Speakers:

Adam Marshall, Centre for Cities
Steve Carr, English Partnerships
Chris Brown, Igloo Regeneration

The second event in the City Solutions series – convened by the Centre for Cities and PwC – took a detailed look at the Government’s recent proposals for financial devolution, as well as moves to create new asset-backed financial vehicles to help England’s cities and towns deliver regeneration and housing growth. The roundtable event:

• Examined the implications of the 2007 Pre-Budget Report and Comprehensive Spending Review – including the potential for Business Rate Supplements, reformed business growth incentives, and planning charges to support local infrastructure investment
• Looked at whether Local Asset-Backed Vehicles (LABVs) can help cities and towns to deliver infrastructure, housing, and economic regeneration. To date, Asset-Backed Vehicles have been used successfully by regional and national agencies – but could also help cities to lever in substantial private-sector investment.

Headline messages

Local authorities are due to gain more financial freedom and flexibility than they have had at any time in the past two decades. Discussion uncovered five key challenges facing cities as they aim to make the most of new revenue-raising powers. These challenges will require councils to shoulder additional risk and responsibility – with more pro-active support from government departments and agencies.

• Objectives: Councils need to set clear economic development objectives before deciding whether new financial tools or delivery vehicles are right for their areas. Local authorities must 1) evaluate their economic challenges, 2) set clear goals and objectives, and only then decide what ‘package’ of tools will help to achieve these goals. This approach will require cities to take a more strategic, long-term approach to economic development.
• Inaccessible language: Many of the new tools and delivery vehicles on offer are technical and difficult to understand. Government agencies, private-sector partners and think-tanks have a role to play in explaining the options in plain and easily understood language. Unless the dense technical terminology around the devolution agenda is more clearly explained, take-up of new financial tools and delivery options may be limited. This, in turn, could have a negative impact on cities’ growth aspirations.
• Identifying and dealing with ‘trip wires’: Central government, local authorities, and business stakeholders now agree on the importance of devolution – and the headline aim of giving cities more powers to influence local economic performance. But there are a range of regulatory, legal and financial ‘trip-wires’ that could hamper the implementation of the devolution agenda – and prevent cities and towns from using new financial tools to support growth. The need for greater clarity on local authority accounting and borrowing rules is one example.
• Local capacity and attitudes toward risk: Many local authorities may need to develop new capacity and skills to successfully use new financial tools and delivery vehicles. In some cases, risk is also a key consideration. Central government agencies – such as English Partnerships and RDAs – can help by providing expert assistance to innovative councils that are willing to shoulder the risk associated with new tools. They can also help other authorities learn lessons from the experience of trail-blazers.
• Local Asset-Backed Vehicles: LABVs have the potential to help unlock additional private sector investment in local regeneration and housing projects – by bringing together public sector assets with private sector capital. However, the benefits of LABVs must be spelt out more clearly to councils and the local business community. Recognition that LABVs offer cities the opportunity to retain a long-term stake in development, keep a share of the returns from any uplift in land values, and balance risk with private sector partners, could help to ease councils’ fears around control of assets – as some local officials worry that this delivery model is tantamount to “selling off the family silver”.

The final report of the City Solutions series will be published in February 2008.