Written evidence from the Core Cities
Group
INTRODUCTION
Core Cities Group is a network of the local
authorities of England's eight largest city economies outside
London: Birmingham; Bristol; Leeds; Liverpool; Manchester; Newcastle;
Nottingham; and, Sheffield. These cities drive local and underpin
national economies. Working in partnership, we aim to enable each
City to enhance their economic performance and make them better
places to live, work, visit and do business. The Core Cities Group
has a track record of more than 10 years, led by the City Leaders,
taking in all three major political parties.
LOCAL ENTERPRISE
PARTNERSHIPS
Core Cities Group has long advocated devolution
and decentralisation to real economic geographies, the places
that drive sub-national economic growth. We therefore welcome
the intention enshrined in the proposal for LEPs to pass responsibility
to our cities and our partners across the public and private sector
to deliver that growth. However, for LEPs to be at their most
effective, and for any investment they eventually receive from
the Regional Growth Fund—or other sources—to give
the best return and value, Government will need to ensure the
following four key actions.
1. Ensure a smooth transition from regions to
LEPs.
2. Commit to real devolution for real growth.
3. Provide flexibility, freedom and new investment
tools.
4. Invest in LEPs in places that drive wider
growth.
1. Ensure a smooth transition from regions
to LEPs
There are major challenges in seeking to move
to the new arrangements during a greatly reduced public spending
round, and Government should seek to work closely with Core Cities
and their LEP partners in ensuring that this is orderly and effective.
There are a number of residual regional functions
that might be delivered effectively across a number of LEP areas
by a LEP including a Core City. It is for individual LEPs to say
exactly what these will be.
There is an issue of capacity and ability to
move through transition and to deliver the new arrangements, that
will affect some LEP partners more than others. Gore Cities authorities
have generally high capacity levels in the necessary areas and
will work together to share information and best practice building
on their current networking. There is an opportunity for Government
to work with Core Cities to use their capacity and experience
to help support some other authorities and LEPs in transition,
and we would welcome a discussion regarding this.
Following transition, there is an issue for
Government regarding economic intelligence and strategy at a sub-national
level that Is greater than one LEP area. Core Cities, with their
LEP partners, are capable of providing this intelligence and strategic
lead, and indeed have done so in the past. It is worth Government
considering how that element of the relationship with our LEPs
might develop for the future, enabling LEPs around Core Cities
to perform these important functions.
For the future, the major LEPs should be considered
as statutory consultees on major Government strategies such as
that for: airports; national rail; motorway and waterways infrastructure;
green infrastructure; cultural and creative industries infrastructure;
the development of the Higher Education sector; innovation strategy;
and tourism development.
2. Commit to real devolution for real growth
There is overwhelming evidence that large urban
areas that have more devolved financial and policy control are
more economically competitive and productive, across and beyond
the EU. The OECD average for locally raised finance through taxation
is 55%. In the UK this is just 17%, with local authorities in
direct control of only about 5% of all taxation—Council
Tax. We are competing in a global marketplace against international
cities with far greater control over finance and investment, particularly
in regard to business rates or their equivalent. This leaves our
cities less able to enhance their competitiveness, which disadvantages
the country's economic recovery.
We are therefore concerned at the apparent re-centralisation
of important levers to unlock economic growth, following the dismantling
of the regional architecture. This includes but is not limited
to: skills; business support; welfare to work; innovation; and
investment to stimulate trade and venture capital into cities.
The urban areas radiating out from Core Cities are economic eco-systems.
Getting the best return on public investment in them requires
an intimate knowledge and locally sensitive policy, which can
only be properly managed at the LEP area level.
In creating LEPs, we need to learn the lessons
of the past, that nationally driven programmes which are not able
to adapt and flex significantly at the local level often produce
poor and wasteful results. In some areas, there may be merit in
retaining a national programme, but only if it is capable of local
delivery in a tailored and integrated fashion through a LEP.
There should not be a prescriptive set of issues
that a LEP may or may not include, and it should be for local
partners to determine priorities in each case, recognising that
they will contribute in some way to delivering the primary outcome
of economic growth and jobs. Housing and attendant population
growth provides employment and demand for products and materials
during the construction stage, increases consumer demand to an
extent in line with increased occupancy, and increases the skills
base across wider urban areas by creating more balanced and mixed
communities, that need to be sustainable for the long term. Therefore,
it is likely that LEPs in major urban areas will need to include
some or all of the following: planning; housing; local transport;
infrastructure development; employment, worklessness and skills;
enterprise and innovation; culture and creative industries; tourism;
and the transition to a low carbon economy.
Likewise, governance arrangements for LEPs should
be permissive and evolve bottom up, as they have in the economically-focused
partnerships that Core Cities have developed around them. These
are fit for place and fit for purpose and we believe that this
is localism in action. Government should not therefore impose
governance arrangements on LEP areas, but should recognize the
considerable and detailed progress that has been made.
To support the above, we suggest that Government
should, through appropriate forms of joint investment planning,
agree to align its investment across departments with the locally
identified priorities of a LEP, at that spatial level. This could
be supported by a similar duty upon other national agencies charged
with delivering priorities relevant to a LEP. These arrangements
and priorities will be different in each LEP area, but the principle
is the same; real devolution for real growth.
3. Provide flexibility, freedom and new investment
tools
We face unparalleled challenges in delivering
economic and private sector employment growth during a time of
greatly reduced public spending. While the private sector is the
primary generator of jobs and growth, it relies on the public
sector to help stimulate growth and create the conditions for
business activity.
We understand that there will be less public
money available, so we want to make sure we use what we will have
in the most effective way, and have access to new investment tools
that will allow us to support business and private sector jobs
growth, whilst protecting frontline services and the most vulnerable
in our communities.
We would support further exploration of place-based
budgeting within LEP areas, in a way which created greater alignment,
efficiency and facilitated positive public sector reform. Such
an approach should also seek to provide long-term certainty over
financing to LEP partners wherever possible. We are therefore
concerned that the "two plus two" proposal for local
government financing, that is two years certainty with a further
two years in principle, may not provide enough flexibility to
deliver effectively with reduced funding amounts. This is particularly
the case for capital finance, where even with reduced amounts,
long term certainty can support market confidence.
Prudential Borrowing is the lifeblood of an
authority's ability to support private sector growth and employment.
It is subject to strict standards through the Prudential Code
and we see no reason why this should be limited in any way. Indeed
to do so would cal into question the ability of a LEP in a major
economic area to deliver the growth and jobs required. A separate
submission may be made to Government on this issue by Core Cities
Group.
Infrastructure brings greater economic returns
on investment than many other forms of capital expenditure, producing
£10 of benefit for every £1 spent, creating jobss supporting
business growth and reducing carbon: a triple win. But a national
infrastructure deficit of some £500 billion over the next
decade is compounded by shrinking public capital finances and
a lack of private sector investment, which is stymied by weak
demand, low market confidence and the difficulty of raising finance.
So without additional investment tools it is hard to see how the
growth or jobs the country needs will happen—or how the
economy can be rebalanced.
The nation desperately needs investment in its
infrastructure and the broader social and economic benefits that
infrastructure-led growth and renewal can deliver. A UK version
of Tax Increment Financing, also known as Accelerated Development
Zones, can unlock the needed investment even in these fiscally
straitened times. It would be a further body blow to our economy
to miss this opportunity to implement UK TIF and we suggest that
the following should now be undertaken.
— That the Government revives the momentum
for UK TIF by expressing official support for implementing it.
— That the £120 million grant pot
set aside for Accelerated Development Zones should be retained
to kick start a few schemes within this financial year testing
different UK TIF models.
— That any new legislation required to
allow a wider use of UK TIF should be put in place quickly.
— That fuller relocalisation of business
rates should be considered in the review of local government finance.
The Scottish Government is understood to be
forging ahead, with at least one UK TIF scheme hoping for approval
this year. But whilst Scotland has concluded that they can use
devolved powers to enable TIF, the UK Government has not yet identified,
or created, the powers necessary for UK TIF to proceed south of
the border.
Not all LEPs will necessarily wish to take on
the same functions or legal status, and therefore it is important
that primary statutory functions, eg for taxation, planning etc,
whilst potentially directed by the LEP, will need to remain with
the local authority.
In addition, we would welcome the opportunity
to engage with Government and others, perhaps through a task and
finish group, to examine a range of potential solutions for capital
financing, infrastructure investment and value capture.
4. Invest in LEPs in places that drive wider
growth
Core Cities will be at the centre of England's
most crucial LEPs. These are the areas that drive the economy
outside the South East and the places that are capable of rebalancing
the economy. Collectively, within their primary urban areas, Core
Cities:
— are home to 16 million people, almost
a third of the population of England;
— generate 27% of England's wealth (more
than London);
— are home to half of the country's leading
research universities; and
— contain 28% of highly skilled workers
(graduate level or above).
These places are also at the centre of economic
flows between adjoining towns and cities, where the right investment
can have a wider positive economic impact. Therefore they need
to be prioritised for investment, particularly during a time of
limited public finance. This should include prioritising Core
Cities in future Government strategy that has a "locational"
element, for example the siting of new national facilities or
the movement of Government departments to outside London, and
potentially the location of any future business support or innovation
hubs.
Business engagement in LEPs will be conditional
on their ability to affect substantial change, which in turn has
a resource implication. Therefore Core Cities LEPs will need to
access finance—or the ability to raise finance—for
infrastructure, transport and other economically transformational
programmes, this might include any residual Regional Funding Allocation,
post spending review, as well as some prioritisation in regard
of the Regional Growth Fund.
August 2010
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