For the UK economy to blossom outside of London, politicians need to get sharing

Divine intervention? The Adonis review offers some lessons. Tom Blackwell, CC BY

An economic recovery has emerged in the UK that is unbalanced in social, geographical and sectoral terms. Whether or not decentralisation can improve this might well come down to simple questions of trust and stability.

It is against this backdrop of uneven growth that Lord Andrew Adonis has launched his growth review for the Labour opposition. Adonis argues for a more coherent national growth strategy prioritising innovation, skills, growing companies and decentralisation to cities and county regions.

The review has familiar echoes with Michael Heseltine’s growth review produced for chancellor George Osborne in 2013. Politically, this highlights the coalition government’s somewhat lukewarm response to Heseltine’s recommendations, especially on the extent and nature of shifting money and power outside the corridors of Westminster.

The Adonis review adds some substance to the vibrant public debate around what to do (if anything) about the dominance of London and the South East and its growing disparities relative to the rest of the UK. It emphasises the qualitative as well as the quantitative extent and nature of growth. It focuses attention on the creation of better quality jobs with training and career development prospects as well on stronger and more sustainable companies able to innovate and export. Drawing on less visible government intervention in the US, it underlines too the need for a “smarter” and more entrepreneurial state, rather than a larger and higher spending state. Doing more with the money government already spends and invests to achieve better outcomes is the trick. Such ideas are challenging for those who advocate simplistic arguments about smaller and less government.

Power to the people

One thing given prominence is the need to boost the local and city-regional dimensions of growth as the route to a more balanced economic recovery. Adonis wants us to meaningfully enhance the powers and resources available to cities and county regions especially for infrastructure, transport, housing and skills. He also advocates a strengthening of the existing Local Enterprise Partnerships in England, and the encouragement of integrated governance structures – the so-called Combined Authorities. These have been established around Manchester, the North East, West Yorkshire, Sheffield and Merseyside, and have given those regions the ability to retain more of the business rates generated in their local economies. There is much in common – if not always acknowledged – between the coalition’s approach and the ideas advocated in Adonis’ Review for Labour. More crucial though might be a key difference in the extent and nature of decentralisation.

Some thorny issues remain in several important areas. First, the decentralisation envisaged requires a shift in how the state works at both local and national levels. The often overlooked issue is what needs to happen in Whitehall and Westminster to make such decentralisation a reality and to make it work.

Seats of power. UK Parliament, CC BY-SA

Austerity politics in what is still a highly centralised system in England has made this more difficult. It helps dissuade politicians from releasing more powers and resources to the local level and it acts as a disincentive to trust local politicians and officials to develop credible plans, wield power in accountable ways, spend their money wisely and deliver policy effectively.

Second, Adonis reiterates the strong argument for empowering people at local level to arrange their own investment in infrastructure, skills and economic development. Critical to this is creating what the OECD calls “fiscal space”: the capacity and flexibility for local governments to raise and deploy resources to address particular local concerns.

Our work reviewing the City Deals in England as part of the EPSRC and ESRC-funded research centre on innovative business models for local infrastructure delivery (iBUILD) has thrown some light on this. It shows that city authorities in England are indeed trying to pool, upscale and tailor resources for long-term investment, and use the private sector in the process, but they are hampered by restrictions within the current system. Retaining a higher level of business rates, then, is but one step on a much longer journey toward meaningful fiscal decentralisation.

Third, the review draws on some of our own national survey findings to pick apart some of the problems with the current system of Local Enterprise Partnerships. In brief, they lack the staff and resources to meaningfully shape growth in their local economies (although this is changing slowly); their geographical coverage is sometimes mismatched with functional economic areas, and their ability to mobilise and orchestrate local partnerships of business, public and civic sectors is mixed.

Keeping them on their toes. Addison Berry, CC BY

More fundamentally, institutional churn and instability is a hallmark of sub-national economic development in England. The pendulum has swung between regional and local arrangements in the post-war period and institutions have come and gone. We have seen Regional Planning Councils, Local Enterprise Agencies, Urban Development Corporations, Regional Development Agencies, Government Offices for the Regions and Regional Chambers.

Seeing quite how we break out of this cycle to move towards more continuity and stability is tough. And it’s hard to imagine, for now, how we can incorporate the kind of longer-term strategic and integrated economic development and planning of the kinds pursued in cities and city-regions in Germany and Sweden. Constant change has produced problematic structures that then spark calls for yet more change.

Follow the leaders

Last, Adonis’ blueprint for Labour rightly places an emphasis on the need for better local and regional leadership. We need strength, far-sightedness and civic sensibility in leaders, he says, as well as an ability to develop ambitious, visionary and credible plans which work in partnership with the public, private and voluntary sectors. This is all laudable stuff, but is it not entirely clear where the “new generation of Joseph Chamberlains” will come from. The politics at local and city-regional level remains constrained by England’s highly centralised governance system.

More decentralisation could usher forth a new generation of local leaders. Directly elected Mayors only found favour in Bristol and Doncaster but not in Birmingham, Bradford, Coventry, Leeds, Manchester, Newcastle, Nottingham, Sheffield or Wakefield. And if that won’t bring forward candidates of the type Adonis craves, then some other institutional innovations are needed to encourage their emergence.

The dangers of a two-speed country dominated have been front and centre of political debate all year. But the enduring point from the Adonis review, and perhaps from Heseltine’s before it, is that inequalities between people and places are both a cause and a consequence of unbalanced growth, and demand not just a stimulant, but a genuine structural remedy if we are to make progress.