Speech

Driving local growth

This speech was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Transcript of the speech as delivered. It’s a pleasure to be here today to confirm and celebrate the first new local enterprise partnerships…


Transcript of the speech as delivered.

It’s a pleasure to be here today to confirm and celebrate the first new local enterprise partnerships, and mark what is, I believe, a pivotal moment for local government.

Context

The difficult decisions set out in last week’s Spending Review are vital if we are to reduce the deficit and put Britain’s finances on a sound footing. Like the rest of the public sector, local authorities must adapt to constrained budgets. No-one in Whitehall underestimates the scale of change this implies for town halls. It means not only working as hard as possible to eliminate unnecessary waste and duplication, but also rethinking many forms of service and ways of working from scratch. Even for the most forward-thinking and advanced councils today will need to be doing things differently in four years’ time from how they do them now.

But the counterpart to constraint of one kind - economic constraint - is freedom of another kind - freedom to lead, to innovate, and to exercise choice. This government is committed to achieving a fundamental shift in the way the country is governed. We want to pass unprecedented power and influence to a local level. Instead of being agents for the local delivery of Whitehall’s priorities, local authorities should wield genuine power and responsibility, with the flexibility to listen and respond to local people’s hopes and ambitions for the place where they live.

That’s why we are radically reducing targets, removing centrally-imposed strategies, stripping out unnecessary bureaucracy and freeing up local funding from the vast majority of conditions and ties. This is opening up space in which local authorities can exercise the leadership, ingenuity and imagination to adapt to changing times. The best and most ambitious will be seeking not only to protect or prioritise, but also, wherever possible, to improve frontline services. Many authorities are taking a sound approach by asking fundamental questions about what they do and how they do it. Proposals from Westminster, Hammersmith and Fulham and Kensington and Chelsea to pool a wide range of functions and services are only the boldest of a multitude of innovative plans being considered by different authorities across the country - including sharing chief executives; bringing together services such as health and social care to deliver better results at lower cost; and inviting the charity and voluntary sector to play a greater role in the delivery of services.

Economic imbalance

Local enterprise partnerships sit in this same tradition of locally-led innovation. They represent part of the solution to the most pressing challenge facing the country as a whole, and that, of course, is putting the economy back on a firm footing for the long term.

Last week, the Governor of the Bank of England summarised it like this:

After an unprecedented financial crisis and deep recession, the UK economy needs to rebalance.

Compare with what my colleague the Business Secretary said in June:

(we have) an economy that is seriously unbalanced both in its sectoral mix and in its regions.

Three facts bring this imbalance home.

First, financial and business services have been Britain’s single largest sector of the economy since 1990. They play a bigger role in Britain’s economy than they do in France, Germany, the US or Japan, and still account for a bigger share of national GDP than manufacturing. The financial and business service sector has an important role in a renewed economy. Historically, however, at its most successful, Britain has excelled in not one area of economic activity, but many: technology, trade, communications, construction - and we cannot expect financial and business services alone to shoulder the responsibility for driving growth today.

Second, there is significant geographic imbalance in Britain’s economy. Only a handful of other cities among the OECD countries - including Seoul, Budapest, Bratislava and Dublin - dominate their national economy to a similar extent.

On one hand this is a huge asset. As the CEO of one global bank put it to me, “the dominance of the City of London is a problem that France and Germany would love to have.” On the other hand, while London and the South East forge ahead, other parts of England grow far more slowly, and evidence suggests that this geographic imbalance is growing over time. I want our other great cities like Leeds and Liverpool to be economic powerhouses in their own right.

Third, even in the wealthiest areas, there remain significant pockets of unemployment and deprivation. Whatever the differences in economic performance between broadly defined parts of the country, the differences between different towns and neighbourhoods are also often great. Tower Hamlets, in the shadow of Canary Wharf, has three quarters of children growing up in low-income families.

The drawbacks of regional development agencies

This government’s vision is to achieve growth that is sustainable and long-lasting, that flourishes in every part of the country, and which leads to a more diverse, and therefore more resilient, economy.

This is the vision set out in our White Paper on Local Economic Growth published today.

When this government came to power, some of the vehicles in place to deal with this challenge were simply not up to the task. Take, in particular, the Regional Development Agencies, the previous government’s chosen method to promote growth in different parts of England. Despite the hard work and good faith of the people who worked in them, these were organisations that were flawed in theory, and ineffective in practice.

First, their boundaries simply didn’t reflect how economies work. It is wishful thinking to imagine that there can be a common solution to the challenges faced by a hotelier on the Isles of Scilly and a commuter from Clifton; or between a Hastings fisherman and a entrepreneur in Milton Keynes, yet this is precisely what the design of Regional Development Agencies implied. Meanwhile, the Thames Estuary - with all its towns and communities and businesses sharing a common interest in inward investment and the development of transport links - was divided between three different regions.

Second, rather than arising from the grass roots up, Regional Development Agencies were imposed from the top down. Their very design was a reflection of Whitehall’s ambitions and plans more than they were of local aspirations and needs. As my colleague in the Business Department, Mark Prisk has said - they “lacked any real democratic accountability to the citizens they (were) supposed to serve.” In some areas this led to a lack of real connection with local businesses, and a sense of disempowerment, frustration, and of being “done to”, rather than encouragement to take initiative.

But the problem isn’t just that the Agencies were based on false premisses, they didn’t even succeed on their own terms - that is, to close the gap between the economic performance of London and the South East, and the rest of the country. For the period between 1990 and 1998, the gap between the growth in Gross Value Added of the Greater South East, and the growth of the rest of England stood at 0.6 percentage points. Between 1999 and 2008 - the Regional Development Agencies’ first nine years - the gap was a familiar 0.6 percentage points.

If only the measure of success had been the rate of production of documents instead. I don’t want to pick on any one Agency, but the reader hungry for details of the South West Regional Development Agency’s activities is spoilt for choice.

You might whet your appetite with the ‘Regional Economic Strategy for 2006-2015’; move on to ‘A Delivery Framework for 2006-2009’, then progress to a ‘Spatial Implications’ paper called ‘Place Matters’.

You could stop there and refresh your palate with a ‘reference guide’, before tackling the ‘evidence base refresh’, the ‘summary of consultations’ and ‘the environmental report’.

For afters, why not try the ‘Commentary on the extent to which the Sustainability Appraisal recommendations have been integrated into the finalised regional economic strategy’, the ‘corporate plan 2008’, or the ‘updated corporate plan 2009-2011’ - which bears the interesting title, ‘What now?’

Finally, if you’re still not satisfied, there are the annual reports and accounts to plough through. In some years, the Agency produced an annual review too. You may be wondering - what is the difference between the annual report and an annual review? Let me tell you: a report has tables - a review has pictures. And very pretty they are too.

I’m not questioning the idea that public bodies should report on their actions. Proper accountability is only possible when taxpayers have clear and accessible information about where their money is going.

But this is just part of the output of just one of nine agencies. Imagine all these documents, or similar, multiplied by nine. It’s a mountain of paperwork next to a molehill of achievements.

Local enterprise partnerships - the principles

We propose to remove the tier of artificial regions, get rid of the bureaucracy, and return power to the local level and into the hands of local people, local organisations and local businesses. Over the summer we challenged them to come forward with proposals for joint working on economic priorities.

In essence, the idea behind these local enterprise partnerships is straightforward. It’s about bringing people together - local authorities from across administrative divides, business leaders and civic leaders with their different experiences and viewpoints - in a common goal: to promote jobs, growth and prosperity in their local area.

But in other ways, these partnerships represent a significant departure from the old approach.

First, local enterprise partnerships truly are locally led. We deliberately chose to keep guidance and strictures about what proposals should look like to a minimum. Ultimately, we in Whitehall don’t presume to know better than local businesses and civic leaders what’s needed at a local level. Some, at first, found this challenging. What exactly should our bid look like? What process should we follow? Will there be more guidance? There’s a certain comfort in being told what to do and, frankly, some authorities have grown too accustomed to relying on instructions. That’s not our view of good governance. The opportunity of local leadership lies in taking responsibility and exercising control, and the best proposals have demonstrated just that.

Second, these partnerships are about working in new and better ways; they are not simply a means for securing supplementary resources. We envisage, for example, that partnerships will be able to bid for the £1.4 billion Regional Growth Fund, but will not receive preferential treatment over other eligible bids. Rather, the key to their success will lie in pooling resources and sovereignty - such as planning powers - to achieve efficiencies, and make limited resources deliver bigger changes. In many cases authorities will already be able to get on with closer joint working right away but where they encounter specific barriers to growth, we in Whitehall will do our part to remove those barriers, granting greater local discretion so that - for example - it’s easier for partners to align funding and coordinate activity on major projects of common interest - whether it’s housing, transport or skills. This is not, incidentally, the Department for Communities and Local Government saying one thing and other Departments carrying on with business as usual.

Here, for example, is what Phillip Hammond, the Transport Secretary said earlier this month:

Once the partnerships are formed, I want to see how far my Department’s local capital funding can be devolved.

Third, these partnerships put the private sector at the very heart of efforts to drive local growth. Too often in the past there was a certain myopia about regeneration. The old remedy to poverty, deprivation and unemployment was the injection of large amounts of public money. But there was too little emphasis on such vital questions as - where are the entrepreneurs and businesses who are going to rent the new offices? Who’s going to employ the people living in new homes?

As the Prime Minister said at the CBI earlier this week:

The new jobs, the new products, the new ideas that will lift us up will be born in the factories and offices you own - not in the corridors of Whitehall.

That’s why we have insisted that local businesses must play a central role in the new partnerships and it’s been truly encouraging to see that there has been great appetite to get involved. Every single bid that we are giving the go-ahead has strong local business involvement. The Members of the Chambers of Commerce both locally and nationally have been staunch supporters and that is very welcome indeed. And in many cases the chairs of partnerships are likely to be business big hitters: those already confirmed include Sir Terry Leahy, formerly of Tesco, in Liverpool; and Sandy Anderson, formerly of ICI, in the Tees Valley. There will be many more in the months to come.

The partnerships - emerging proposals

Today, I’m delighted to be able to confirm that the first 24 partnerships are good to go forward. All share some common attributes. They are built on how areas think about themselves, how they relate to each other, and genuine shared interest - not on an arbitrary Whitehall blueprint. They have a strong level of business engagement. They are testament to local ambition and ingenuity, and proof that central government does not need to micro-manage.

But they are also hugely diverse, reflecting the wide variety of different local needs across England. Some are rural, some urban. Some North, some South.

Some cover areas with very significant populations - some 3 million people live in the Leeds City Region, for example - while others have a very large geographic spread, such as ‘Coast to Capital’, reaching from Brighton to Croydon.

Some are cities, such as Manchester or Sheffield, who want to match a proud industrial heritage with a strong modern economy by encouraging industry and joining up centres of employment and enterprise with residential areas.

Others, such Cornwall and the Isles of Scilly, see a role in fostering tourism; and others, such as Oxfordshire City Region, want to make the most of the presence of world-class centres of scholarship, research and innovation.

Taken together, these 24 partnerships represent:

  • £518 billion, or 54 per cent of England’s Gross Value Added
  • 1.1 million, or 57 per cent of all businesses in England
  • 13 million employees, or 58 per cent of all employees in England; and
  • a population of 31 million, or 60 per cent of England’s population.

Without wanting to be invidious, I’m particularly taken by some of the areas which illustrate true local vision and determination.

The Kent, Essex and East Sussex partnership has the potential to be an economic powerhouse which will help develop the Thames Estuary, and could create more than 100,000 jobs in the longer term; but it will also drive the regeneration of historic seaside towns such as Hastings, Margate, Ramsgate and Southend.

The Thames Valley Berkshire proposals, which cover towns such as Reading, Slough and Windsor, will focus on improving transport links and infrastructure, boosting skills and improving the supply of housing.

And the Tees Valley Unlimited proposals have been put forward with great energy, and could really put Teesside on the map, making the most of the area’s immense potential and its local strengths in petrochemicals, port services and the biotechnology sector.

I very much look forward to seeing these and all the other proposals come to fruition.

Next Steps

So, what happens next? To the partnerships who have had the go ahead today, the message is simple: the ball is in their court. It is now for them to recruit their boards, set their priorities, and begin their conversations with the department about how we can help by removing barriers and passing greater control from the centre.

Let me be clear, though. The announcement of 24 areas today is a beginning, not an end. For those proposals which did not quite make it this time - we hope that they will draw inspiration from what is possible, and we will continue to support them as they refine their plans. And any other area that wants to have a local enterprise partnership that suits business and community aspirations can come forward with proposals at any time.

Of course, in many ways, for the bids that have been cleared, the hard work is only just beginning. Their results will reflect the effort that goes into building and maintaining relationships at a local level between public bodies, the private sector, voluntary and charitable groups and more. Their achievements will be in proportion to the ambition of what local partnerships ask of us in central government, and our commitment in removing barriers and constraints.

In sum, this is a unique moment of challenge and opportunity for all of us, and what we do and achieve over the coming months will, in the end, be a test of our collective commitment to a better way of governing and driving local growth in every part of England.

Ends