Opinion: Heseltine report puts the State back on the hook for helping lead economic recovery

The lack of a joined-up growth strategy has been this Government’s Achilles heel. This week’s report from the Heseltine Review finally provides one. Some on the Tory backbenches will urge David Cameron and George Osborne to ignore many of the recommendations, and the swathes of evidence standing behind them, in favour of abdicating responsibility for the economic recovery to the private sector. Jacob Rees-Mogg predictably caricatures the findings as favouring a 1960s approach to regional development – his preferred course being deregulation. The Heseltine Review embodies a growing consensus as to what should underpin a 21st century growth strategy:

Britain needs an industrial strategy – In an increasingly competitive global economy, Government can help create an environment in which businesses are able to thrive. Nurturing innovation, investment in infrastructure and helping provide a supply of skilled workers as among the areas in which government has a key role. Lord Heseltine sums this up perfectly, surmising that “experience indicated there are some things only government can do to drive growth in the economy” and emphasising the public and private sectors are inextricably interdependent. Everyone from the CBI to the TUC agree with this and therefore the report’s call for a National Growth Strategy is welcome. Additionally, there is a need to empower civil services to take more risks. While ensuring Government programmes provide value for money is crucial, Lord Heseltine is right that too often, admirably ambitious projects are evaluated placing too much stock on the benefit of hindsight.

Rebalancing the economy means shifting economic and political power to local areas – The report acknowledges that no one in Whitehall can know how to solve the specific challenges facing a particular locality. While there have been both pros and cons in moving from RDAs to LEPs, the lack of authority and resources at the disposal of LEPs severely constrains their ability to transform their local areas. Likewise, local government have become little more than Whitehall’s branch offices – dependent servants rather than valued partners. Lord Heseltine’s call for separate funding streams from national government to be combined into a single funding pot for local areas is sensible. Different areas have different spending needs in their pursuit of spurring on local economic growth. IPPR has argued for devolution of funding in the area of housing, and the Northern Economic Futures Commission final report, being published next month, will set out the case for further devolution of funding. Less sensible is Lord Heseltine’s suggestion that areas compete against each other for this funding. The public sector’s biggest strength is the stability it provides. Local government needs a reliable funding stream – we would not ask the devolved administrations of Scotland, Northern Ireland and Wales to compete against each other for funding. More promising is the report confronting head on the fact that substantial localism necessitates not just changes in local governance, but also wide ranging changes to the structure of central government. The local growth teams it advocates would be a good start.

The Heseltine Report’s express backing of combined authorities in the model of the Greater Manchester Combined Authority and of conurbation mayors is welcomed. There is a growing body of evidence (for instance, the recent European Institute for Urban Affairs report) that the regions and their major cities have as big a part to play in the nation’s economic recovery as London and the Greater South East, but they have been held back by centralisation and of under investment in both hard and soft infrastructure by national government. The Northern Economic Futures Commission final report will add to this and sets out a growth strategy for the North of England which shares may of the ambitions of the Heseltine Report.

Comprehensive and stable policy is important – An attempt by government to cherry-pick parts of the Heseltine Report would be a mistake. That is not to say that it should accept all 89 recommendations, but rather that making changes to local government without addressing the inadequacies of Whitehall, or increasing links between public institutions and local businesses without changes to skills policy, will greatly blunt their potential impact. More fundamentally, stability, as noted in the report, is a precondition to economic transformation. A stable growth strategy which has cross-party buy-in is essential. The private sector will be cautious in investing in areas where local economic development policy is in constant state of flux. Equally, institutional changes can take time to bed in as we have seen from the move from RDAs to LEPs.

The Heseltine Report is not without flaws, but is the closest thing to a growth strategy which the Coalition has available to it. Cameron and Osborne should therefore, with a sense of urgency, embrace it.

* Graeme Henderson is a Research Fellow at IPPR North

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3 Comments

  • David Pollard 2nd Nov '12 - 4:55pm

    From what I have read in the papers rather than reading the report itself, I agree with Mark. The Coalition must have a go at something.

  • Why were the highest-spending RDAs the ones with the lowest return in GVA per worker, and why would Heseltine’s LEPs get more than the same disappointing results that attempts at regional development have for my lifetime? As we know, there’s now no money left.

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