The COVID-19 outbreak is challenging local economies in an unprecedented way, exposing the weaknesses of the current economic model and the political system that underpins it.
For too long, despite rhetoric, growth has been far from inclusive: economic development strategies set by the centre have relied on agglomeration and its alleged trickle-down effects, often favouring high growth sectors and financialisation, while sidelining the foundational dimension of the economy that is essential for the wealth of all local areas. This has gone in parallel with the adoption of ‘place-blind’ policy approaches, which have failed to release the untapped potential of many local communities, especially in areas that are lagging behind.
The limits of this model of ‘growth’ were laid bare well before the pandemic – but COVID-19 has now taken the challenge to a new level. The crisis maps onto pre-existing, deep inequalities and threatens to widen them further. As shown by the latest ONS data and the BBC analysis at local authority level, it is becoming increasingly clear the pandemic is hitting the areas with the highest levels of socio-economic deprivation hardest, and COVID-19 mortality rates are more than the double in these places compared to less deprived areas. The same applies to local economies: ‘left behind’ places, eg in former industrial areas and coastal towns, have been affected the most – and will struggle even more to rebound as the country seeks to find its way towards recovery.
Councils have been at the forefront of the response to the crisis, but simply do not have the powers and means to counter these trends alone. Depleted by a decade of austerity and the shock to their budgets and to the local economies imposed by the pandemic, they find themselves disproportionately stretched. SIGOMA’s analysis of council funding shows that authorities serving some of the most deprived urban communities in England face a shortfall of £1.2bn between the financial impact of COVID-19 and emergency funding received from government, and anticipate extra spending pressures of £720m over the year.
Meanwhile, vital income streams are drying up, and councils are expecting huge losses in business rates, council tax and fees and charges. Under these conditions, it is no exaggeration to argue that the survival of the local state might be at stake. As Cllr Judith Blake aptly put it in a recent article for The MJ, this would be a road to disaster – if local government goes bust, how will discretionary services be delivered? Who will support local communities in their everyday lives and struggles? In the wake of a pandemic that is showing the critical role of local authorities in protecting their residents, we should not be left pondering these questions.
To be clear: this ‘failing’ of the local state is not of its own making. Our broken centralised system of governance is the root cause of the meltdown that most councils are facing, as they have been left at the mercy of poor and often contradictory decisions made by few in Westminster. Despite initial promises, financial support from the centre has been risible compared to the scale of the current challenge and there’s no sign things will improve anytime soon. Government rhetoric of ‘whatever it’s necessary’ has quickly morphed into asking councils to ‘share the burden’ – but many of them just do not have any resource left to do this. Input into decision-making from local leaders has been almost non-existent. Mayors were invited to a recovery planning meeting with the Prime Minister only to see their suggestions being ignored – leading, once again, to place-blind policy responses that have blatantly failed to address the needs of specific local areas throughout the crisis.
An effective recovery plan cannot be laid out by the centre alone at its own terms and conditions: it will need direct input from local leaders, harnessing their unique local knowledge, expertise and resolve. Opening up to local government would also bring to the table the creative thinking and initiative necessary to devise an economic strategy for recovery that works for all areas, moving away from wealth extraction and focusing on wealth building.
To deliver change on the ground, economic policy decision-making must be brought closer to local communities – and further devolution will be crucial to achieve this. ‘Levelling up’ could provide a recipe to overcome the crisis, but it will require a spirit of radical institutional (re)invention, with the local state at its heart. Local leaders have repeatedly shown they’re up for this challenge. Now the choice is in central government’s hands.
Dr Arianna Giovannini is deputy director of the Local Governance Research Centre and associate professor/reader in local politics and public policy at De Montfort University