkshire & the Humber 120



'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

participants here:

* councillors

* local authorities

* regional development agencies

* town planners

* academics

* community groups

* companies

* 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

almost unthinkable.

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

the centre.

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

spending review;

* 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

estates including:

* 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

Business Service;

* 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

unemployment areas.

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

people themselves.

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£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

depressed regions.

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

sustainable communities;

* 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.'

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