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Devolving for growth - Implementing the Sub-National Review (SNR)

Date of speech	7 November 2007
Location	Albert Hall, Nottingham
Event summary	Core Cities Summit

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Transcript of the speech as delivered.

Thank you for inviting me to speak at this year's Core Cities Summit, as I did last year in Bristol.

The Core Cities Group has played an important part in policy debate for some time and it's interesting to track the development of your influence. You:

• Have helped confirm the central role core cities have as engines of your wider economies
• Are responsible for two thirds of the county's new jobs; two fifths of our population growth in recent years and one third of the country's population is living in or near English cities.

This was analysis we incorporated in Government in the joint Treasury and Communities and Local Government report on the economic role of cities alongside the Budget in 2006.

You have prompted other cities to consider their own economic role more seriously - last month I spoke at an event with the Regional Cities East alliance - six smaller cities: Peterborough, Luton, Ipswich, Norwich, Colchester and Southend-on-Sea - which share knowledge and look to collaborate on improving the economic performance of their areas and believe they can create more jobs and affordable homes together, than they can afford on their own.

You have extended your work beyond the eight cities you represent in the UK to the international level - new COMPETE report published today which Michael Parkinson will discuss the latest result

You have made a big contribution to the ideas in the SNR, and I know you can make an equally big contribution to its implementation.

I am fortunate to be in a rare position as a Minister, being able to lead the work on the work on the SNR for over a year at the Treasury and able to launch the report from the Communities and Local Government.

The Review was very open. The team visited every region; and consulted with over 300 organisations and individual experts.

It was informed by Sir Michael Lyons' comprehensive report into local government, in which he underlined the important economic role for local authorities, as part of defining and delivering a vision for the places they serve.

And it was informed by Kate Barker's recommendations to bring together planning for homes and the environment, with planning for economic growth.

The review takes the reforms a stage further from the previous five years - RDAs, prudential borrowing powers, devolution, Business link, regional funding allocations - giving local authorities stronger incentives and greater powers to support economic growth.

When the Prime Minister launched the Constitutional Green Paper in his first week, he said, the SNR will "signal a shift of focus to local authorities, open up the possibility of powerful city regions and give a clearer role for regions of England."

The SNR also reflects the Prime Minister's vision of a modern democracy, in which power is exercised at the lowest level and those with power are held more clearly to account.

Moreover, these reforms are essential, as global economic and technological changes place an increasing premium on enterprise, innovation and skills.

This means the Government's commitment to increase growth in all regions, reduce regional disparities and deliver neighbourhood renewal will in the future be all the more challenging and all the more important.

It means that further freedoms and devolved decision-making are required at regional and local levels: first, to respond to rapid economic change; second, to deal with persistent local deprivation or poor economic performance; third to recognise no area or local economy is the same; and fourth, therefore, to develop to their fullest potential.

Last year when this summit took place we were working on publication of the SNR. This year at this summit we are working on implementation. It is very much work in progress, open to influence and contributions which I'd very much welcome.

In SNR, we provided a single integrated strategy, strengthened institutions, more delegation of funding from RDAs and a new economic development duty for local authorities. We are preparing consultations on these reforms, which, we will publish in the next couple of months.

In the SNR, we promised to concentrate regeneration investment more on the most disadvantaged areas.

The Comprehensive Spending Review (CSR) announced £2 billion for neighbourhood renewal programmes with jobs, enterprise and greater emphasis on economic growth…. and I aim to set out the allocations of funding authority by authority, alongside the announcement of the core grants for local authorities in the provisional local government settlement.

In the SNR, we promised a more strategic and clearer remit for Regional Development Agencies (RDAs). The CSR confirmed a new framework in which they must operate, and a single department at a national level - BERR - responsible for the Government's target on regional economic performance.

In the SNR, we promised stronger public and democratic scrutiny of regional policies and strategies. Proposals in our consultation will help establish this in the region via elected local authority leaders; and proposals being discussed, as they say 'through the usual channels' - will see elected MPs at Westminster playing a greater role in challenging and holding to account, RDAs and other agencies in the regions.

In the SNR, we promised Multi-Area Agreements (MAAs) that could be a method for marshalling the collaboration of local authorities in wider city or sub regions….. on housing, planning, jobs, economic investment, transport skills, business support.

We announced today the 13 areas - from the core cities and well beyond - that have registered a formal interest in MAAs. And in the SNR we promised to look at long term options for the 3 year LABGI, to consider further the challenge of formal funding mechanisms in to support general infrastructure investment and Business Rate Supplements in particular.

Alongside the CSR we published a white paper on Business Rate Supplements; a discussion paper on LABGI; and confirmation that we will legislate - in the new planning bill - for a new planning charge rather than a planning gain supplement.

I and other Ministers, and our officials - will be looking to the core cities group not just to help develop these policies but also to lead the way in delivering many of them.

The main point I want to put to you today is that there is much local authorities, and core cities in particular, can make of what we are proposing in the SNR and there is much more you can make of the economic powers and freedoms we have already put in place over the last five years.

Let's start with the reforms we've promised and have now made to the system of targets for local government, and in particular the scope for local authorities to set the priorities for their own areas.

We've done what few really believed we could cut 1,200 indicators down to 198 and there will be no mandatory targets from the centre through the maximum 35 to be agreed as part of the LAAs.

This is what Sir Simon Milton - LGA leader described as:

"An excellent step that will help free Councils to deliver a what local people want and need"

34 of these 198 indicators are directly relevant to the local economy covering areas such as:

• employment rate;
• benefits;
• supply and quality of housing;
• skills;
• transport;
• business regulation.

Councils can decide to give any of these a priority in the 35 they choose to form a part of their local area agreement with central government, and for which a further round of performance reward grant will be payable.

Of course, councils can also decide that their impact on any of these areas may be greater if they can pool their efforts and resources in collaboration with neighbouring authorities and our new MAAs are designed to encourage this.

Core cities have demonstrated to others than this type of collaboration can be done…….

• the 10 local authorities in Manchester forming the AGMA network, running the airport and overseeing transport strategies for the wider city
• here in Nottingham, with the City Council working with the neighbouring authorities and the County Council on a transport plan for Greater Nottingham.

We announced the underlying principles of MAAs in the SNR, we announced today the 13 areas that have expressed a strong interest. MAAs will develop differently depending on the history and economic circumstances of the different areas.

For example:

• Greater Manchester are considering how best to tackle worklessness and skills at the sub-regional level, bringing together public agencies to give people out of work in the area better access to skills training. With an economy the size of the North East of England, the potential prize here in terms of economic growth is significant
• The Tees Valley partnership is focusing on how to bring together long-term capital programmes, placing this in a context of sustainable economic development
• Bournemouth, Poole and Dorset are considering whether an MAA could deliver more than individual councils in skills, housing, the environment and tourism
• South Yorkshire are exploring how to use an MAA as a means to deliver more affordable housing as part of the programme.

I will take a close personal interest in these potential MAAs; and regional ministers are another likely source of support. But let me be clear, central government will not be telling areas what specific priorities, targets or funding streams will go into individual MAAs. Communities and Local Government will act as champions for this new way of working across Whitehall - locally designed, voluntary, bespoke and based on evidence of the local barriers to economic growth. We'll ensure that this policy develops in line with the principles set out in the SNR but the decisions and the delivery responsibility will rightly rest in the sub-region.

When businesses need more revenue to expand, or when they need to balance their books, they look for innovative ways of increasing trade and sales.

Last week we published research on local authorities' trading activities. This showed together they are generating around £1 billion a year on services like property management, highways and vehicle maintenance, legal, financial, waste management and IT. But only one in four aims to make a surplus to invest in services, or keep the council tax bills down.

The more enterprising councils might consider how they can make better use of the powers we established in 2003. These allow better performing councils - and that is now the great majority - to trade through a company. Like Norfolk with its wholly-owned companies NPS Property Consultants and Norfolk County Services. Both provide a wide range of services to authorities across the country and have developed joint venture companies to provide shared services. Their combined turnover will exceed £140 million this year. I asked about similar examples in the core cities, and was told there are none.  If I am wrong, I would like to know. If I'm right, I'd like to see some serious attention given to the potential of such powers.

Let me turn to another new power for local authorities, that I had a hand in introducing from the Treasury in 2004.

The new borrowing regime enables councils to raise money for capital projects and - unlike trading - the powers are being well used by councils to support a wide range of services and developments.

Nottingham City Council have used prudential borrowing to fund a contact centre for council service users which is bringing together 8 different buildings into a single stop shop allowing both better services standards and significant savings.

There is nothing to stop local authorities borrowing together to jointly fund projects that may benefit the wider area.

And as a rule of thumb, a reliable revenue stream of £1million a year could be used to raise £10 millions for investment; £10 million in revenue could raise £100m for a major improvement in the area.

So with the prudential borrowing regime in place, the challenge becomes the reliable revenue stream to service and repay the borrowing.

Our aim in government now - just as we said in the SNR - is to create the funding instrument for local authorities - to raise the investment needed for infrastructure and the long term improvements.

For transport………like London and indeed Durham, Manchester is now considering a congestion change to support public transport improvements.

Nottingham is considering applying for powers to introduce a work base parking levy - which could raise up to £12 million a year towards investment to expand the city's successful tram system.

For housing and the environment, we will introduce a system of planning charges, as many from the development industry and local government sector urged in response to consultations on the planning gain supplement.

These will be raised on new developments to finance the infrastructure needed to support substantial growth. They will sit alongside and supplement revenues to planning authorities from Section 106 agreements which raise around £2 billion a year but many local authorities don't negotiate them and 60 per cent of major residential planning applications are not subject to such agreements.

And for economic development the new power to raise a Business Rate Supplement will be an option that could command wide support. With a 2p supplement a city like Nottingham or Newcastle could raise £4 million a year or the seven West Midlands authorities could raise more than £27 million.

These are all ideas developed in discussion with local government, just as implementation will be too.

We in Central government will work with you, on development of the policy and funding methods but decisions and visions for your place are yours.

However, the main point of these financial freedoms is not just public money, revenue or capital. It's the leverage this gives to help attract the inward invest from private sector sources. This was a major theme in the SNR report. 

Many are doing this, and again there are lessons to learn and share here.

Sheffield's 'Heart of the City' project, for example, is an innovative mixed use development, including a new Millennium Square linking the city's Peace Garden and its Winter Garden. Here £11.5 million of public sector investment has helped lever in nearly £180 million from the private sector.

Manchester and Salford's Housing Market Renewal Pathfinder, government funding of £221 million has helped generate over £650 million of private sector investment.

In Liverpool's Paradise Square Development Area, retail-led regeneration by Grosvenor PLC will amount to over £920 million, dwarfing the public sector funding contribution by more than 5 to 1.

One thing is clear……in many places, local authorities need to reframe their relationship with business, which in the future needs to allow for more influence and more systematic involvement.

In some areas, private sector leadership or influence in local strategic partnerships is valuable.  In other areas, City Development Companies may be useful.

However I would like to encourage more innovation. I've argued that confident leaders can look to draw in expertise and contributions from beyond their own political base. A town hall of all the talents will strengthen not weaken local government.

If a Mayor in Hackney can bring in Mike Tomlinson to lead to drive to raise school standards then first rate local business leaders can surely command a more central place.

So I'd like to encourage more innovation and I'd like to encourage more debate, with ideas from business organisations like the British Chambers of Commerce as well as local government.

And there is experience we can draw on from successful modern European cities…….usefully published today in the report of the COMPETE study, commissioned jointly by Communities and Local Government, Treasury and the core cities group.

Some key messages I have taken from COMPETE are

• the crucial role of partnerships and networking -  Helsinki and Munich show how a powerful culture of consensus at city, regional and state level, including universities, the private and public sectors, can create a dynamic environment where innovation and competitiveness flourish
• strong and innovative leadership - Sheffield and Barcelona demonstrate what strong strategic leadership and governance can deliver in regenerating cities undergoing rapid economic change
• the need for cross boundary collaboration and linkages - Rotterdam works closely with its surrounding region to improve regional, national and international transport links and create networks, clusters and business chains that become self-generating and maximise economic success
• the decisive role of skills and capacity building - Dortmund illustrates how crucial improving the quality of training and human resources can be to delivering successful economic development.

Thank you.