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Crisis: Hazel Blears' perspective

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There is no bigger priority for this government than doing what we can to make the slowdown as short and as painless as possible: from recapitalising the banks, to supporting people facing repossession.

But vital as international and national actions are, this recession will be felt intensely at a local level. Local government has a crucial role to play in helping people through tough times.

Over the past decade, councils have transformed themselves into some of the brightest lights in the public sector, rightly feted for their innovation, ingenuity and leadership. The downturn is the acid test of all these qualities.

As national government seeks to provide the right challenge and support, four principles should inform how we work together.

This is no time to shy away from devolution. Local flexibility is now more important, not less. Different towns - in some places, even different streets - will be affected in different ways. We need nimble and targeted responses from local government.

A strength of local area agreements is that councils have room to tweak services and give people practical support. Last month, City of York held an event on managing debt.

Ipswich Borough Council and Citizens Advice have set up a desk in the town hall to help people claim benefits and tax credits. Responsive leadership can make a huge difference to people when they need it most.

Second, it can be possible to find opportunity in challenges. Although low interest rates mean the three-year funding settlement will stretch further, many councils are seeing demand for services rise as income from other sources, such as charging, falls.

This should be a catalyst for innovation. Local government has already made impressive efficiency savings over recent years. The continuing growth of ventures, such as Cambridgeshire and Northamptonshire County Council’s project to pool back-office functions, shows that there remains scope for further improvement.

Innovation could also mean breaking the mould in service design and delivery. Take childhood obesity. A whole range of groups and services have an interest: schools, parents’ groups, leisure centres, GPs. By coming together at a local level they can surely find imaginative ways to head off problems before they arise, saving money in the long term.

Councils are ideally placed to make those local conversations happen, and the most far-sighted will seize the chance to be imaginative.

Third, opening up local democracy still matters. In the past year, councils large and small, rural and urban, have taken huge strides in getting people involved and making themselves more accountable through participatory budgeting, town hall open days, community contracts and more besides.

In tough times there’s a temptation to retreat into the bunker. It must be resisted.

Involving people more closely is one way to get services right first time, avoiding waste and boosting satisfaction. What’s more, when there are tough calls to make about budgets and priorities, it’s vital that people feel part of decision making.

The alternative is disconnection, discontent, anti-politics, and the rise of extremist parties who offer glib solutions to complex problems. None of us can afford to let that happen.

Fourth, dealing with immediate challenges is no excuse for neglecting the long term. It is already time to be planning for the upturn. Most councils will not wait for the economic duty proposed in the Sub-National Review before getting on with the job: places as diverse and Westminster City Council and Somerset County Council are already developing strategies for recovery.

While it is hard to be certain how and when the upturn will come, it is clear that London and financial services will not drive national growth as they once did. The future lies in stronger, more prosperous regions, with more diverse economies, and cities outside the south-east which can hold their own with the best in the world. We now have ten multi-area agreements equipping city-regions with new powers and flexibility to unlock their full economic potential, creating jobs and promoting skills.

This should be a year of swift progress, turning those ambitions into reality, and more city-regions coming forward with plans. But MAAs are one step in a journey, not the end of the road. The Local Democracy Bill will allow for Economic Prosperity Boards, taking on joint powers to boost sub-regional economies.

And in the Budget we will confirm two areas to pilot City Region Agreements, conferring a level of discretion and devolution currently seen only in London, and potentially setting the pattern for a new generation of powerful, prosperous cities.

We can overcome the challenges ahead. The UK last went into recession in 1990. Back then, councils were underfunded and demoralised. This time, they are stronger than they have been for years. I’m confident that we can deliver, working together.

Two speakers at next week’s LGC/New Local Government Network annual conference outline how councils can cope with a tough 2009.

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