COMMENT: This week the government published its long-awaited Industrial Strategy, which it hopes will “transform the national economy” by tackling the UK’s productivity problem, writes Andrew Carter.
Nobody would dispute the importance of this aim, especially following the Office for Budget Responsibility’s recent warning that economic output is projected to fall further in the coming years.
However, for the strategy to bring us closer to addressing the productivity problem, it has to better reflect the different economic challenges faced by different parts of the country, and recognise that policy needs to be co-ordinated at the local level to address them.
As recent Centre for Cities research shows, productivity is not a nationwide problem. Cities in the greater South East are among the most productive in Europe. They are also 44% more productive than cities elsewhere in the country, most of which lag below the national average. To address the UK’s productivity problem, the priority therefore has to be getting cities outside the greater South East punching at their weight.
In this context, it was welcome to see the Industrial Strategy’s focus on giving the new metro mayors more powers and investment to drive growth and productivity in their local economies. This was most notable in the new Transforming Cities Fund, worth £1.7bn, which will be used to improve transport across city regions – an important factor in improving productivity.
Less welcome, however, was the government’s decision to give Local Enterprise Partnerships (LEPs) – as opposed to local authorities – new responsibilities and powers to implement local industrial strategies in non-mayoral areas.
It remains to be seen how substantive these local strategies – due to be in place by 2019 – will be. But putting LEPs in charge of these strategies is a misguided move for a number of reasons.
The government is implementing uniform powers and responsibilities to LEPs, but this doesn’t reflect the reality of their strengths and weaknesses”
Firstly, it raises issues of democratic accountability and transparency. Driving improvements in local productivity requires decisions about transport, planning, education and skills. In other words, it requires decisions about local statutory services and public money. Metro mayors or council leaders – having been elected – are better placed to make these decisions than a private sector-led LEP which lacks the democratic mandate to do so.
The focus on LEPs seems even stranger given that a government-commissioned review recently concluded that LEP governance is patchy, and that LEPs should introduce the same level of accountability as applies to local authorities. Ironically, this need for reform is even acknowledged in the Industrial Strategy, in which the government pledged to review the roles of LEPs with a view to improving leadership, governance, and accountability.
The government anticipates that this review will enable it to develop a “clearly defined set of activities and objectives” to guide LEPs in overseeing local industrial strategies. That begs the question – if these reforms are needed, why give LEPs responsibility over local industrial strategies which are due to be in place by 2019?
Another issue is the variance in performance of LEPs across the country. Some are very good, some perform less well. Moreover, this variation in performance is a design – not a glitch – in the LEP system. The government is implementing uniform powers and responsibilities to LEPs, but this doesn’t reflect the reality of their strengths and weaknesses.
Finally, there is an issue of resource. In a National Audit Office survey last year, only 5% of LEPs agreed that the resources at their disposal were adequate for them to meet the expectations placed on them by the government. Handing LEPs more powers and responsibilities over local industrial strategies will only exacerbate that problem (unless accompanied with considerable additional investment).
Ultimately, local industrial strategies should be led by combined authorities or local authorities working at the functional economy level of places. They should also have a formal requirement to have substantive private sector involvement in the strategy setting, prioritisation of programmes and monitoring of performance.
But the means of engaging the private sector involvement should be left to places to determine. In some places it might be via the LEP, in others, the chamber of commerce will be better placed. Government needs to trust places to know how best to involve the private sector in driving local economic growth, rather than prescribing from the centre.
Andrew Carter is chief executive of the think tank Centre for Cities.
