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The Government's simplified business support offer leaves weaker local economies worse off, say Neil McInroy and Harry Knowles in a new report from the Centre for Local Economic Strategies In his first major speech as prime minister, David Cameron declared transforming the economy to be the first priority of his government. In particular, he spoke of the need to rebalance the economy, ‘ensuring that success and prosperity are spread more evenly across regions and industries'. But less than six months on from this speech, his government is moving away from the highly-targeted assistance which has helped deprived areas. The Government is calling time on elements of assisted-area programmes which have provided weaker economies with the support needed to tackle barriers to economic growth in some of the poorest areas of the country. Areas with prosperous private sectors have the advantage of a concentration of skills and businesses. Economic growth in such areas is organic and self-sustaining, drawing in new investment and private sector funding. But many places with UK national designated assisted-area status are not economic growth nodes. They are often former manufacturing hubs with fragile private sectors, where skills levels are low and investors scarce. The evidence is stacked in favour of a highly-targeted approach to business support in such areas, proving time and again to be not only cost effective but vital to re-establishing growth and boosting local economic resilience. Grants for Business Investment (GBI), have, for example, provided incentives to private businesses to invest or expand in disadvantaged areas. Without such targeted assistance, sustainable private sector growth in these areas is very difficult, if not impossible. The Government has withdrawn GBI and moved its whole approach away from the ‘hands-on' support which has proved so effective. Instead, it is shifting responsibility for driving local growth to businesses and communities. The Government plans to strengthen the broader business environment – through easing planning legislation and boosting skills – while leaving the many functions of local business support to the geographically-patchy new local enterprise partnerships (LEPs). The first round of LEPs has launched with no central funding or specific tools to directly intervene to support businesses in struggling areas. Deprived areas can bid – alongside their richer counterparts – for funding from the Regional Growth Fund (RGF), which is focused on boosting private sector growth. But the RGF is, on its own, a blunt instrument which will not provide the necessary level of funding deprived areas needed to transform and compete within a rapidly-changing economic landscape. England's weaker economies will, at a time when they are in need of ramped-up support, receive considerably less in economic assistance than they did previously. The stark choice the Government must now accept is to provide the bespoke and locally-sensitive support deprived areas need, or accept that they will decline even further. Decline will mean increased economic costs from the rise in benefit claimants and loss of productivity, as well as increased social costs resulting from entrenched deprivation. The other option is to deal with decline by accepting and facilitating relocation, to more prosperous areas, which itself comes at a high social and community price, as well as putting extra strain on to other labour markets. A further consideration is the Government's new welfare-to-work proposals –success will mean we need to create jobs in deprived areas. Withdrawing support to create jobs would not be conducive to realising welfare ambitions. In its local growth White Paper, the Government recognised the need for a targeted approach, stating that it might intervene in areas of market failure. It must now provide the specific tools and resources to help LEPs and other local delivery organisations support individual local businesses in disadvantaged areas. A big, new, productive society for our deprived places is dependent not on a centralised, one-size-fits-all approach, but on a range of approaches, policies and ways of working. In our report, the Centre for Local Economic Strategies (CLES) and Furness Enterprise is calling for the Government to: maintain targeted, individualised business support offering. The Government should be actively involved in stimulating private sector job creation in deprived areas and providing the support mechanisms needed for weaker economies to innovate and diversify retain the GBI fund to provide sustainable job creation in areas which will suffer most from the withdrawal of public funds stipulate that LEPs use specific elements of their funding to help disadvantaged areas and find alternative partners for those areas without LEPs. It needs to harness the legacy in manufacturing found in many deprived areas, helping them make the transition to a range of emerging industries. If local support is not available to assisted areas, then decline will be at a heavy cost. It will also mean we are further away than ever from a sustainable and balanced economy. The social capital that is at the heart of Mr Cameron's Big Society agenda will be further eroded if local social fabric, framed by fragile local economies, is left unsupported and alone. It's time to address the current situation that Mr Cameron has already recognised, whereby ‘prosperity has been confined to some areas at the expense of others'. n Neil McInroy is the CEO of the Centre for Local Economic Strategies, and Harry Knowles is the chief executive of Furness Enterprise, the business development agency for Barrow and Furness. The report Big productive society: Making deprived areas strong again is available from the CLES website.

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WHITEHALL

Growth policy is missing the target

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