According to ministers, Local Area Agreements (LAAs) are “the most significant change in public service and local funding since the Second World War”.
LAAs are meant to increase councils’ financial freedom and give them more flexibility to design services that fit local needs. And the new ‘fourth block’ for economic development and enterprise will slash through red tape, giving cities and towns a chance to deliver growth.
Sounds good – but is it actually true? In reality, LAAs are more modest. They are potentially useful tools, but are constrained by our centralised system of local government finance.
It’s early days, but so far the signs are mixed. Talk privately to a finance director or chief executive in an urban area, and you’ll hear disappointment and resignation in equal measure. Most say that the flexibilities on offer are outweighed by the complexity of the negotiation process. For some, the ‘fourth block’ has barely registered at all.
Local Area Agreements are new – and could still deliver real financial flexibility to England’s local authorities. But for this to happen, Government needs to match ministerial rhetoric with a real willingness to devolve more financial power to cities and towns.
Urban areas face an uphill battle to jump-start their economies. The key building blocks – more jobs and better skills – are hard to achieve even when cities are flush with regeneration cash.
Take Liverpool as an example. More than thirty different Government departments, agencies and unelected regional quangos control regeneration funding in the city. Over £300 million in annual spending is committed and deployed by these groups – rather than the city’s own government.
Liverpool City Council – ostensibly responsible for economic development and regeneration on its patch – is left with the difficult task of cajoling potential funders to the table. The process is depressingly similar, whether for huge infrastructure schemes like Merseytram, or small neighbourhood-based initiatives in Kensington or Toxteth.
And Liverpool is not alone. Urban local authorities across England face similar constraints. Foreign observers, exposed to England’s financial maze, are often amazed that regeneration happens here at all.
Yet there are real prospects for change – provided that the rhetoric behind Local Area Agreements is reflected in practice at the highest levels of Whitehall. A real commitment to pool and devolve regeneration funding to cities and towns would give them a fighting chance to foster better economic performance. This sort of commitment is within reach. For starters, the ‘fourth block’ of LAAs should be re-focused and up-scaled, with real resources attached to it. Currently, the block centres on the Local Enterprise Growth Initiative (LEGI) and neighbourhood renewal funding, when its focus should be far broader.
We argue that the LAA fourth block should be transformed into a strategic Economic Development Contract between central and local government, covering a wide range of regeneration funding streams. A contractual approach would allow cities and towns to develop and implement their own proposals for physical, social, and economic regeneration – and commit resources accordingly.
For this to work, ‘place’ must become part of everyday thinking across Whitehall. LAAs can only deliver radical new freedoms and flexibilities if all major spending departments accept that different places have different needs.
ODPM ministers need to spend less time selling LAAs to local authorities, and more time persuading their ministerial colleagues to make a substantial commitment to them. Only then will we see the kind of financial devolution that our towns and cities really need.
