Local devolution must deliver a ‘double dividend’

Devolution offers the chance to tackle poverty and inequality by doing things differently – but current thinking may lead us towards the same mistakes, according to a new report by CLES.

With a national economic model which seems incapable of dealing with poverty and inequality, there is a chance that a fresh action by cities and local government can get to the roots causes of weak local economies and social exclusion.

But in a new report, CLES argues the flawed economic thinking and a Treasury economic model that has left so many parts of the UK lagging behind may simply be replicated at a local level unless we change tack.

Supported by Carnegie UK Trust and the Smith Institute, The Local Double Dividend examines the barriers to local economic development, the root causes of poverty and uneven economic performance and the limitations of current debate around devolution.

The agenda for change currently being put forward is mostly centred on Treasury-backed agglomeration in “cities of growth” says the report, with less attention on poverty and inequalities within and between places.

If this is the shape of devolution to come we will be relying on the benefits of growth ‘trickling down’ to disadvantaged areas – an approach that has so far failed. What is required is local economic policy that has social investment and a focus on addressing inequalities at its heart.

The report argues a ‘Double Dividend’ approach is required in which both economic and social success are seen as intrinsic to local prosperity. Social outcomes such as decent wages, and enduring social institutions, are key to an area’s sustainable economic success but are too often seen as a barrier to growth.

The report’s recommendations include:

• A fresh focus on building social capital in areas with weak local economies
• A new role for local government in promoting business citizenship so that the private sector helps to create an effective workforce
• Harnessing the power of public sector procurement to deliver social and economic success
• Realising the role and power of anchor institutions with a significant stake in place

Neil McInroy, Chief Executive of CLES, said: “Local government is battered by austerity and clearly needs to free itself from a failing economic and social model. It must take any devolution which comes its way and demand more. It’s time for an enabled and empowered local state working with social and business partners to forge a new local social contract. A contract which delivers a double dividend of both economic success and social justice.”

Jennifer Wallace, Head of Policy at Carnegie UK Trust, welcomed the report saying: “The economy is a vital component to our national wellbeing but it is only one component, this research by CLES shows the importance of building strong communities and focusing on improving people’s lives for all to prosper. We need to move beyond the Big Society to a better relationship between public services and the people they serve.”

Paul Hackett, Director of the Smith Institute, said: “Local growth in all places won’t be achieved by letting the market rip and focusing just on areas of business opportunity. As the report shows, our future success will depend on making more of the social value that local people can offer. The report concludes rightly that the best route to economic success is where you build strong communities that fairly share the rewards of growth.”

The report highlights several examples of the Double Dividend in practice. They include the London Borough of Camden’s innovative use of commissioning to take account of social, environmental and economic impacts. In Northamptonshire, Corby Employment Agencies Forum is helping to tackle the exploitation of workers by setting common standards for the town’s employers.

Manchester City Council has taken a fresh approach to procurement following work with CLES to better understand the impact of its expenditure. It has utilised its spending power wherever possible to ensure it links with social and economic priorities. And in Preston the city council has worked with CLES to explore how anchor institutions can bring benefits for the local community and economy.

•  Copies of The Local Double Dividend can be downloaded here.