A Budget for widening gaps

Matthew Jackson argues the Budget has delivered incentives for local economic development which will only serve to exacerbate gaps in our already imbalanced economy

Having taken a first glimpse at the 2011 Budget there seems plenty in it for economic development practitioners in the public sector and for developers in the commercial economy.

There is a £200m investment in rail projects in predominantly the north and midlands of England. There is the creation of 21 enterprise zones in some of the localities hardest hit by recession and public sector cuts. There is commitment to work experience placements and apprenticeships for young people who are unemployed. And there are a host of amends to planning functions including fast-track application processes for major infrastructure, the emergence of land auctions for public sector land, and the removal of brownfield redevelopment targets.

Delving a little deeper into these policy developments and it becomes clear that there is a degree to which the initiatives and mechanisms serve up contradictions for local economic development. How can enterprise zones develop without commitments to redeveloping brownfield sites and the industrial heritage of declining cities? Will land auctions simply lead to development upon vast swathes of green belt, threatening all notions of sustainable development? How can we enable economic growth without the expertise of local government and regional economic development practitioners? And how can the array of supply side interventions flourish without balanced investment in the demand side?

For me, the Budget fails significantly to address and consider these key questions in a way which will be beneficial to the growth of our economy, to narrowing economic gaps and importantly tackling economic and social inequality. Indeed there are a number of key critiques to the emerging policy:

The challenge of scale – the relationships between the 21 enterprise zones and the local enterprise partnerships (LEPs) appears vexed. How far the ten announced are able to ‘nest’ within the LEPs, and how far will fiscal instruments such as TIF (tax increment financing) and business rate reductions work together and with the grain of the review of local government finance’s intentions to relocalise and vary business rates is open to debate.

LEPs will have different economic strengths and weaknesses and also different political and entrepreneurial cultures. The retention of business rates within a locality may actually be a blunt rather than creative finance-raising vehicle, particularly in places with a small business base.

The lack of strategic expertise – the commitments to economic growth in the Budget come at a time when, as a result of spending cuts, we are seeing the stripping back of economic development functions at the local authority level and the removal of regional development agencies. A host of strategic and delivery expertise is being lost in the process – something that’s surely vital to growth aspirations and the delivery of enterprise zones.

The challenge of opening up planning – there are a number of elements to the announcements that open up the planning process and reinstate the assumption of planning favouring the developer. Land auctions of public sector owned agricultural land will surely lead to retail, housing and other development on greenfield land, threatening the coalition’s commitments to the environment.

Relaxation of planning for major projects could simply lead to a new generation of retail, office and warehouse ‘sheds’ which characterised the 1980s and 1990s. There is a challenge here for local authority planning departments not to simply roll over in the drive for economic growth but to continue to make considered choices including ensuring wider community benefit and planning gain through the process.

The dependence upon the market – initiatives such as enterprise zones and TIF are helpful mechanisms for financing physical and business infrastructure. The challenge is they require the commercial economy and particularly global developers to drive them. What happens in places that don’t have those market forces and which don’t necessarily have aspirations of growth? There is also a need to fully understand the role and needs of small businesses in this growth-focused agenda.

The challenge of matching supply and demand – policies behind this Budget appear to be very supply side. For example, enterprise zones are about putting the conditions in place to enable growth industries and new enterprise to flourish. But what is being done about the demand side? In many of the areas where zones are located there is a need to develop entrepreneurial cultures and provide business support, particularly in the most deprived areas.

The consideration of social justice, equality and the environment – while the investment in rail projects is welcome, it is undertaken in a purely economic growth-focused manner. The infrastructure is deemed important to attract business investment. What about social factors and the links between access to public transport and access to employment? Similarly, how do reductions in fuel prices contribute towards environmental concerns and priorities?

Across each of the policy measures announced in Budget there is an overriding assumption that reducing regulation will lead to growth. Interventions such as enterprise zones need to recognise that there are wider barriers to growth than regulation – including low skills – and address them.

The focus of apprenticeships – evidence suggests apprenticeships for young people are most effective in public sector and construction professions. These are both potentially declining trades. A degree of thought is required as to what the sectoral nature of apprenticeships will be and what guidance the commercial sector requires to influence apprentices.

The Budget has an economic policy objective to ‘achieve strong, sustainable and balanced growth that is more evenly shared across the country and between industries’. While the policies suggested certainly have the potential to enable growth, I would argue they lack the innovation, creativity and importantly principles required to match growth with sustainability and equality.

The government is offering a piecemeal approach to economic development which is overly focused on reducing regulation rather than supporting people and improving places. Cutting red tape may actually benefit business in London and the southeast more than in the areas designated for special interventions such as enterprise zones. Surely not the perverse outcome government is seeking?