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Newsroom & speeches
27 October 2005
Delivered version
1. Thank you. I’m delighted as a Treasury Minister, to be able to join you today for this event.
2. Or rather, I’m delighted that you can join us here in the Treasury. Allow me to add my welcome to Des Browne’s, Chief Secretary to the Treasury, whom you heard speak earlier this morning.
3. Ten years ago, it would have been unimaginable to have an event on local and regional policy hosted at the Treasury, with not just one but two Treasury Ministers discussing the subject.
4. Not because of Harold Wilson’s view – that the Treasury is full of “very clever chaps who are very good at stopping you doing almost anything,” but more for the reason one of the old Treasury heads put to me recently, that “we didn’t pay much attention to local and regional policy in the past because we thought that there was not a lot we could do about it”.
5. The thinking has certainly changed – as this seminar confirms.
6. That change in our thinking is also demonstrated through close work with the Office of the Deputy Prime Minister over the last several years – to examine, develop and implement more to encourage local authorities to see enterprise and economic development as a central policy concern, and as a central part of their role as community leaders.
7. I’m very pleased, therefore, that we will hear also from ODPM Minister Phil Woolas – a close friend and colleague – later in the seminar programme today.
8. This morning, Des Browne set out the Government’s general commitment to Local Area Agreements – or LAAs – and the impact we believe they’ll have on central and local government and on other local service providers.
9. I’ve been asked by NLGN to set up the theme for this afternoon on the Local Enterprise Growth Initiative – or LEGI – and on the new fourth, economic, block of LAAs. I’m not going to discuss the detail of the LEGI with you, others are billed to do this later.
10. Nor am I going to do what Ministers are normally briefed to do, which is to run through a list of all the things that their Department has done for local government – though it is a long list!
11. You know these things as well as I do, and you will have your own judgements on them.
12. Instead, I want to give you some context for considering LEGI and LAAs, to make clear that this is not just the latest policy wheeze or project funding pot for local government.
13. We’re preparing to implement this new economic policy measure of the LEGI, at the start of our third term in Government.
14. And it’s important to trace a new policy approach back. So looking back, the first term of this Government was characterised on economic policy by a new national framework for stability.
15. We created – for the first time in a generation – a new economic policy framework based on credible institutions, clear objectives to promote stability and growth, and maximum openness and transparency.
16. The impact, of course, has been that over the last eight years, we’ve enjoyed the most stable, rather than the most volatile, of major economies – an economy with steady growth and historically low and stable levels of inflation and interest rates.
17. So it was after 1997 with public service delivery. We put in place national frameworks and national programmes for the New Deal, schools improvement, NHS waiting lists, and community regeneration.
18. There had been a long history of underinvestment in British public services, a lack of clarity about roles, and an unacceptably low level of performance.
19. So, alongside increasing investment, we set about introducing new levers for control – Public Service Agreements, performance targets, and the Prime Minister’s Delivery Unit.
20. We were indeed a Government in a hurry. We wanted to signal a decisive change in approach, set new policy priorities, secure rapid change in delivery, and see tougher disciplines on service providers. It was the right thing to do then, even if we did overdo it at first with more than 300 PSA targets.
21. But as we entered our second term in Government, we developed a more sophisticated analysis and a stronger evidence base. We were able to see the limits and sometimes the perverse consequences of driving reform from the centre.
22. Here in the Treasury, we knew that stability is a necessary but not a sufficient condition for longer term economic success. We knew that we needed to reinforce the drivers of growth and productivity – business investment, skills, enterprise, competition, innovation and science.
23. And we knew that we had to reduce the disparities in growth and economic performance between and within the regions and nations of the UK, if we are to secure a stable and successful national economy for the long term.
24. Disparities, which represent a huge waste of potential, with output per person in the poorest regions of Northern Ireland, the North East, and Wales 40% below the level in London.
25. Levelling up the lowest six performing regions just to the national average would bring a £60 billion boost to the UK economy.
26. And as we considered our microeconomic policies, alongside the macro, it became clear that many of the decisions on design and delivery were better taken in these regions.
27. In economic terms, our guiding principle was – that there is evidence of regional disparities in skills, employment levels, business start ups, levels of R&D, business investment and availability of venture capital.
28. And where the market failures that underlie these disparities are primarily regional and local, our policy response should be designed and delivered regionally or locally.
29. In common terms, in this day and age, you can’t run economic policy and top quality public services from the centre because new technologies, a premium on skills and innovation, more demanding consumers and varying local needs and strengths, all work to expose the contradictions of a centralised approach.
30. So, just as with economic policy, I think you can trace in the last eight years a similar development – in different degrees – in other departments and other policy areas.
31. The story of the first two terms under this Government has been the same for local authorities. Before 1997, local government was poorly funded, and often poorly focused and poorly performing.
32. Since 1997, we have increased resources substantially and consistently; the central government grant has risen 30% in real terms. We have introduced clearer targets – through PSAs – and tighter controls – with ring-fencing, new inspection regimes, and the Comprehensive Performance Assessment.
33. Again, at first, I would argue that this was necessarily top-down to ensure the additional money delivered.
34. But, as a result, the capacity of local government to deliver has increased. There are now 47 excellent authorities, compared to 22 just three years ago when the CPA was introduced – and one poor authority now, compared to 13 then.
35. Outcomes have improved in school results, recycling, the quality of housing stock, and right across the range of other service areas.
36. And as a consequence, we have been able to introduce substantial new freedoms and flexibilities – from prudential borrowing to trading powers and local area agreements – allowing local councils to draw on their local knowledge and strengths to deliver more effectively.
37. I dwell on local government not just because you make up the majority of the audience, but because I believe that local government is special and different from any other tier of government or type of organisation in the public sector. In my view it has three unique characteristics.
38. Firstly, it is the only organisation that is democratically accountable to all the people living in its area.
39. Secondly, it has a strong sense of place – a quality increasingly important in a world of increasing insecurity – as it owes its existence to a discrete geographical area and, at its best, it is there to look after and promote the interests of that locality.
40. Thirdly, it is able to bring together in partnership the diverse range of bodies that can contribute to the life and well being of the community.
41. These are important strengths to build on and we want to make sure you bring them more to bear on the economic challenges faced by your local area and region. And of course, we want you to bring them to bear on designing and implementing the LEGI or LAA approach tailored to your area.
42. So this commitment to more devolved leadership and decision making over policy design and delivery is the first and most fundamentally important dimension to the broader context in which together we now consider the development of the LEGI and the LAAs.
43. There are three other important principles that are integral to our approach.
44. First, councils have a key economic role that we want to do more to develop.
45. This is connected to the community leadership role of local authorities – experts on the needs of their area, accountable to the people in their area, capable of aligning the interests and visions and efforts of other agencies, serving their area.
46. Of course, local authorities also have a huge economic local impact directly and indirectly, through their employment and procurement, and through the services for which they are responsible, from planning to waste to education.
47. That’s why we introduced powers for local authorities to improve the economic well being of their area.
48. Why we encouraged innovation through BIDs, URCs and enterprise areas.
49. Why we created the Local Authority Business Growth Initiative, which becomes payable from February, to recognise and reward councils who see the business base in their areas expanding.
50. And why we launched in the Budget this year the LEGI, supported by the creation of the fourth block of LAAs.
51. But, in developing a stronger economic role for our local authorities, it is important to recognise that economic spheres are rarely consistent with council boundaries.
52. Labour markets, commuting patterns, transport networks, housing markets, or retail catchments do not respect the administrative boundaries of local government and local authority strategies must reflect these economic realities.
53. It means that the regional and sub-regional economic context is important, as are the relations with RDAs in particular.
54. There is no principled or pragmatic choice between either regions or cities and councils. Rather, there must be close cooperation and consistency on economic strategies, priorities and activities between the leading agencies at both regional and local levels.
55. Second, the best local authorities work closely with local employers and business organisations.
56. Because we want to see skills, business support, development, urban planning, and employment services driven more by employer and local economy demand, and because we want to increase leverage from the private sector in investment, support for skills and enterprise learning, community regeneration, environmental improvements, and tackling business crime – we need to strengthen the link between local authorities and local business.
57. And third, at the heart of successful and sustainable regeneration is economic renaissance, as well as an urban renaissance. Now, you might think, well, he would say that wouldn’t he? He’s a Treasury Minister.
58. But the best anti-poverty strategy is employment, the most sustainable regeneration programme is jobs, and the most effective social inclusion policy is work.
59. We know that enterprise drives national productivity and employment. Today in the UK we’re seeing over 3500 new businesses starting up each week.
60. But Americans are almost twice as likely to be involved in starting up a new business, and Britain would have 1.8 million more businessmen and women if we had the same proportion of people starting a business in the UK as the US.
61. Enterprise is also central to local economic performance. Here the greatest disparities and therefore the greatest challenges and potential lie.
62. In England alone, our top three performing regions have more than twice the number of businesses per resident than our poorest performing region. So enterprise as a policy priority is most important in our most disadvantage areas.
63. I hope you can trace these principles of wider policy in our approach to LEGI and the fourth block of LAAs.
64. We’re looking for:
And, as I draw to a conclusion, we need to be clear about the implications of these imperatives. For us at the centre:
For local government and its partners, there’s a need to recognise:
65. We are still at the early stages in proving the concept of LAAs and LEGI. We believe strongly however that they have a part to play in our broader drive to devolve more policy and delivery responsibility from central government, to improve the quality and responsiveness of public services, and to increase the effectiveness of local economic development.
66. We’re ready to consider doing more in the longer term - in light of the Lyons Review and through the CSR process - but the further progress that can be made will be strongly shaped by how successfully local authorities and their partners rise to meet these challenges.
67. Thank you.
