Leps should focus beyond GDP growth

The recent budget’s stress on ‘building a resilient economy’ was very welcome, but it’s unclear how the measures it introduced will do so. Far from it, it appears to maintain a course which is based upon quite a narrow, and somewhat hollow, view of economic and social progress.

When national and local economies were on the brink of the recession in 2007-08, it was already too late to discuss the resilience of the preceding growth. The opportunity to learn from the crash now presents itself.

However, and as some form of recovery takes hold, the government’s view of the world economy has instead been simplified into a ‘global race’ to achieve marginal GDP growth. The concerns about this growth fall into three related categories, and are part of an overarching critique which holds that the type of economic growth being pursued is somehow less substantial than is often assumed, and won’t put the country on a solid economic footing.

First, there is the apprehension that, despite growth, the country is vulnerable to future shocks – current fears about the potential housing bubble for example. Second, there is the concern that growth won’t have an impact on social goals such as poverty and unemployment – the risk of the jobless recovery, and worries around the nature of and remuneration for employment. Third, there is a risk that growth fails to account for long-term changes to the structure of the economy, and challenges in the economic, social and the environmental spheres. CLES in particular has done some pioneering work in this area.

The gearing for growth has been pushed into local policymaking too, as the local economic policy bodies set up by the government – local enterprise partnerships (Leps) – compete for a funding pot distributed from the centre. The process means that, in order to be successful, they must show how they can drive local growth, and support the UK in its bid to win this global race. Understandably therefore, this has often resulted in plans which play into the government’s definition.

However, as IPPR North’s forthcoming research will reveal, many Leps have innovated in this process: they’re preparing for economic difficulties ahead, trying to make the recovery translate into jobs, and are understanding and facing up to the long-term challenges – economic, social and environmental – which their areas face. For example, some local areas show acute awareness of their reliance on several large employers, their natural environment or infrastructure assets for employment; some understand that – in order to adapt and compete – they need a strong skills base and to promote more diverse, entrepreneurial and innovative small businesses; and others are integrating their public services so that social goals and economic growth are more effectively tied together.

The recession has been devastating for many areas of the country, and failing to learn these lessons is a potentially costly oversight. But pursuing short-term economic growth at all costs defeats the purpose and, while it’s tempting to rush for growth, the primary lesson of the downturn shouldn’t be lost: that not only can the wrong kind of growth be a poor measure of economic progress, but it can also be very fragile and, in the long run, self-defeating.

Many Leps are independently building the solid foundations they know are necessary for long-term economic stability, but this appears to be despite, not because of, national government policy. It’s clear therefore that not only can Leps learn from one another, but also that government can learn from Leps, and in so doing could build a national economic strategy which – by being rooted in solid local foundations – can prove more resilient to the next recession.