We are told to expect a ‘Budget for Growth’ next week.
After almost a year devoted to slashing the deficit, chancellor George Osborne is now moving on to an attempt to strengthen the economy. In particular, the government will be trying to fix the local economies of places that have, despite over four decades of public policy, remained in decline.
No one knows whether such measures will be successful in stimulating the private sector to generate jobs
Cutting the deficit will lead to reduced public spending, which is predicted, in turn, to produce higher levels of unemployment in areas heavily dependent on public sector jobs. Local enterprise partnerships, the regional growth fund and enterprise zones (EZs) are building blocks of the government’s early efforts to produce an economic policy. Tax increment finance (TIF) is also likely to be part of the mixture.
No one knows whether such measures will be successful in stimulating the private sector to generate jobs, particularly in places where the economy has been in structural decline for many years.
In parallel, ministers are about to go public with the details of their review into the local government funding system. It is likely Eric Pickles will propose the local retention of business rates. This reform, coupled with the New Homes Bonus, will be intended to create incentives for councils to expand their council tax and non-domestic rate base: more planning permissions would lead to more local tax - at least where there is pressure to develop.
Policies such as LEPs, EZs and TIFs may turn out to be the greater part of the government’s overall economic growth policy. Mr Osborne, in common with most recent British chancellors, has shown no interest in old-fashioned ‘industrial’ planning. Efforts to incentivise local economies, in total, will be the nearest we get to such a policy.
Local government will, therefore, have a key role in facilitating economic growth. Councils’ planning, economic development and housing policies may need to change for them to benefit fully from the policies on offer. Similarly, it is hard to imagine new, localist, institutions collectively delivering such pro-growth outcomes. Unless local authorities can use the government’s various grants, tax breaks and incentive mechanisms to full effect, little will happen.
Put simply, Whitehall will to a significant extent depend on town halls to deliver government economic objectives.
Tony Travers, director, Greater London Group, London School of Economics