Economic recovery from COVID-19 - the biggest public health and economic crisis we have faced for generations - will require a multi-tiered systems approach to economic management.
A recovery that builds back better, to level up opportunities cannot just be run from the centre, nor just from local areas, it needs a partnership at local, pan-regional and national level. This needs to recognise the reality of functional economic areas at sub-regional level, and the benefits that can be achieved through strategic collaboration at pan-regional level.
This report looks at the lessons learned from the experience of subnational bodies and suggests some principles that ought to underpin their further development.
- What are subnational bodies?
They are pan-regional partnerships that exist to co-ordinate activity with their member local authorities and Government. They follow from the recognition of the importance of building economic and infrastructure strategy around functional economic areas, both at a sub-regional and subnational level.
There are two main types of subnational bodies: economic partnerships and transport partnerships (some of which support each other). The most established economic partnerships are in the Northern Powerhouse and the Midlands Engine, followed by the newly emerging Western Gateway and Oxford-Cambridge Arc. There are subnational transport partnerships covering most of England, but only TfN currently has statutory status.
- What's the policy agenda that is driving them?
There are four main policy drivers for these partnerships:
- Closing the productivity gap – the strongest factor driving the initial establishment of the Northern Powerhouse and the Midlands Engine was the need to co-ordinate strategy at pan-regional level to close the productivity gap through investment in infrastructure, skills and innovation
- Devolution – this was underpinned by devolution to Mayoral Combined Authorities (MCA) established around sub-regional functional economic areas, these MCAs could then collaborate at pan-regional level to further accelerate their impact. But just as devolution is incomplete, subnational bodies have also developed ad hoc, rather than coherently.
- Levelling up – the Brexit referendum, along with the unequal impact of COVID-19, has made addressing regional and local inequality a major policy priority, and both MCAs and pan-regional bodies are now focusing on how they can drive levelling up.
- Economic recovery – in the face of the recession that COVID-19 has caused, the number one priority now for subnational bodies is how they can support economic recovery and build back better, working in partnership with MCAs, councils, Local Enterprise Partnerships (LEPs) and Government.
- Pre-conditions for success
The report identifies several factors which are critical to whether subnational bodies can be successful:
- Economic coherence – subnational bodies needs to have a clear economic geography with good evidence of economic interrelationships.
- Subnational legitimacy underpinned by devolution – empowered local government with strong devolution is key to underpinning the success of subnational bodies.
- Government engagement – is very important to make a reality of the commitment to rebalancing, but in practice this has been variable.
- Scope – clarity on the purpose of collaboration at this level of scale, which should be about additionality.
- Key functions
- Infrastructure – planning and co-ordination
- Internationalisation – trade and investment
- Innovation – collaboration between universities
- Voice – to agree collective prioritie
- Economic data – high quality economic evidence
- Challenges and tensions
Because these bodies have developed in a largely ad hoc way, the report identifies several challenges and tensions which they face:
- The need for a clear economic rationale and functional clarity between MCAs and subnational bodies
- A tension between statutory and voluntary aspirations and opportunities
- Incomplete devolution, which can unbalance relationships across the pan region
- The competing dynamics of economic geography vs administrative convenience
- Bottom-up ownership vs Government sponsorship
- How to be an effective pan-regional voice.
The report outlines several principles, drawn from the research, about how subnational bodies could evolve in the context of further devolution and economic recovery.
- Further devolution
The pre-condition for successful subnational working is strong and empowered local government. Therefore, devolution needs to be broadened and deepened. This means:
- Extending devolution across all of England
- Further strengthening MCAs so that they can lead social and economic recovery and renewal
- Subnational bodies should be the level at which the local meets the national through a pan-regional partnership.
- Economic recovery and levelling up
There should be a systems approach to economic recovery and levelling up, with clarity about the role of each level in this process
- MCAs, councils and LEPs should drive recovery and building back better at city region level
- Subnational bodies should have a clear remit in a national plan for economic recovery, renewal and levelling up.
This should be supported by processes that hardwires this approach into Whitehall.
Some of the functions that could best be performed at this level to drive economic renewal and levelling up could include:
- A subnational partnership agreement on pan-regional industrial priorities
- A pan-regional equity investment fund
- Devolution of statutory functions and budget for transport and infrastructure
- Trade and international investment with devolution of Department for International Trade (DIT) functions
- Creation and consolidation of economic observatories.
Different pan-regional areas should be able to shape the exact model of partnership that is appropriate for their circumstances and geography. But where these partnerships receive Government funding, as well as member support, then they will need some common governance principles which are consistent across England. These should support local and national partnership and emphasise complementarity and additionality to the role of MCAs, councils and LEPs. This means a form of governance that:
- Is representative of local government and geographically complete
- Includes key figures from regional businesses, LEPs and universities
- Has an independent chair, agreed with all partners.