CEDOS February 2022 Newsletter
Message from the Treasurer
Hello and welcome to the first CEDOS Newsletter of 2022. I imagine for all of you mince pies are now a distant memory and the focus is firmly on the job in hand. I have always found February to be a month of hope and optimism. This is the month the commute to and home from work started to happen again in daylight (remember those days!) and for the last two years has probably meant the ending of the working day starting with the curtains closed! February is the month of Valentine’s Day and Pancakes and perhaps most importantly, February is also Groundhog Day! However, the furry animals didn’t get a look in this year as, by some fateful co-incidence, February 2nd 2022 was Levelling Up day.
The Levelling Up White Paper, coming in at over 300 pages, is a comprehensive and tough read which will clearly create both challenges and opportunities for areas, Authorities and communities. The White Paper did remove the Sword of Damocles from Local Enterprise Partnerships, although there will still clearly be some changes in their structure, function and role.
The White Paper also confirmed the more holistic approach to Levelling Up that many CEDOS members had hoped for, reflecting on imbalances within areas not just between them and identifying the central role of health, education, quality of life and quality of place in reducing socio-economic inequalities.
There are still many questions to be answered if the UK post-war economic regional imbalances can start to be turned around by 2030. This includes how this current approach at reducing regional inequalities will succeed with arguably less resources than previous attempts. The White Paper has also tightened the links between “Devolution” and “Growth”, when in reality they are two different processes and, whilst complimentary, improvement in one does not always drive positive feedback in the other.
The post COVID-19 economy and recovery we are all grappling with may itself deliver convergence between the economic performance of regions with limited intervention, but it may also widen the current gap. Levelling Up with limited additional resources, a potentially disparate UK Shared Prosperity Fund that is being forever top-sliced (and looks more like a fund for community renewal than the Community Renewal Fund) and a private sector still focussed on recovering balance sheets will be a major challenge!
Let’s see if 2nd February 2023 feels more like Levelling Up day again and less like Groundhog Day.
Matthew Epps, CEDOS Treasurer and Lead Commissioner (Business and Economy), Warwickshire County Council
Lunch & Learn Network Event Recap – 21st May 2021
The Lunch and Learn session during January 2022 focussed on how we can create high quality jobs as part of a Levelling Up process. We were extremely grateful to both Professor Irena Grugulis and Professor Chris Warhurst, co-chairs of the ReWAGE Expert Group for giving their time to prepare, present and lead the discussion. Creating high quality jobs clearly has some challenges, especially related to young people entering a labour market where progression routes are harder, a market with short term and largely unsustainable pay rises for some roles and a range of issues relating to gender equality and job roles.
For further information on the work of ReWAGE please click here.
The UK Shared Prosperity Fund
Alongside the Levelling Up White Paper, further details were announced on the UK Shared Prosperity Fund, the much-vaunted replacement for EU Structural Funds. The announcement has surprised many Authorities on the structure and focus of the fund, although many details still need to be confirmed and further and more detailed guidance is due in the spring including an outcomes and interventions toolkit.
Firstly, the fund is to be administered at a District/Unitary level or by Combined Authorities where these arrangements are in place. Many of our County Council colleagues had been gearing up for a significant role in the fund, which now provides a period of uncertainty of their role as long term Accountable Bodies to regeneration and economic development programmes. There is a worry about capacity to rapidly deploy resources to deliver the fund within District Councils, many of whom have continually scaled back their Economic Development capacity since 2009.
Whilst the top-slicing of the fund to support the £559m Multiply adult literacy programme has been long known about, details on how the Department for Education plan to implement the fund are yet unknown. It is hoped going forward that there are no more major top slices of the fund so it can be deployed as flexibly as possible within target areas and against local priorities.
There is a line within the update pre-guidance giving the Secretary of State the flexibility to directly fund the third sector for skills provision where there is a risk of fall off as EU funds tail off. It is doubtable that many Local Authorities would argue against this in principle, but the devil as always will be in the amounts and the detail.
The vision for the fund is based around the following objectives:
- Boost productivity, pay, jobs and living standards, especially in those places where they are lagging.
- Spread opportunities and improve public services, especially in those places where they are weakest.
- Restore a sense of community, local pride and belonging, especially in places where they have been lost.
- Empower local leaders and communities, especially in those places lacking local agency
Alongside Multiply (adult numeracy) the investment priorities include communities and place (which includes a broad range of environmental, public realm and anti-social behaviour reduction measures), local businesses (support for businesses, innovation support and leveraging private sector investment into areas such as the low carbon economy) and people and skills (skills and qualifications, in-work progression undertaking skills needs and support to enter the labour market).
The vision appears to have a stronger focus on community driven projects than many Authorities anticipated, with an emphasis, perhaps with the exception of the first bullet point, on social and physical capital, pride of place and increasing life chances. The UKSPF clearly moves programme management and decision making to as close a political geography as possible to local communities and feels like a return to some of the area-based policies not seen since the latter years of the last Labour government.
The allocations for the UKSPF will be based on a ‘formula’ basis and provisionally this is a positive step. However, it is not clear if the formula will mean that all areas will get at least some investment, or whether only some areas will get any meaningful investment.
The ‘formula’ arrangements for the Levelling Up Fund and particularly the Community Renewal Fund have been complex and created a feeling of opaqueness. The latter fund, with allocations based on priority areas and priority projects, was felt to have ultimately been paid lip service to and the selection of projects by Civil Servants has not always met local priorities or reflected the local appraisal process. There are clearly lessons to be learned in these areas.
The emphasis of the fund to support localised economic development, unlock key barriers to growth and support local pride and access to services will provide some of the key tools to stimulate some of the key mission statements within the Levelling Up White Paper. In some ways this is a very stark departure from regional policy under EU Structural Funds.
Whilst there were issues with the EU Structural and Investment Funds programme, they did allow for a range of projects to operate at scale, such as those around workforce skills, business support, innovation and low carbon. The scale of these interventions allowed economies of scale in delivery, attracted a wider range of partners to engage in the schemes, such as Universities, a range of NHS providers and the private sector and was able to focus primarily on sub-regional economic impact. However, the current EUSIF programme did leave many District Council’s feeling excluded from participating in the fund due to relatively high levels of minimum project size and a preference for projects that covered an entire LEP geography.
Whilst many Unitary Authorities and Combined Authorities are well placed to deliver the fund, to successfully implement programmes across the board, especially in two-tier Districts, there will need to be some capacity building support. One clear example is in areas such as employment and skills which lower tier Authorities have historically played a lesser role in.
The UKSPF has seemingly swung to supporting more micro-local projects from more strategic interventions at scale, rather than trying to accommodate a middle ground.
As with the Community Renewal Fund, there is scope to cross-fund activity that may have previously been split across the European Regional Development Fund or the European Social Fund. This should allow for greater integration of labour market, net zero, growth and innovation outcomes into more coherent packages or even single programmes. Again, these may be more effective if delivered at scale.
However, it remains to be seen if there will be a distinctive revenue/capital split across the programme and the conditions on any capital spend. The Community Renewal Fund had a 10% cap on capital within each project, whilst Towns Fund and Levelling Up Fund both concentrate on predominately capital projects.
Whilst it is stated that the activities of the UKSPF must align with any priorities within any Devolution Deals, it is still unclear how the ongoing outcomes of any County Deals within two-tier areas that are progressed will dictate what happens locally with UKSPF. This may be why at present the allocation only runs to March 2025.
The next steps for local areas will be to develop a Local Investment Plan, with more clarity on process and allocations coming in the spring. Many areas were already working collaboratively across all tiers of Government and with partners on recovery, strategic and investment plans. These may now need to adapt in the short term to fit any criteria Government will lay down for UKSPF.
The Levelling Up White Paper
The Levelling Up White Paper has now been released and after two years of rhetoric. There is now something tangible on paper about the Government’s vision for Levelling Up and something for Local Authorities and local partners to analyse where they can play a role, what resources they may need and what it might mean for their economies and communities.
The White Paper, weighing in at over 350 pages, provides a narrative on the approach to undertake broad, deep and long-term policy interventions to reduce inequality.
“If underperforming cities in the North and Midlands were as productive as London and the South-East, UK GDP could be boosted by around £180bn per year.”
The economic dominance of London and the wider South East has for many years drawn in capital, talent, businesses and international linkages from the rest of the UK. London is a truly global city, which frequently overpowers opportunities for the rest of the UK. The concentration of this massive agglomeration creates a range of issues for London and its surrounding areas, and a different set of issues for those regions outside of the main commuter belt. The challenge for every recent Government has been how to rebalance this wealth generating capacity without damaging the capital.
The central tenet of Levelling Up is that talent is spread equally spread, but opportunity is not, and growing the economic pie through unleashing the private sector and raising output per worker, unlocking new high-quality jobs and creating opportunity for all will improve innovation and economic dynamism and drive growth across the whole of the UK. It is built on the principle that ‘capital’ should invest in places with the highest economic returns – but acknowledges that has not fully benefitted large swathes of the UK.
There are some national redistributive policies such as increasing the National Minimum Wage and moving Civil Servants out of London, but the Levelling Up White Paper generally focusses on small to medium scale, localised ‘barrier removing’ or growth stimulating interventions and a range of ‘liberalisations’ of macro-economic policy. this includes expanding the British Business Bank’s Regional Investment Funds and some of the recently announced tax driven incentive schemes including Freeports, continuing Enterprise Zones and the Super-Deduction scheme. Much of the White Paper must be placed in this context.
For those of us in the profession long enough, we recognise this ‘approach’ does not really diverge from most previous approaches to regional economic development. For Levelling Up to work, it is probably a question of how much resource is invested and over what time period.
The Levelling Up approach is centred around 12 core missions, highlighted below. The use of a Levelling Up ‘mission’ is an interesting choice of language as opposed to the usual vision, aims and objectives. The theory goes that mission-led approaches to policy change, such as those deployed by NASA, are targeted, measurable and time-bound. Whether these attributes can be attributed to interventions within the White Paper are open to debate.
Levelling Up Missions
• Living Standards
• Research and Development
• Transport Infrastructure
• Digital Connectivity
• Education
• Skills
• Health
• Wellbeing
• Pride in Place
• Housing
• Crime
• Local Leadership
Each of these missions has its own key outcome to achieve by 2030. Many of these outcomes are at present vague or focussed at national level outcomes and do not come with specific or tangible targets for reducing social or economic disparities. Whilst the missions notionally have targeted measures attached to them to achieve by 2030, some are open to major interpretation and for some the gap between the more prosperous and less prosperous areas could widen and the Government still achieve its mission. As an example, for Living Standards.
“By 2030, pay, employment and productivity will have risen in every area of the UK, with each containing a globally competitive city, and the gap between the top performing and other areas closing.”
The definitions of ‘pay, employment and productivity’ are clearly critical, as is what it means to be a ‘globally competitive city’, what is an ‘area’ and whether the ‘top performing and other areas’ means London and the rest or the top 50% performing areas and the rest.
In order to support growth within areas that need Levelling Up and reverse some of the negative re-enforcing cycles, there are a number of key investments that need to be made across a number of localised capital deficits. These are:
• Physical Capital
• Human Capital
• Intangible Capital (innovation and ideas)
• Financial Capital
• Social Capital
• Institutional Capacity
Emphasis within the White Paper at this point appears to be focussed on the roles of intangible capital and local institutional capacity, which are arguably the lowest cost elements required to stimulate local renewal. The scaling back of HS2 is a major reduction in Government investing in physical capital.
It has been discussed at many CEDOS sessions that social and economic disparities are often most stark within areas not necessarily between areas, something which the White Paper also recognises. The localised focus of the UK Shared Prosperity Fund may be a useful tool in this area – but other policy measures in this area at this stage appear more limited.
There are major economic differences across much of the UK between places of work and places of residence, with regional economic drivers also often being home to the most disadvantaged communities. There are also major disparities between areas of similar size and located only a short distance apart, with the example of Doncaster and York provided in the White Paper, but this is also relevant across a range of geographies. Closing these gaps and supporting the most disadvantaged communities will in all likelihood be a more important consideration for most Local Authorities than pre-occupation with national gaps and targets.
Devolution
The biggest and most immediate issue for Local Government within the White Paper is the devolution element. A total of nine combinations of Authorities have been invited to develop and submit County Deals (Cornwall; Derbyshire and Derby; Devon, Plymouth and Torbay; Durham; Hull and East Yorkshire; Leicestershire; Norfolk; Nottinghamshire and Nottingham; and Suffolk).
The wider devolution aim is that by 2030 every part of England that wants one will have a devolution deal. There is a clear link being established within Whitehall that increasing economic decentralisation will result in increasing local growth, with local areas making the right decisions to support their own growth. However, recent UK history has shown macro-economic policies have far more of a bearing on local prosperity, both positively and negatively.
Whilst three tiers of Devolution Deals have been specified as flexible pathways (a single institution with a Directly Elected Mayor, a single institution with no Directly Elected Mayor and a Joint Committee approach) the clear spoils come with a Directly Elected Mayor. Government’s emphasis is ‘the stronger the decision making in the deal’, and the more powers will be devolved. Further guidance identified areas need to have a combined population of 500,000 to be considered for a Devolution Deal and be either an established County or a functional economic area.
There is also a proposal to strengthen the powers of existing Mayoral Combined Authorities, especially around levying additional business rates to invest in economic development aspirations.
There is a mix of single, two tier and multi-area Authority structures within the first tranche of County Deals and many will be watching closely the process and outcomes to inform their own direction of travel on devolution.
Whilst the White Paper provided a future role for Local Enterprise Partnerships, there is an encouragement that they are increasingly integrated into the business boards of Mayoral Combined Authorities and County Deals.
There are a number of policy level elements to the Levelling Up White Paper which could have a positive impact on all regions. Levelling Up is now a cross cutting theme across all of Government and a broad range of Departments now must incorporate the national Levelling Up missions into their plans and budgets.
Other significant policy announcements include three Innovation Accelerators for Glasgow, Greater Manchester and Birmingham, supported by £100m of additional funding, the development of an Office for Place to support the regeneration of the UK’s towns and cities and the development of a Levelling Up Advisory Council to provide expert external advice.
There are also proposals to explore setting up a Community Wealth Fund, utilising dormant assets. This will move away from current stop-start funding programmes for community projects. There are also plans to expand cultural spending outside of London through Arts Council England’s uplift in funding in the last spending review.
One of the more hidden details within the White Paper was an increase in the use of new sources of real time data to support areas understand their Levelling Up challenges and to build on the Subnational Data Strategy. One of the challenges of the pandemic has been the rapidly changing circumstances on the ground that locally available data simply cannot keep up with, often only being available on an annual basis. The rate that the labour market switched from furlough and potentially high unemployment to labour shortages over the autumn of 2021 is a clear example of this. The use of real time data, if this is practical and achievable, could create radical change in how Local Authorities and their partners deliver local services, deploy resources and stimulate growth.
The major issue for Levelling Up will be the shape of the national economic recovery, which over the last year has seen 7.5% growth, the highest annual growth figure since 1941. However, there still remains significant economic headwinds, a drive to achieve net zero and a changing set of relationships in global trade to navigate. How the recovery period plays out over the remainder of the decade and its impact on regions are smaller geographies will likely have more bearing on socio-economic disparities than any Government Levelling Up policies and investment. As many parts of the UK try and overcome the legacy of the last half century, it is to be hoped that Levelling Up is not running against a future tide of widening economic disparities.
Future Dates for CEDOS Events
Every first Monday of the month at 12pm-1pm, CEDOS will be facilitating a forum to discuss issues and share practical solutions and best practice around the Community Renewal Fund. It will be open to members and non-members and will run until July 2022. The forum will be virtual and can be accessed via an open link. Forthcoming forum dates will be:
Monday 7th March 2022, 12pm – 1pm
Monday 4th April 2022, 12pm – 1pm
Our next Lunch and Learn session will be taking place on Friday 25th March ,12pm – 1pm and will focus on the UK Shared Prosperity Fund.
Please contact info@cedos.org for further information on these events.
CEDOS on LinkedIn
CEDOS are delighted to launch our new LinkedIn company page for members to share links, news and commentary. LinkedIn is the world’s largest professional network and we look forward to engaging with current and prospective members on the platform. To follow and post please visit https://www.linkedin.com/company/cedos/