How local authorities can deliver growth through data
After the catastrophic Truss/ Kwarteng administration, a semblance of order and common-sense look to have returned to 10 and 11 Downing Street over the last six months.
As Jeremy Hunt has found, there are no quick fixes to an economy still firmly in a post-pandemic and post-Brexit recovery mode, with the additional challenge of a cost-of-living crisis caused by rocketing inflation after Putin’s invasion of Ukraine.
So, against a challenging macro-economic backdrop, the Chancellor took some positive steps to stimulate growth, while also boosting the Treasury coffers by confirming the big hike in Corporation Tax from 19% to 26% would take place from this month.
Beyond extra funding for potholes, public swimming pool maintenance, and the not unexpected commitment for a third round of Levelling Up funding, I thought there were some interesting growth-related announcements in the Budget of relevance to local authorities.
Innovation Zones (IZs) and the new so called ‘trailblazer’ devolution deals announced for the Greater Manchester and West Midlands Combined Authorities stood out.
Like Freeports – another recent initiative designed to boost regional growth - Investment Zones offer tax incentives to help grow priority sectors for the economy.
The eight potential locations in England are: North East, Tees Valley, West Yorkshire, East Midlands, West Midlands, Greater Manchester, Liverpool City Region and South Yorkshire. Each IZ is expected to focus on growing clusters of businesses around the following key sectors of high growth potential: Digital and Tech, Green Industries, Life Sciences, Advanced Manufacturing and Creative Industries.
This is all very well on paper, but to generate the growth, jobs and wealth the Treasury expects, delivery will lie in the execution: how will local authorities or combined authorities do this in practice?
The challenge we see when we speak to local authority economic development teams is that because the data they rely on to make key decisions is so patchy, they can sometimes come up with policies to deliver growth, but without any evidence or insight to ground them in reality.
For example, we’ve seen situations where a politician gets elected on a ticket to create thousands of jobs and then says to the executive team: ‘Go on and deliver this’, and, with the lack of detailed data-driven insights, they are left saying ‘how’ or ‘where do we start?’.
Therefore, a lot of these growth programmes are like the proverbial elephant sandwich –impossible to tackle.
If you have got something like a major infrastructure project locally, then at least there is something that policies can coalesce around, making it arguably less challenging to build a growth strategy.
A classic example would be in the West Midlands, where Solihull Council and the West Midlands Combined Authority are looking to maximise the opportunities of the HS2 interchange there with the 346-acre, £3.2bn Arden Cross masterplan for a new economic zone creating 27,000 jobs, 6 million sq ft of employment space and 3,000 homes.
However, if a local authority is not benefiting from a transformational infrastructure project, it’s clearly a bigger ask.
When economic development teams are given ambitious growth targets, they need to understand how they can be achieved. Will this be from the organic growth of existing businesses on their patch, or inward investment with new businesses moving into the borough, or a mixture of both?
Officials therefore need to know therefore the answer to a number of critical questions: What does their business base looks like? What are the growing – and declining – sectors locally? Are employers getting the skills they need?. Where will these new workers come from? Are facilities available to house these new jobs and businesses? The list goes on.
If you don’t have a handle on this critical information, the task becomes so much harder, more time consuming and targets are less likely to be met.
We find that, historically, local authority officials have not had the depth and the quality of information to allow them to answer these critical questions.
Whether you have something like HS2 to hang your hat (or your growth strategy) on, or whether you don’t, it all comes back to the fact that you need the best quality data available. This needs to be accurate, integrated and give a complete picture of activity, rather than relying on a limited piece of data about business, or employment, skills or innovation.
We’re therefore seeing a growing demand from local authorities for accurate, real-time data. Our IDM Business product, a unique AI -driven solution which can be customised to the needs of the user, is being used by a growing number of local authority economic development teams including, for example, by Brent and Ealing Councils in London to support their growth strategies and policy interventions.
Maximising the opportunity
If you are going to maximise the benefits and opportunities of IZs, or any other government policy designed to stimulate growth, I believe it must be done holistically.
If we look at two very successful combined authorities, Greater Manchester and West Midlands, the reason they have done as well as they have, winning the confidence of central government, is they have seen the opportunity to build a brand, allied to a strong vision of what they want to be as a future economy.
That kind of top-down approach, which has involved the Metro mayors there, Andy Burnham and Andy Street standing up and saying ‘this is what we are going to be doing’ and then making compelling, evidence-based arguments to the Treasury, is surely a blueprint.
It’s not exactly a new phenomenon though. Andy Burnham’s approach today is not actually any different to that of Sir Howard Bernstein when he was running Manchester City Council 15 years ago – strong local leadership, built around a clear vision of ‘this is where we are headed’.
It’s having that over-arching view of what you want to be. I believe the only way to get this detailed view is to properly understand the context of your local economy and the better quality of data you have, the sharper the picture will be.
Living in Scotland, where of course there is heavily devolved administration that has not necessarily performed as well over time, I was interested to see Greater Manchester and West Midlands given new and deeper powers in the Budget. Like Government departments they will now have a single financial settlement, meaning they will not have to repeatedly bid for funding from the centre.
While I am an admirer of the achievements of both the mayors and combined authorities in Greater Manchester and West Midlands, I don’t believe devolution is necessarily a magic bullet - there is no guarantee that every English city region will perform as well as they do.
A lot is down to leadership, vision, management, politics and of course opportunity.
In fact, in every federal system, be that the USA, Germany or Switzerland, there are always places that thrive, where people want to live and work, and others that don’t do as well.
It will be interesting to see how the trailblazing city regions fare over the coming decades in delivering the growth needed to level-up the economy.
The one thing we do know is that the data will soon tell us how effective levers for growth Investment Zones have been – providing they live on after the next General Election!