How the north-east is re-thinking £4.2bn of public spending

This article originally appeared in the Local Government Chronicle.

The cancellation of HS2 last month shone a bright light on how we determine the “best use” of public money and how that money can (or cannot) be used to address the social and economic challenges we face. These are questions that procurement professionals in local and regional government face every day.

In a nation with serious challenges across the board, the north east faces even more than most. The region has the lowest average wages in the UK, with workers often in insecure and precarious work. This feeds through to the highest rates of child and in-work poverty in the country, rates which have increased over the past few years. As the saying goes “wealth is health”, and the statistics bare that out – a person living in the north east is expected to live for fewer years than someone living anywhere else in the rest of the UK (with a higher proportion of those years in ill health).

“local authorities have an under recognised lever at their disposal”

Local authorities feel the urgent need to stem the tide but face few options on how to do so, having weathered over a decade of severe budget cuts. And even if the conditions were ripe to attract private investment for regeneration, the prevailing property-led model to do so has shown itself to produce little by way of “trickle down” to those most in need. Yet local authorities have an under recognised lever at their disposal to support more positive outcomes for their places. Harnessing existing public funds to promote local economic development has been shown elsewhere to be the “best use” of improving the wealth (and health) of an area, and it is an approach north east authorities are seeking to employ to reinvigorate the regional economy.

Councils in the north east spend £4.2bn with external suppliers every year. This is more than just a number on a balance sheet: it holds the promise of creating local economies which deliver more for communities and that have a profound impact on deeply-rooted inequalities. By reevaluating and restructuring how public funds are spent, local authorities have a golden opportunity to invest in projects, initiatives and businesses that not only meet their needs but also stimulate the regional economy, generate jobs and uplift marginalised communities.

“an ambitious initiative”

That’s why The Centre for Local Economic Strategies (CLES) is working with the North East Procurement Organisation (NEPO) on an ambitious initiative aimed at transforming public procurement in the region.

The project is important – and not just because it places a focus on the practical process of how public money is spent or because of the good jobs, positive work with the community or for the climate that suppliers might undertake as a result. It is – above all else – symbolic of an ambition to use the spending power of the local state to impact positive change, address challenges and tackle the inequalities we face in our communities.

“look to the north east for inspiration”

This opportunity takes on even greater significance when we consider the commitments to furthering regional devolution announced by leaders on both sides of the house at their respective party conferences earlier this month. The creation of a directly elected mayor as part of a new devolution deal for the north east will bring more power and spending within local control, creating the opportunity to work collectively to direct spend more intentionally. As deals of this kind open up in more places across the UK they will be able to look to the north east for inspiration for how to use their spend more powerfully to tackle the challenges faced in their own regions.

We can also look forward to the Procurement Bill making its way towards royal assent. The new Bill will shift away from price-mandating language and uses a broader definition of value that includes contributions to solving social and environmental challenges, as well as reforms to encourage more small, local and social businesses into public sector supply chains. However, our experience with the implementation of existing social value legislation is that it is not the lack of a legal framework that is the barrier to progressive change.  It’s not even just about the quantity of money spent. It’s about adopting an intentional progressive approach towards spending public funds, with a specific focus on addressing local challenges.

“the possibility of a new era”

The implications of this initiative reach far beyond the north east. It signals the possibility of a new era in public procurement where the economic, social and environmental welfare of local communities is prioritised. Public procurement shouldn’t just be about spending money, but about investing in a better north east and better local economies everywhere.