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What should local economic development do now?

While many have articulated the problems, finding solutions to sluggish local economies is more elusive. At today’s Work Foundation/CLES event, ‘Economic Development: Innovating for Local Growth?, Professor Henry Overman, director of the Spatial Economics Research Centre at the LSE, made a plea for greater acknowledgement that, really, we don’t have a clue what economic development should do now.

‘Places face different challenges so appropriate responses will differ,’ he said. ‘Acknowledging that is key to understanding the changes.’

So while those areas poised for growth have a whole new tool-kit to choose from – Tax Increment Financing, New Homes Bonus etc – these aren’t much help to those places whose economies have no chance of growth in the near future.

All areas need greater control over how they respond to change, as well as recognition from central government of the progress already made in local governance.

The ambiguities of current policy are creating confusion and fragmentation at the local level; while the government decentralises with one hand it centralises with the other, leaving local areas with less control over issues such as skills and worklessness.

Geography remains an issue, despite the abolition of the Regional Development Agencies (RDAs), often accused of being the ‘wrong geographical level’. Their replacement – LEPs – also have the wrong geographies in many cases, said David Bailey, professor of international business strategy and economics at Coventry University, citing the neighbouring LEPs of Birmingham and the Black Country.

He wants to see the ‘duty to co-operate’ between LEPs enforced and incentivised so that areas cut off from core cities are not left isolated and to allow the right scale for local development, and wants LEPs to be given genuine powers and the ability to raise funding.

For many areas localism could be the key to renewal, said Lizzie Crowley, researcher at the Work Foundation. ‘With no money around we need to make sure localism happens by building up community assets and capacity’, she said. Neil McInroy, chief executive of CLES, made a plea for economic development that shields local economies from further pain as well as helping them to grow, and for a focus on place resilience.

But while there is little doubt that a paradigm shift in economic development is needed, there was less clarity about what the nature of that shift should be.

Do we focus more heavily on place, boosting local resilience by improving the way local economies work as systems and networks and attempting to find the economic DNA of each place? Or should we accept the unevenness of development around the country and focus our energies on getting the basics of schooling, housing and transport right to attract and retain high-skilled workers in places most likely to grow? Is traditional economics such as clustering, innovation and even industrial policy now passé?

As the government itself flips between Keynesian and free market approaches and between centralism and localism, the lack of clarity is playing itself out in local areas, many of which find themselves in limbo. While policymakers flip-flop it’s up to local areas themselves to take the bull by the horns, recognise their own needs as well as the need for change, and react to challenges in the most appropriate way for them. For, as this event proved, the future of local economic development is unlikely to be uniform but a patchwork of different approaches, interventions and change.

One policy that did get broad agreement – scrap High Speed 2 and give the funds to LEPs!

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