When it comes to New Year resolutions for 2023, top of the list for local leaders should be getting serious about inclusive growth.
The sector starts the year with the now traditional austerity challenge – to set budgets that protect services, while maintaining financial viability. Yes, the local government settlement was not as bad as many had feared. But it is only a short-term fix, when a long strategy for a more sustainable system of local government finance is what is needed. The underlying financial position for many councils is still precarious (with a third fewer staff than in 2010), just as the demand pressures that they face continue to grow.
The big problems confronting local places in 2023 are social and economic. So, however tough the budget choices might be, the worst thing to do would be to cut economic development capacity just when this will be most needed. This will be a year of recession (the worst and longest in the G7), with inflation at a 30-year high, an unprecedented fall in average earnings and in standards of living. Councils will need to do everything to support local people and businesses and to generate growth.
We desperately need economic growth to get us out of recession, but this time it must be inclusive and sustainable as well. Ever since the Brexit vote, we have seen signs of a new approach. From Government we have had levelling up funding pots and a White Paper, with rumours of more to come this year. While at local level, cities and towns have been developing good inclusive growth practice on employment charters, inclusive procurement and inclusive innovation, as well as doing everything they can to promote growth.
We now need to move from these one-off interventions to purposeful strategy. Inclusive, sustainable growth isn't just a nice to have; it is the social and economic imperative of our era. Our major social, economic and environmental challenges are interlinked, and this requires an integrated approach to improving productivity, generating growth and transitioning to net zero carbon. That's why we have published Time to get serious about Inclusive Growth, as the start of a project to flesh out the agenda for action. We identify three foundations for place-based inclusive and sustainable growth: inclusive investment and innovation; prevention investment and human capital development; and growing the green economy. Our aim is to work with local partners to develop these over the coming year.
Investment in innovation and in regeneration is critical to making our towns and cities more successful. For many places investment in knowledge assets and innovation districts can be a powerful stimulus for growth. This needs to be hard-headed, aligned with the real economy of local places, not just catalysing commercialisation of university research, but also driving innovation in SME supply chains and in the foundation economy. At the same time, we need a strong pipeline of investable regeneration projects that have better social, health and economic outcomes hardwired into their design. There is still a huge wall of potential investment chasing new project opportunities, with pension funds increasingly looking for better alignment with the social objectives of their environmental, social and governance portfolios. How can we be more creative in developing inclusive investment strategies that respond to these opportunities?
Covid showed how health and wealth are two sides of the same coin. The underlying vulnerability of places to health and economic shocks is directly related to the strength of their labour markets and the health of their people. Most of this cannot be improved by more investment in the NHS alone. That is why public service reform that prioritises prevention and early intervention, together with long-term investment in human capital development through education and life-long skills, is so important. How can we establish a clear local leadership role on health improvement, skills and employment? And how can we work across the system to incentivise prevention and early intervention?
The opportunity that places face is to align their innovation and people development approaches with the green economy of the future. We need to plan for net zero transition, not just to call for it. That means developing the investment and infrastructure projects, including on renewable energy, flood mitigation and housing retrofit, that can decarbonise our towns and cities – as 3ci is doing with the Core Cities and Key Cities. So how can we plan and provide for the new skills we will need, and what can places do to support green industry supply chain clusters?
The year 2022 may have been one to forget – politically and economically – but there are grounds for optimism in 2023. The full extent of the challenge facing us is clear. A cross party consensus on the need for devolution is emerging, from Michael Gove's Levelling Up White Paper to Gordon Brown's A New Britain report. Meanwhile, devolution itself has picked up pace again with a spate of County Deals and the North East deal all being signed late last year, and with trailblazer deals for West Midlands Combined Authority and Greater Manchester set to be concluded early this year. This creates much needed capacity to focus on inclusive growth, just as councils, Local Enterprise Partnerships and investors are increasingly recognising that this should be their core priority.
So, let's make this a new year's resolution we all keep.
Ben Lucas is founding director at Metro Dynamics
@metrodynamics
