Economic development has so far been a desirable, rather than essential element of the local government remit. This looks set to change, however, as a consultation begins into how councils should take a more active lead in developing the prosperity of their areas.
The Sub-National review of economic development and regeneration, published by the Department for Communities &
Local Government in July 2007, proposed for the first time that economic development should be a statutory duty for top-tier local authorities.
The main areas of this work are economic and community regeneration, business support, employment programmes, increasing local skills and attracting employers and investors into the area. The reforms support the concept of place-shaping introduced in the Lyons report, says Leo Boland, chief executive of Barnet LBC.
“The report raised the question of how councils can ensure greater prosperity and sustainability for their communities. This is still relatively new territory for councils,” he says.
The review acknowledges that the current approach to economic development is too fragmented and complex and that more power should be handed to councils so they can deliver strategies that meet local need. It proposes a number of changes that, in theory, should mean councils will be able to cut through a chunk of bureaucracy in accessing funding and agree strategies with the regional development agencies (RDAs).
Council economic experts have welcomed the assessment duty with mixed enthusiasm and caution. Mark Pembleton, Cheshire CC policy adviser, describes the proposals as “fantastic”. He says: “Economic development has not been given the standing it deserves. If you’re going to address the gap between north and south then this is what will make the difference,” he says.
Paul Raynes, Local Government Association programme director for economic issues, agrees that economic development duty is a positive step forward. “We see a need for the analysis to be an evidence base for local area and multi-area agreements (MAAs) and those with other partners to develop infrastructure locally,” he says.
However, once they have the new duty will councils have the cash to make use of their analysis? John Wicks, head of economic development at Bournemouth BC and a director of the Institute of Economic Development, says: “It is important to have the economic duty recognised, but if councils don’t have the resources to act then it will ring hollow.”
And Rafiq Chohan, Slough BC’s head of economic development, takes a similar stance.
“My view is that the duty does not go far enough. Local authorities will have to do an assessment to understand the dynamics of the local economy. But that in itself is no good unless they are having to take action."
The sub-national review does propose a number of reforms to the structure and responsibilities of the RDAs which currently have most responsibility for economic development that should go some way to addressing these concerns. Taking forward the review of sub-national economic development and regeneration, which was published by the DCLG last December, outlines proposed reforms to streamline regional economic development.
Under the proposals, RDAs outside London would have an increased strategic role. They would become designated regional planning bodies, taking over planning responsibilities from the regional assemblies. The earliest this could happen is 2010.
Councils will be responsible for agreeing regional strategies with the RDAs. The government expects the agencies to delegate funding to councils and sub-regional bodies wherever possible for programmes that have been identified by authorities’ statutory economic assessments. Councils in London would have the same relationship with the Greater London Assembly, London Development Agency and other stakeholders.
The RDAs will also play a key role in establishing effective LAAs and MAAs with the different councils within economic regions, and the government is exploring whether these partnerships could expect certainty of funding for longer than three years.
“The regional development agencies have not always been as strategic as they might have been. The idea is that by devolving decision making from Whitehall and the agencies they will be getting out of the business of delivery and passing money to councils to deliver on projects,” says Mr Raynes.
Mr Pembleton is also hopeful the reforms will end piecemeal funding for economic development. “We have lots of area-based schemes, such as neighbourhood renewal, where councils have to parade their bids like a beauty pageant.
“At the moment the vast majority of funding is held at a regional level. It is very complicated and often amounts to only small sums of money. With this duty we’re being trusted with a democratic mandate to shape our places,” he says.
Mr Wicks adds: “RDAs are certainly not going to release funding without tight agreements and targets. But it does mean that each local authority would be able to put forward its own particular priorities.”
In terms of implementing the economic assessment duty, Mr Raynes says a lot of councils are already doing this and does not foresee it being a particular challenge for councils. “The review is just about legislating for good practice,” he says.
Mr Chohan advocates the benefits of economic assessments. Slough BC’s review of its economic development two years ago produced a mine of valuable information. “We identified that we had an economy of£7.5bn, with an output of£2.5bn, which made us one of the three most productive towns in the UK outside of London,” he says.
“Just being able to have hard data on where we are at was really useful for understanding economic development. If we hadn’t done the assessment we would not have known that we have a lower than average rate of female employment because we had fewer part-time jobs.
He adds that the SNR reforms will enable the council to act as a broker for the community by challenging national
institutions such as the Learning & Skills Council and Jobcentre Plus to provide more appropriate skills training for its
However, one hurdle to be overcome is exactly how councils should go about collecting data for economic assessment, as current practice varies widely.
“I would like to see something more prescriptive being introduced with councils using similar economic statistics,” says Mr Pembleton.
Another issue that needs clarification is how to involve district councils in economic assessments, says Mr Raynes. “Clearly there are many important levers for economic development in the hands of district councils. There is a need for the duty to take in district councils as well as upper-tier ones,” he says.
Many are hoping that the SNR consultation will provide a platform to debate the ongoing issues over incentives for economic development and the devolution of other areas of funding, in particular, business rates.
Mr Chohan would also like to see the supplementary business rate, proposed in a recent white paper, tied in with the SNR reforms. The supplementary business rate would enable a proportion of local business rates to be ring-fenced for infrastructure that would be mutually beneficial to communities and businesses, such as improved transport links. Mr Chohan says this could bring an extra£2-4m to the council’s coffers.
Mr Boland has a further suggestion on how to generate resources for economic development. “I would argue that along with the duty the government should give us the tools to do this. Councils do not have good financial tools for paying for upfront development.
“At the moment if a development takes place and you get a thousand extra residents it takes several years before we start to get the money back through taxes. We would like the government allocate some of this extra tax from the growth to allow us to raise loans to develop infrastructure,” he says.
Mr Boland has put forward his growth model to local government minister John Healey, as part of the SNR consultation.
Summing up the opportunities of the consultation, Mr Pembleton says: “If those developments [on incentives] are put
alongside the economic assessment duty it is a positive sign that the government is saying local authorities are best placed to determine and deliver economic development.”
2008 SNR implementation
Publication of new regeneration framework
Consultation covering implementation of the integrated regional strategy and the local authority economic assessment duty
Separate consultation on the options for devolving 14-19 education funding from the LSC to local authorities
Advice for economic development companies
Implementation of business support interventions (implementation continues through until 2009-10)
Publication of joint ventures vehicle practical guidance
New RDA sponsorship framework comes into force
New Working Neighbourhoods Fund comes into operation
Publication of new RFA guidance
New LAAs and MAAs begin
Introduce bill to Parliament on single regional strategy and local authority economic assessment duty
Introduce bill to Parliament on devolution of 14-19 education funding from the LSC to local authorities
Introduce bill to Parliament on business rate supplements