25 July 2016

Give local authorities the wherewithal to drive recovery

Brakes have been applied to the austerity drive by Philip Hammond. Talking about deficit reduction Mr Hammond said ‘looking at how and when, and, at what pace we do that’ is something to be considered ‘in light of the new circumstances that the economy is facing’. Interest rates have been held but, as expected, the indication is that the ties of austerity will be loosened.

What will this mean at a time when government borrowing rates are at their lowest ever? One view is that the Government should borrow to finance public investment, that more must be done to try to shore up the economy post Brexit.

The UK Government can now borrow at 1.08% for 10 years and for under 2% for 30 years, notwithstanding the downgrading of the UK state debt. Mr Hammond has said there will be no emergency budget but a clear fiscal plan will be set out in the Autumn statement leaving Mark Carney and the Bank of England to manage in the interim.

Given the unrelenting pressures local authorities have coped with, and their proven resilience, local government now has the most important strategic role to perform in seeking to retain confidence in local markets and deliver growth to local economies. Lack of resource and skills sets due to changes necessitated over the last nine years have added to their challenges.

Brexit may well give further impetus to the devolution agenda driven by the public sector demand for local/regional control. One debate needs to focus on the extent of power, the relaxation of the mayoral requirements and authority over budget, and borrowing. This could present an opportunity for local authorities to push for real autonomy enabling them to take regionally-specific steps in their local economies to try to fix some of the very real social and economic issues and differences.

Central Government should look at current borrowing commitments and consider how these could be adjusted to enable investment by local authorities. Coming full circle, tax concessions could be granted extending, for example, the enterprise zone model to key investment areas and enabling benefits to be allocated across devolved areas more easily.

An easier, more efficient zoning system both in the case of physical regeneration and economic in terms of rate and tax reliefs to occupiers and across combined authorities (in the sense of combined local authorities and combined public authorities e.g. local authority, wealth and transport), would better enable such intervention. However, to move in this direction skills and resources are needed which at present are being pulled elsewhere.

Finally, the announcement by Sheffield City Council of an initial £220m of Chinese investment, the biggest outside London, shows how important it is for the public sector to work closely with the private sector and continue to innovate to secure future investment.

Tiffany Cloynes is a partner and head of public services (England), Geldards LLP.

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