Need and potential exist in the same neighbourhoods
Researcher
Last Friday, the Government launched a consultation on the Fair Funding Review, the first attempt in more than a decade at reforming the formulas used to determine local government funding allocations. Three days later they published their Industrial Strategy, a ten-year plan to double investment in eight high-growth sectors.
Both are welcome. Who can disagree with the Fair Funding Review’s commitment to update outdated formulas, streamline the number of grants, provide longer-term certainty through multi-year settlements and steer resources towards deprived areas? Likewise, who can fault the Industrial Strategy’s ambition to raise productivity and accelerate growth?
The complexity lies in their implicitly divergent treatment of place.
The Industrial Strategy channels capital investment towards places with the greatest potential. A significant amount of economic activity in the eight growth sectors is already clustered in urban areas, and the Strategy states unequivocally that “city regions are the engines of the modern economy”. Meanwhile, the Fair Funding Review channels funding towards places with the greatest need. An estimated £2 billion will flow from affluent to more deprived areas, many in the north and the countryside.
This rigid division between need and potential overlooks the nuances of place and shines a light on the reality of much modern economic policy: dynamic but cash-strapped city regions versus subsidised but static hinterlands. Life on the ground is more complicated.
City regions are rightly cast as the engines of national productivity. Directing more capital investment towards these places is a valid policy decision and a break from the 2017 Industrial Strategy’s ‘something for everywhere’ model. Yet even the most affluent places in these areas struggle with financial difficulties that neither a short transition phase nor the extension of the Dedicated Schools Grant Statutory Override will solve. Indeed, failure to improve finances in these areas could jeopardise the very growth they are intended to achieve if councils are forced to cut back on crucial capacity in planning or economic teams.
Similarly, deprived areas should receive adequate funding. But they also have sizeable economies and industries. They require a pathway to economic growth which goes beyond simply attaching themselves to the nearest city region.
Need and potential coexist on the same streets. City regions require not only capital investment but also improved funding arrangements and fiscal power — for example the ability to levy or retain tax revenues — to sustain their growth ambitions. Meanwhile, deprived areas need a growth vision which recognises the existence of polycentric geographies which often fail to align neatly with the city region model.
The Government has made place a central plank of their policy agenda. This is welcome but it must now mature in depth and nuance, moving beyond a dichotomy of ‘poor’ areas with the need for more grant funding and ‘productive’ areas with the potential for more capital investment. It remains unclear whether Whitehall is capable of implementing the changes required to realise this ambition, or whether truly place-based policy is only possible through greater devolution.