Left Behind is my new book written for senior officials in local government. I am Oxford's professor of economics and public policy and work on Britain's regional divides. Michael Gove appointed me as an official adviser for levelling up, (albeit unpaid). But my interest was more than academic: having grown up in Sheffield, I saw my city's economy broken by misguided national policies, and left to spiral down, becoming the poorest city in England.

Left Behind starts angry, setting the current crisis of local government finance within the larger setting of Britain's broken regional economies. It explains why that downward spiral is so common. But its core contribution is hopeful and practical. It describes the many examples beyond our shores in which locally-crafted public policies have renewed places once damaged, distressed and despairing.

Devolution and how to use it

The book is a clarion call for the devolution of powers and money. England's governance has become exceptionally centralised in a highly dysfunctional Whitehall, within which the Treasury is far too dominant. Such micro-management is doomed to fail. I document the gulf in life chances dependent on the postcode lottery of region and neighbourhood.

Despite the tight fiscal situation, the new government will rightly be under intense pressure to give local government the authority and longer horizons for the budgeting needed to begin the task of renewal. Indeed, fiscal tightness should be the spur to devolution and only by devolving decision-taking closer to the problems can governance become more efficient.

A rule-of-thumb is subsidiarity. For each objective, devolve to the lowest level of government at which it can realistically be achieved. For renewing regional economies, that level is the combined authorities.

For the first time in decades, thanks to the combined authorities, many broken regions will have the agency they need to renew their economies. But currently, with a few exceptions, they are not equipped for the task. So, what are the priorities for skilling up? I argue that there are three essentials.

Finance for local firms

Outside south east England, regional economies are dominated by small and medium-sized enterprises (SMEs). Once they had major firms in skilled industries like steel and chemicals, but as these collapsed, they were replaced by footloose, low-skill businesses like Amazon distribution warehouses and call centres.

Workers in such jobs were at the wrong end of hierarchies of humiliation. Renewal will come initially from the most innovative of these SMEs: those with the ideas and ambition to grow rapidly into firms of national or international significance. Currently, they are constrained by a shortage of risk-bearing finance. Two-thirds of Britain's venture capital for SMEs goes to the South East, which has less than a quarter of Britain's workforce.

The combined authorities need to encourage a locally-based venture capital industry and this is at last feasible through partnering with Britain's two public banks – the British Business Bank and the National Infrastructure Bank. By partnering with local universities, the combined authorities can encourage spinouts, providing the land on which clusters can form, such as South Yorkshire's Advanced Manufacturing Park –already full only eight years after being launched.

Training for local people

As these SMEs grow into cutting-edge businesses, they will create the skilled local jobs of the future. Local workers then need to be equipped with the skills to fill them and this becomes another core task for the combined authorities.

Colleges of Further Education (CFEs) are the natural partners for local authorities keen to forge stronger pathways from school to skilled vocations. The lesson internationally is that training should be co-financed and undertaken in tandem by firms and CFEs. As with SME finance, the spiral down into mutual antipathy between local business and local government can be decisively replaced by the common purpose of renewal.

Learning rapidly what works

Unlikely as it seems, combined authority mayors might gain inspiration from how Deng Xiaoping used devolution to rapidly learn how to transform China.

Deng inherited an over-centralised system of governance and a deeply impoverished society. Setting objectives to regional leaders, he devolved agency to them while admitting he did not know how to achieve this. Regional leaders learned from each other and Deng was able to initiate the most spectacular mass reduction in poverty in human history. Let's do the same. w

 

Paul Collier is professor of economics and public policy at the Blavatnik School of Government, University of Oxford

 

X – @Blavatnik School