At the recent Spending Review the government sought to reaffirm its commitment to levelling up. Yet it provided no vision of the institutional changes needed if it is to have any chance of success.
This is alarming given the findings of new research published last month by Demos and the universities of Birmingham, Cardiff, Surrey and Warwick. We concluded that levelling up has zero chance of success within the current institutional framework. Based on more than fifty interviews with practitioners across the country, we found a number of issues with the current framework that must be urgently addressed.
Existing processes to encourage local economic development are highly wasteful. A great deal of senior level time and energy is spent bidding for funds and then attempting to stitch together the proceeds. More concerningly, funds are not spent on what places need. This is because local enterprise partnerships (LEPs) and local authorities tend to bid for what they think central government will approve, not what they need. Such issues are compounded by the short-term nature of funding cycles.
In addition, the power to make local industrial strategy and the power to implement it are often in different agencies. The problem is particularly evident in the case of skills – the strategy is often not implemented and funding is fragmented. The result is strategic bodies without the power to implement in this area. Finally, local institutions too often lack local visibility and accountability. The work of LEPs and combined authorities is largely invisible, making real accountability to the public impossible.
It’s clear we can’t just muddle through; fine grained improvements to the rules and structures just won’t work. There are two options once you recognise the need for real change: greater centralisation or greater local accountability. Though the former – perhaps reheating the Government Offices for the Regions – might work better than the current system, it throws away important benefits of Local Enterprise Partnerships; interviewees regularly described how LEPs can be effective creators of strategy and convenors of partnerships
Instead, we must build stronger local institutions: one authority with the rights needed for strategy development and implementation. Where they exist, Mayoral Combined Authorities (MCAs) can become stronger institutions; elsewhere, Unitary/Counties can either stand alone or combine into new MCAs where they are smaller than the functional economic area or a minimum efficient size. LEPs should continue as advisors and convenors with the right to be consulted, coterminous with the decision-making institutions.
But we need behavioural and process changes as well as structural reform. Whitehall currently exercises control over local spending and policy through a series of funding competitions, plus central funding and/or regulation of some activities. This is inconsistent with strong local institutions with real decision rights and is identified in our interviews as one of the main problems with the current system. Our recommendation is a process of strategic conversation or negotiation between mayors and a single representative of Whitehall, through which agreed objectives are set.
Levelling up will be difficult: there’s no doubt about it. But it isn’t impossible – it has been achieved elsewhere. What is impossible is trying to level up within the straitjacket of the UK’s current institutional framework. That’s why the government must bring forward plans to empower local institutions: the only organisations that will truly level up.
Ben Glover, Deputy Research Director & Charles Seaford, Senior Fellow – Demos