Make It Local: Growing the economy

Government has the power to free up local economies so that labour productivity could grow by as much as 20 per cent in some areas. It can do this by:[4]

1. Agreeing a devolution settlement for the whole of England which delivers fair sub-national government expenditure and flexible funding to address local needs.
2. Devolving multi-year employment and skills agreements: enabling local leaders to work with partners to deliver jobs and skills driven by local needs and opportunities.
3. Investing in a new generation of social housing: giving councils the funding and powers they need to deliver the homes their communities want.
4. Accelerating local climate action: enable councils to link skills, careers advice and employment interventions with national reform and local climate action and job creation.
5. Revitalising high streets: councils need growth funding certainty and better local powers to shape their town centres, making them more resilient to economic shocks.

“It’s the economy, stupid”

The cost-of-living crisis has brought the performance of the economy into sharp focus. The public wants the economic pie to grow, they want its distribution to be fairer and at the same time they want the environment to be protected. Increasing productivity in every part of England is essential to increasing incomes and reducing inequality. But as we have seen this cannot be achieved through our current centralised system. Since the financial crisis of 2008, productivity in the UK has flat lined and nearly half of the UK’s sub-regions are 10 per cent below the UK average. We know from international comparisons that devolution, which builds on good government and high levels of local integration, can have a transforming impact on productivity.[1][2]

Many of the country’s productivity challenges have been around for decades and our current centralised approach hasn’t been up to solving them. Local economies differ widely across the country in terms of their sectoral composition and their paths to higher productivity, but there are a number of factors that influence economic performance in any setting.

Across England, £20 billion is spent on at least 49 nationally contracted or delivered employment and skills related schemes or services managed by nine Whitehall departments and agencies, multiple providers and over different geographies.[3] Government strategies haven’t set out how schemes like Levelling Up and Towns Funds, Help to Grow, Restart, Bootcamps, apprenticeships, etc work together, with no single organisation responsible for coordinating how the totality can improve outcomes. This cannot be the best way to operate for the future.

Productivity is closely linked to real wages. Both have stagnated since the financial crisis in 2008. Declining real wages negatively impact on people’s living standards and on their actual and perceived wellbeing. Turning this around in the medium to long term will improve the economy, and people’s health, everywhere.

Councils and combined authority areas are the right place to coordinate activity to meet community expectations on economic, social and environmental challenges. We know it can’t be done from Whitehall. We have been involved in a real-time experiment over many years and international comparisons show that our current centralised approach is ineffective in addressing the challenges. With the right capacity and within a stable framework councils and combined authorities can deliver the transformation to the higher skilled, green and fair economy that communities expect.    

Under an umbrella of devolution, one which supplies long-term financial certainty, financial flexibility and some additional powers, local authorities and their partners can achieve better outcomes across:

• transport
• skills and employment support
• housing
• digital technology
• business support
• public sector services
• and highstreets and place.

This will bring about conditions for increased capital investment, improved productivity and better, inclusive and sustainable, economic growth.

Central government must set the framework for decentralisation. It must retain responsibilities for:

• macroeconomic stability
• trade arrangements with other countries and blocks
• nationally significant infrastructure
• making and enforcing the rules on market engagement
• standards and quality of goods and services.

Everything else to do with economic development should be in the decentralisation project. Central government must work with councils and combined authorities on a significant capacity building programme for the sector. This means ensuring the sector is able to develop and employ the skills it needs and is able to attract high quality political leadership, to deliver on the local economy. We have to do what we can quickly, but also recognise that this is a long-term project that requires transformation at local and national level. 

This level of change requires cross-party commitment because it will need to be sustained over multiple governmental mandates. 

Devolution

The framework for devolution has been developing over time and the latest Trailblazer deals and the promise of more widespread devolution are moves in the right direction. But individual deals, however welcome, cannot be the end game and we need to work with government towards a devolution settlement for the whole country which: 

• brings sub-national government expenditure on economic development into line with our major international competitors, such as Germany
• provides non-competitive flexible single pot funding
• allows councils and combined authorities to fairly keep the proceeds of local growth to reinvest according to local need.

Skills and employment support

Work Local is the LGA’s model for achieving better coordination and outcomes across skills and employment support. Multi-year devolved employment and skills outcome agreements (DESAs) funded up by a single pot of funding would enable local leaders to work more effectively with partners – government, employers, training and employment providers and institutions, the VCS and unions – to plan, commission and have oversight of a jobs and skills offer driven by local need, challenges and opportunities.

Work Local partnerships could integrate services like careers advice, employment support, training, and business support services creating ‘one stop shops’ connected to wider services, and partners. They would take a whole systems approach to decisions on infrastructure and capital with learning, skills and employment to maximise opportunities for residents, businesses and the wider local community. 

These devolved arrangements would sit within a wider national strategy to ensure complementarity between places and with national policy. Partnership, democratic accountability and effective use of national and local expertise, knowledge and resources runs right through our Work Local ambition. A cost-benefit analysis shows a place-based, Work Local approach has the potential to increase by 15 per cent the number of people improving their skills or finding work at lower cost, just by using a limited amount of existing investment more effectively. For a typical medium sized combined authority (a city region with a working age population of 960,000), more effective use of around £270 million investment per year would mean an extra 2,260 people improving their skills each year and an additional 1,650 people moving into work. 

To achieve this, national government should co-design a framework for employment and skills devolution with us, and fund and trial Work Local, ensuring:

• all new support and repurposing of existing provision is co-designed with councils so it lands well on the ground
• data is shared with local government and that providers are mandated to support integration
• alignment of boundaries - DWP contract package areas and JCP districts, LEP areas and Local Skills Improvement Plan footprints - to functional economic areas (FEAs).

Housing

Invest in a new generation of social housing

There are currently more than 1.2 million households on council housing waiting lists. Research for the LGA and partners has found that 100,000 new social homes a year would improve the public finances by £24.5 billion over 30 years, including a reduction in the housing benefit bill and temporary accommodation costs.  

Speed up delivery of housing which currently has planning permission

Councils need powers to incentivise developers to build housing more quickly. For example, to charge developers full council tax for every unbuilt development from the point the original planning permission expires; it should also be easier for councils to use their compulsory purchase powers to acquire stalled housing sites or sites where developers do not build out to agreed timescales.

Councils should have local energy planning levers to help ensure the grid is fit for housing growth, the electrification of heat, and to exploit the benefits of renewable energy.

To ensure locally generated investment is focused on addressing local housing need, Right to Buy must be reformed by permanently allowing councils to retain 100 per cent of receipts, allowing discounts to be set locally and increasing the proportion of retained receipts that can be used to meet the cost of replacement homes.

Change rules around developer infrastructure contributions

So that funding is available upfront to support an ‘infrastructure first’ approach so that councils can ensure that key infrastructure - roads, schools, GP surgeries – is built before people move into new homes.

Green economy

Local climate action should be targeted to drive inclusive and sustainable growth. All businesses, all households, everyone will need to take climate action. For the benefit of all, the public sector should ensure that public effort also enables private markets. The national economy exists as a network of local economies, councils can target local action to:

• build local skills supply chains, pump priming market growth through targeting public investment in retrofitting social homes and public buildings
• build a pipeline of energy, housing and transport projects with the scale and returns to crowd in private capital
• create confidence by signalling the technical solutions and infrastructure needs for different neighbourhoods, for instance through local area energy planning
• enable consumer action by supporting communities through advice, protections, collective purchasing (like solar together), to help people take their own climate action.

Transport

Meaningful and flexible funding would enable Government to reap the benefits from the good preparatory work that is being done by councils on emerging Local Transport Plans. Outcome based incentivisation coupled with five year pots like Network Rail and National Highways will help speed up transport decarbonisation, boost inclusive and sustainable growth and deliver better outcomes more cheaply.

Buses remain by far the most popular form of public transport. Government should fully commit to the reforms and investment as set out in its National Bus Strategy to ensure bus travel remains affordable, people can access work opportunities.

High Streets

Our high streets and town centres remain vital social and economic hubs, however, they remain challenged with High Street vacancy rates at 14 per cent and shopping centres at 19 per cent. This masks sub-regional variation, with some places seeing High Street vacancy rates approaching one in four of all buildings. Along with growth funding certainty, councils need better local powers to shape their town centres, making them more resilient to economic shocks. This includes streamlining the compulsory purchase orders process and removing nationally set permitted development rights.

Digital

To meet mobile and broadband targets, and accelerate rollout, the new government should provide funding for councils to build internal expertise and put in place local digital champions who would support the coordination of local delivery.

Councils will play a key role ensuring the 1.7 million people who rely on technology enabled care are not left without a connection or digitally compatible device as a result of the Public Switch Telephone Network switchover. With 40 per cent of councils responding to an LGA survey not knowing how they will pay for the move to digital telecare, funding to upgrade to digital devices would support their preparation for the upgrade to next-generation digital networks.

Public sector reform

Pilot a new approach to public service investment, by asking areas to come forward with radical proposals to bring together budgets and public services under the leadership of local government.

Set out a clear vision for how the NHS and local government can align investment around place to both support improved health outcomes and improved economic growth. We know that where devolution of health and social care has taken place, areas have seen significant benefits for local residents. For example, the Greater Manchester Population Health Plan update showed a substantial increase in school readiness and a smoking prevalence rate falling twice as fast as the national average.

Similarly, the inclusion of “helping the NHS to support broader social and economic development” as a core purpose of an Integrated Care System (ICS) provides the NHS with the opportunity to develop its role as a driver of local growth. Its ability to drive change as an employer, procurer and place shaper should not be underestimated, but they will only achieve partial success by working alone. Government needs to provide flexibility within budgets to allow local government and ICSs to pool resources to allow for alignment of local anchor strategies, and how these can build on existing economic growth and population health policies.

Devolution cannot turn things around overnight. Improving productivity and economic and social wellbeing takes time and requires long-term cross-party commitment to decentralisation at the national level and changing the way we do things.

Capacity remains a critical issue for councils. Councils face workforce challenges across a full range of service areas. Investment in corporate capacity, knowledge and skills is needed in many councils to be able to meet devolution aspirations for improved economic outcomes in the short term. This needs to be built up.

Our economy is changing fast. We need to address labour market challenges (eg rising vacancy and economic inactivity rates and low skills levels), and at the same time capitalise on opportunities of green growth, automation and new global markets. National policy struggles to anticipate these or find meaningful ways of enabling local leaders to address the totality of these issues which differ from place to place. We need to trust local places to make the right decisions for local communities. If we get the restructuring right, then over the long-term we could see labour productivity grow in some areas by as much as 20 per cent.[4]

Make It Local publication
Improving our health and care services
Acting on climate change
Tackling the rising cost of living
Building more houses
Improving life chances for all children
Making our communities safer
Building strong local politics