Speaking at last year's CBI Conference, held against the backdrop of the business world's dissatisfaction with Rachel Reeves' first Budget with its hike in employers' National Insurance contributions, GB Energy chairman Juergen Maier had an even bigger complaint.
In the context of providing the industry with confidence that might support the new Government's commitment to growth, Maier lamented that since the demise of the Public Finance Initiative and Public Private Partnerships (PPPs) as a commercial model, any contracting between public and private sectors is an arduous and time-consuming process of reinventing the wheel each time.
Such constant delay in sealing deals is an enemy of growth and an obstacle to delivering on the Government's Plan for Change – which identifies historic under-investment in infrastructure as a primary cause of the nation's productivity gap, particularly between London and other major cities.
The strategy to address this focuses on boosting agglomeration economies in these city regions.
The key argument of Ride the Wave is that, for the Government's growth agenda to succeed, local investment risk must be balanced with opportunity within a new, evolving ecosystem of mayoral strategic authorities and national financial institutions.
Key policy levers include a significant increase in public sector capital investment, the creation of new public financial institutions – PuFins for lovers of new and quirky public sector acronyms – like the National Wealth Fund to crowd in private capital, sweeping planning reforms to streamline development and the empowerment of mayoral strategic authorities as the primary vehicles for devolution and growth in England.
These mayors gain enhanced powers through statutory local growth plans, integrated funding settlements and a revised Treasury Green Book, emphasising place-based impacts.
For local authorities, delivering on this agenda requires forging effective partnerships with the private sector. However, this occurs in a context of significant financial pressure and recent high-profile council failures, making risk management paramount.
Authorities face substantial challenges, including a lack of in-house commercial and financial skills, governance gaps exemplified by a near-total breakdown in timely local audits, the instability of institutional churn from ongoing reorganisations and the inherent complexity of managing PPPs. This creates a fundamental tension between the central government's dash for growth and the imperative of fiscal prudence at the local level.
Ride the Wave is a forthcoming Localis report, supported by Core Cities UK and the Chartered Institute of Public Finance and Accountancy, examining the framework for local investment aimed at driving urban renewal and economic growth in the UK.
Its analysis centres on how local authorities can navigate investment risks and opportunities within a changing policy landscape characterised by a new emphasis on city regions, empowered mayoral authorities and a reliance on private finance.
The key argument of Ride the Wave is that, for the Government's growth agenda to succeed, local investment risk must be balanced with opportunity within a new, evolving ecosystem of mayoral strategic authorities and national financial institutions.
The core challenge lies in the tension between driving investment pipelines for growth and the need for fiscal prudence. To resolve this, fundamental issues related to local government capacity, institutional maturity and outcomes evaluation must be addressed.
Our forthcoming report will make the case that chief financial officers and local leaders, operating under the well-established hierarchy of borrowing and investment priorities under the Prudential Framework, face a severe political backlash and financial consequences when risk is not managed. So naturally, the financial culture around planning reinforces prudence, throttles risk appetite and stymies growth ambitions.
Addressing this means dealing with the structural weaknesses caused by local government's inherently weak capacity – a frailty which currently acts as a barrier to investment and collaboration. And this shows up most markedly in the dearth of in-house specialist commercial and financial skills which encourages an over-reliance on external consultancy.
Successful place-based investment will demand a well-resourced strategy to improve in-house commercial skills. In this light, treat local government recruitment as part and parcel of any capital investment programme.
We should also bear in mind the considerable institutional churn the establishment of new strategic authorities is engendering and the detrimental impact of the lack of established process, relationships and long-term vision on securing new urban investment.
Ride the Wave suggests a raft of policy recommendations for accelerating institutional maturity. In parallel with this structural issue, there is the need for better management of private capital in regeneration.
Remedying this means steps to better contractual management as well as support and guidance for better risk allocation and the exclusion of ‘soft' services – taking lessons from the Welsh Mutual Investment Model and encouraging authorities to step up their confidence by gaining experience from smaller-scale PPP projects.
Evaluating the success of urban investments will be another critical challenge. The development of statutory local growth plans and spatial development strategies are crucial new means for setting a clear strategic direction for regional growth and for aligning local investment with national ambitions.
We suggest a single framework that measures both short and long-term impacts, harmonising the Local Government Outcomes Framework and the Integrated Settlements Outcomes Framework would help ensure growth is both sustainable and inclusive.
Joe Fyans is head of research at Localis
