Devolution, Inclusive Growth and Local Skills Strategies

In today’s blog, CURA’s Jonathan Payne argues that the devolution agenda in England has so far been driven by a neo-liberal “growth first” approach that eschews consideration of the challenges presented by inclusive growth. He argues for an inclusive growth approach that is more sensitive to the quality of employment and the lower end of the labour market, and he specifically considers the role that local skills strategies might play in such a policy agenda.

Since 2010, UK governments have promised to empower local communities to drive growth as part of the devolution agenda for England. This has seen the creation of Local Enterprise Partnerships (LEPs), bringing together local authorities and members of the local business community, along with ‘City Deals’, ‘Growth Deals’ and ‘Devolution Deals’, brokered between central and local government. The question is what kind of growth and for whom? The emerging discourse of ‘inclusive growth’ reflects concerns over poverty and inequality, and the general idea that everyone should benefit. The Prime Minister, Theresa May, has spoken of building an economy that ‘works for everyone’ and of spreading the benefits of growth across all parts of the UK. Against the backdrop of weak productivity, ‘industrial strategy’ is being promoted, with the aim of creating good high-value jobs, while the National Living Wage for the over-25s supplements the Government’s welfare-to-work agenda and its commitment to ‘make work pay’.

Inclusive growth is a hot topic, with an All-Party Parliamentary Group looking at the issue, and the RSA’s Inclusive Growth Commission, Manchester University’s Inclusive Growth Analysis Unit, and the Joseph Rowntree Foundation, amongst others, producing reports. The term remains, however, a contested one. A key distinction is between a neo-liberal, growth-first approach which seeks to create more jobs and connect more people, including marginalised groups, to the labour market, and a growth-shaping agenda which goes further by developing more and better jobs. Importantly, the latter puts the spotlight on job quality and includes the lower end of the labour market, an approach favoured by, amongst others, the Joseph Rowntree Foundation.

This is vital because nationally government policy remains firmly wedded to the growth-first approach. Industrial strategies since 2010 have been about sexy, elite sectors and technologies which employ only a tiny fraction of the working population, and have had little to say about the ordinary economy where most people work. Here, one in five UK workers are in low wage jobs and one in eight are ‘working poor’. Many of these jobs are low skill and insecure. While the National Living Wage is welcome, it remains age-restricted and is not a living wage. Progression out of low wage work also remains problematic, with only one in six managing to permanently escape after ten years. Government worships at the shrine of a ‘flexible’ labour market, which gives the green light to employers looking to compete through low wages and poorly designed jobs, ‘zero’ or short-hour contracts and other forms of ‘labour flexibility’, problems which extend far beyond the ‘gig’ economy. With the UK’s low paying sectors a major contributor to our productivity gap with European competitors, there are glaring policy tensions. Austerity also squeezes wages and corrodes investment, while welfare cuts and a punitive regime of conditionality and sanctions applied to those on benefits suck money out of deprived communities and are designed to drive people into any job.

Locally, there are real challenges in fronting up to inclusive growth. Funding for local growth has been cut from £11.2 billion between 2006/6-2009/10 to £6.2 billion between 2010/11 to 2014/15. Local authorities have experienced cuts of 40%. LEPs have limited resources and staffing. Devolution is top-down, limited and uneven, with a crazy paving of devolved powers and responsibilities, which threatens to worsen already stark regional disparities in one of the most centralised countries in the western world. There are concerns that central government is off-loading responsibility for spending cuts, uneven development and deep-rooted structural problems in our economy and labour market. Secret deals, brokered behind closed doors between central and local elites, can mean that questions of ‘what kind of growth and for whom?’ and the lower end of the labour market do not get a look in.

This is not to suggest that local actors have their hands tied when it comes inclusive growth. There are certainly things they can do to directly address low quality employment, whether it be local authorities ‘leading by example’, using public procurement to lever improvements in private-sector contractors, enlisting the support of local ‘anchor institutions’, such as universities and hospitals, or campaigning for employers to sign up to voluntary Living Wage Compacts. Preston’s experiment with Community Wealth Buildingis one approach, and it will be interesting to see how this plays out.

Local Skills Strategies and Inclusive Growth

Another issue worthy of attention is the role of local skills strategies in all of this. At national level, skills have been the policy lever of first and last resort for addressing international competitiveness, productivity and social inclusion over the last 35 years. We know skills have a role to play in productivity and better jobs and in helping people to access work and progress in their lives. But research also tells us that skills have to be used in the workplace if they are to add to productivity. Equipping people with education and training can help some individuals to get better work but it cannot magic away low-skill, low-pay, insecure and dead-end jobs which still have to be done by someone. Neither should we think Robotics and Artificial Intelligence will ride to the rescue or that they will eat all the jobs. The ‘skills problem’ is not just one of too few people with the right skills (weak/misdirected skills supply), it is one of too many jobs which are not effectively using the skills and capabilities of many of those already in them (weak employer demand and poor utilisation).

Skills figure prominently in the devolution agenda, including a number of City Deals and are often an area where devolution deals have requested more influence. We also have the planned devolution of the post-19 adult education budget to Combined Authorities/LEPs by 2018-19, the most visible element of skills devolution to date. However, cuts to adult skills funding leave a massively reduced budget of £1.5 billion across England, much of which is already committed to meeting statutory learning entitlements. Schools and 16-19 funding remain a fiefdom of the Department of Education. Apprenticeships are nationally funded and administered through the Apprenticeship Levy, with government having set a target of 3 million new starts by 2020. Schools and Further Education Colleges both operate in competitive markets for learners, and are subject to centralised accountability mechanisms in the form of ‘high stakes’ national inspections. The ability of local actors to exert influence over the local skills system looks to be pretty limited.

The danger is that local skills strategies focus simply on boosting qualification stocks, addressing skills gaps and shortages, and equipping young people and the unemployed with the ‘right’ skills and attitudes for work, against the backdrop of massively reduced funding. As Ewart Keep has persuasively argued, locally we could see mini-versions of the same skills-supply, target-driven agenda, an approach that nationally has done little to address problems of weak employer demand and poor utilisation over several decades with much bigger volumes of public funding. As the OECD/ILO have also argued, if local skills strategies are to contribute to national productivity and inclusive growth they need to go beyond traditional skills supply measures and address employer demand and utilisation. They call for a major re-think of the ‘skills problem’ which would involve integrating skills into broader initiatives around economic development and business improvement, and working with employers to address issues of product market strategy, work organisation and job design, and the way people are managed. A key challenge is firms bedded down on the ‘low road’, competing on the basis of price, with low wages and low skill job design.

This raises interesting questions for local skills strategies in England at a time when Government is asking Combined Authorities and LEPs to bring forward ‘local industrial strategies’. How far will local growth strategies address low paying sectors? Will we see skills integrated with economic development and business improvement initiatives in ways that do not neglect the lower end of the labour market? Do local actors have the resources, capacity and expertise available to do any of this and can they think differently about the ‘skills problem’? How much progress can be made locally in terms of raising employer demand for, and use of, skills in the context of a weakly regulated labour market and shareholder-driven economy? On this latter point, we will only really know if we try. I have recently been carrying out research, funded by CURA, that has probed these issues in the Midlands, focusing on local actors’ understandings of the ‘skills problem’ and approaches to addressing it. The main finding is that local skills strategies are struggling to move beyond a narrow supply-driven agenda and develop a more integrated approach which fronts up to the challenges presented by low skill, low wage jobs. However, these are still early days. What is clear is that a focus on the ‘whole economy’ and the quality of jobs must be at the heart of inclusive growth agendas.

Jonathan Payne is a core member of CURA and Professor of Work, Employment and Skills at the Department of Politics, People and Place at De Montfort University.

Urban Futures Podcast – Tackling City Decline with Andy Pike

In this second edition of the Urban Futures podcast we talk to Andy Pike, Professor of Local and Regional Development and Director of the Centre for Urban and Regional Development studies, at Newcastle University about recent work he and his colleagues have carried out into city decline in the UK.

You can download the podcast on soundcloud and itunes.

The Declining Cities report, analyses city decline in the UK and reviews international experience for learning. The research seeks to address a gap in urban research agendas that have tended to focus on successful, thriving cities rather than the situation of and policies needed in cities coping with relative decline. The report develops an index of city decline and a typology of relatively declining cities which is used to measure the scale and nature of city decline in the UK. It also includes a review of UK and international literature on policy responses to city decline as well as an assessment of the implications of the evidence for declining UK cities.

Devolution after Brexit: 3 things that need to change

In this post, originally published on the New Economics Foundation’s blog, Adrian Bua argues that devolution should deliver a genuinely more equal, decentralised and balanced political economy in the UK following the Brexit vote.

Brexit has cast doubt over much of UK economic policy – including the Treasury’s pledged support for a ‘devolution revolution’.

Many areas that voted in favour of Brexit were those left behind by a decline in British industry since the late 1970s and those suffering the most from government spending cuts.

They’re the areas that need effective devolution the most, but they’re also the areas standing to lose the most from a Brexit.

Uncertainty has already hit the manufacturing sector with Siemensdeciding to halt investment in Hull, and it won’t be the last case of its kind. Decisions like this will affect poorer regions disproportionately as their industry is generally more dependent on EU demand.

Moreover, these regions have also benefitted the most from EU regional development funding – and therefore stand to lose the most as these funds are discontinued, especially if the British state decides not to compensate the losses.

All this means that poorer regions will suffer from short term disruption and uncertainty, but it does not mean that such regions won’t benefit from Brexit in the long term. For example, supporters of Brexit such as James Wharton, the Minister for local growth and the Northern Powerhouse, say northern businesses now have a huge opportunity to “go global”.

We are concerned however, that rather than leading to a more balanced economy, Brexit risks turning Britain into a full-on ‘hedge-fund economy’ that works for already global finance firms and the City of London.

It’s therefore even more important that the government changes its currently-flawed approach to devolution in the following ways:

1. An industrial strategy for the whole of the UK

The Brexit vote was a loud complaint by those left behind by what Colin Hay has called the ‘Anglo-Liberal’ growth model based on London’s financial services, spending fuelled by private credit and housing price bubbles. This also brought with it the decimation of our public and social services.

We need a new industrial strategy and a plan for regeneration that will boost the incomes and opportunities of these alienated communities that have been left behind.

2. More power to the people

The above, which would include some redistribution of wealth, needs to be accompanied by the redistribution of power.

As Tony Hockley argues, more money and investment can’t reverse the cultural elements of inequality, highlighted brilliantly by Lisa McKenzie’s work on the stigmatisation of working class neighbourhoods in Nottingham, for example.

To tackle this appropriately, as well as offering opportunities for excluded communities to benefit from growth, we need to enable such communities to take an active role in our society and economy. Approaches to ‘Community Economic Development’ such as that being carried out in Preston in their experiment with co-operative industry, have much potential in this respect.

By combining economic development, with the empowerment of citizens, communities can become ‘development makers’, rather than ‘development takers’.

Devolved areas should also engage citizens in forms of participatory public administration, by implementing meaningful and genuine forms co-production in public services, and developing more ambitious approaches to participatory budgeting to give genuine control to people over public investment in their areas.

3. More democratic politics

Our politics also needs to be more responsive to people and the decentralisation of political power needs to occur in political parties and through the electoral system.

Decay in these key democratic institutions is part of what Colin Crouch terms ‘post-democracy’, a condition which I argue elsewhere underpinned many of the pathologies surrounding the EU referendum.

All political parties need a bottom up reinvention based on greater democracy.

How do we do this?

Current attempts by the Labour party to rediscover its roots in social movements are welcome, as are remarks by incoming Prime Minister and Conservative leader Theresa May about a country that works for everyone.

A more proportional electoral system that allowed for a greater plurality of political parties, that could experiment with different organisational models and offer a greater variety of policy platforms without engaging in distracting internal struggles would also be welcome.

Adrian Bua is researcher at the New Economics Foundation and at the Centre for Urban Research on Austerity

Workshop on Austerity and Local Economic Development in England: Mapping a Research Agenda

The Centre for Urban Research on Austerity (CURA) at De Montfort University (Leicester)  is holding a two day workshop on May 16th and 17th 2016 that will bring together leading academics to discuss the future research agenda around local economic development and skills in England.

One of the main pledges of the Coalition Government and its Conservative successor has been to ‘empower’ local communities to develop bespoke initiatives that can drive local economic growth, expand employment opportunities and help address sector and regional imbalances within the UK economy. As part of this ‘new localism’, Local Enterprise Partnerships (LEPs) have been established which bring together local authorities and business leaders to take forward this agenda. Government policy has also placed ‘cities’ and ‘city-regions’ at the core of its approach, brokering a number of ‘City-Deals’. These policy initiatives come at a time of austerity, with substantial cuts to public spending and local authority budgets.

From the outset, LEPs courted controversy, with many commentators highlighting problems of ‘inadequate resources’, ‘uncertain accountability’ and ‘varying capacity’. Since then resources have been stepped up and the dust has now settled sufficiently to permit a fuller assessment. One issue concerns how LEPs might link skills with economic development. For many years, government policy in England has emphasised skills as being central to economic competitiveness, productivity growth and social inclusion. Some commentators, however, argue that narrowly formulated policy interventions aimed at boosting skills supply often fail to address problems of weak employer demand for, and usage of, skills. Indeed, evidence indicates that the UK has serious problems with ‘over-qualification’ and the under-utilisation of skills, which often have a spatial dimension. Skills policies are likely to work better where they are joined up, and integrated within, a wider suite of policies around economic development, business improvement and innovation that impact on employer demand for skill.

If an integrated approach to skills is to emerge locally, then LEPs are a key mechanism. Much is likely to depend on their ability to engage local businesses and mobilise employer action around skills, an area that has proven to be challenging in the past, as well as build constructive partnerships with education and training providers. The hope might be that this approach would not only allow skills provision to be better tailored to local economic needs but would also be able to raise employer ambition around skills by effecting change in competitive strategies and approaches to work organisation, job design and people management. With all actors – LEPs, councils, employers, education and training providers and individuals – facing austerity, there are many challenges as well as questions. Will local actors be given the resources, freedoms and flexibility to deliver on this agenda? Will employers buy into this? Will policy commitments to ‘localism’ and ‘decentralisation’ be hamstrung by cultures of centralisation within Whitehall departments? Is power really being devolved or just responsibility for cuts? Will local actors find spaces for new, innovative and creative approaches that can be extended and built upon? How all of this will play out remains unclear. What is certain, however, is that there is an exciting and important research agenda here for workshop participants to engage with.

Speakers: David Bailey (Aston University), David Beale (Sheffield University), Gill Bentley (University of Birmingham), Crispian Fuller (Cardiff University), John Harrison, (Loughborough University), Martin Jones (Sheffield University), Ewart Keep (Oxford University), Andy Pike (Newcastle University), John Shutt (Leeds Beckett University), John Tomaney (University College London), Chris Warhurst (Warwick University)

If you are interested in attending please send an email to Suzanne Walker (swalker@dmu.ac.uk) to register your place.

Devolution deals: three risks

Devolution to city regions is a central pillar of the conservative government’s industrial strategy. The ‘Northern Powerhouse’ model developed in the Greater Manchester Combined Authority (GMCA) is being rolled out through ‘Devolution Deals’ and the Cities and Local Government Devolution Bill. Advocates of devolution argue that it can close regional disparities in economic output by boosting growth in city regions. It is also argued that closer proximity of devolved administrations allows policy to be tailored to local needs; that devolution contributes to increased dynamism by creating opportunities for local innovation and increases local participation and accountability. As recently summarised by the Local Government Association these are points of consensus in British policy circles.

However, the evidence of devolution as a driver of economic growth, convergence in social and regional inequalities and is pretty thin.  For example, one analysis of devolution concluded that the evidence in favour of such links is very weak and another found a moderately negative relationship. It seems that this evidence is overlooked by the general consensus in favour of devolution amongst policy makers.  In this blog, I will set out three key ‘risks’ that explain failure to deliver on the ‘economic dividend’ argued for by so many proponents of devolution.

The balance between the transfer of resource and responsibility

It is often argued that the ‘litmus test’ of devolution is the balance between the transfer of policy responsibility and resource capacity. On this test, it can be said devolution in the UK has been non-existent in recent history – the purse strings have remained under tight Whitehall control. Research on the coalition government’s devolution reforms found that the scale of devolved functions heavily outweigh the devolution of resources to carry these out effectively. In order for local units to exercise devolved responsibilities effectively, resources and resource raising powers need to be commensurate with responsibilities. The Conservative government’s devolution deals are being pursued in a context of even harsher projected public spending cuts. It is therefore difficult to avoid the cynical conclusion that devolution forms part of a broader agenda to transfer the responsibilities of managing cuts to lower government tiers, rather than a genuine attempt to construct a more decentralised political economy.

Exacerbating inequality

‘Devolution deals’ seem to involve a more fundamental shift of power away from central government than previous attempts at devolution. However, these deals are struck on a case by case basis. Some resource raising powers are on the table, but some regions receive more powers that others – leading to an asymmetric distribution of powers that could exacerbate existing inequalities. Even if these were uniformly devolved, the ability to capitalise upon these is likely to differ across city-regions.  It is also noteworthy that many of the policies that previously distributed the proceeds of the UK’s London and finance-centric economic model are being discontinued by the austerity agenda. Recent research by the Institute for Fiscal Studies makes it clear that measures such as the ‘Living Wage’, which is presented as mitigating these impacts, will do little to compensate for those at the cutting edge of these reforms. Compounded by the imbalance between the devolution of functions and resources noted above, heed should be taken of the possibility devolution to city regions serves as a model for the shrinking the welfare state.

Collaboration and co-ordination between regions and governance tiers

Devolution deals are concerned with arrangements for individual cities and city-regions. Beyond the aspiration for a larger collective contribution to national economic output, there is little focus on the relationships between regions and the impact on devolution deals upon the overall functioning of the economy. Because of this, analysts of devolution have raised the possibility that rather than leading to an “effective and coherent yet more locally autonomous system of government”, devolution policy in the UK might deliver “a disconnected set of governance fiefdoms pursuing more or less strategic ends with varying degrees of competence”.  A related likelihood is the devolution deal model will encourage competition over collaboration between city-regions. As economist James Meadway argues “by granting large cities more powers on the allocation of spending, but leaving the level of taxation, spending and borrowing under tight Treasury control, regions will be forced into competitions with each other to attract business expenditure and therefore extra tax revenues”. This could lead to a regulatory ‘race to the bottom’ that would substantially undermine the collective potential of city-regions to deliver improved economic and social outcomes.

In conclusion, a viable model for a more decentralised political economy should:

  • transfer ‘effective’ policy autonomy by providing adequate resourcing opportunities for devolved units;
  • reduce inequality within and between regions and social groups;
  • provide effective co-ordination between regions and governance tiers.

Although devolution deals are an emergent approach whose outcomes are not yet evident, the ad-hoc and case by case nature of the devolution deals, and the context of harsh public spending cuts within which they are taking place, are likely to lead to negative outcomes regarding the three areas above. It is therefore quite doubtful that devolution deals can constitute a viably generalisable model to deliver a more decentralised and effective political economy.

Adrian Bua is Research Assistant at the Centre for Urban Research on Austerity, as well as at the New Economics Foundation