It would be difficult to write an article about economic development without at least mentioning the current economic climate.

The credit crunch and the rise in commodity prices is clearly going to affect the economy, both at a national and local level. However, as is commonly said, every cloud has a silver lining. Where the market fails, the public sector steps in. Although not inspired by current economic conditions, the Government’s proposals to revamp the role of regional development agencies (RDAs) and expand the economic development role of local authorities are nonetheless timely.

Just as the words “credit crunch” began to slip into common parlance, back in the summer of last year, the Government published a review of sub-national economic development and regeneration. The review was born out of the recognition that high and stable rates of economic growth and employment, in a highly competitive world, are dependent on improvements in productivity. In the last ten years the UK’s overall productivity performance has been reasonably good, but there are very wide variations from region to region. The aim of the review is to develop a far more joined-up approach and thus establish a more consistently good performance.

In March this year the Department for Communities and Local Government and Department for Business, Enterprise & Regulatory Reform published a consultation document (with a formal Government response due back by 20 September 2008) snappily entitled Prosperous Places: Taking forward the Review of Sub National Economic Development and Regeneration. The document makes a number of key proposals, which are summarised below.

Consultation document key proposals:

  • Empowering local authorities To establish a new statutory duty on upper tier and unitary authorities to assess the economic health of their areas and delegate down from RDAs to local authorities the responsibility for delivering economic regeneration. There are also proposals to move the responsibility for 14-19-year-old education and skills to local authorities alongside reforming the Local Authority Business Growth Incentive Scheme (LABGI) to ensure a more well-defined focus on economic development.
  • Joining up local authorities Allow sub-regions increased powers to manage transport and encourage the development of multi area agreements (MAAs), that is, local area agreements run on a cross-boundary basis. There is also the possibility that this may extend to establishing statutory sub-regional (in normal language local authority level) arrangements for economic development activity. The aim is to get away from directing funding to individual local authorities. The hope is that a sub-regional approach will foster a more collaborative approach. It also overcomes the problem that economic markets tend to not fit neatly within local authorities’ administrative boundaries.
  • Power to regions Having proposed removing certain responsibilities from RDAs, this leaves RDAs with less to do. The solution is to transfer the role of the regional planning body from regional assemblies to RDAs. To appease those concerned at the lack of democratic accountability, powers are given to local authorities to scrutinise through a leaders’ forum.
  • One big happy family This proposal aims to bring central government departments closer together as it requires regional strategies to be signed off by both the Secretary of States for BERR and Communities. There is also a proposal to appoint a minister for each of the English regions.

The intended date for bringing these changes into force is 2010.

Is it good for local authorities?

Potentially it means a great deal for local authorities. The RDAs have since the late 1990s largely controlled the economic development purse strings at the expense of local authorities. When enacted these changes will help to redress that balance, while at the same time meeting the Government’s aspirations of devolving powers down to local authorities as expressed in the Local Government White Paper Strong and Prosperous Communities.