City deals risk privatising economic development

Government structures for the likes of Leeds, Liverpool, Newcastle and Sheffield give too much say to big local business, argues Kevin Meagher. This could skew the outcomes and pointlessly damage both the public sector and smaller firms

When I served on the board of a sub-regional economic partnership a decade ago I got used to the idea of being one of the token private sector representatives.

After all, the body was charged with making decisions involving large amounts of public money and it felt right that locally-elected representatives – councillors and their senior officers – were accountable for the decisions that were taken.

The business representatives provided a valuable perspective, sure, but it would have been wrong for private interests to dominate – and they didn’t.
The current government disagrees. Launching their much-vaunted ‘city deals’ for northern cities including Leeds, Sheffield, Newcastle and Liverpool, ministers seemed content to shift that balance.

Under cover of offering greater freedom to our cities to shape their own priorities around transport, skills and development, ministers are in effect privatising power and influence over these big decisions while socialising the risk and cost.

This is because it is Local Enterprise Partnerships, rather than local authorities per se that will direct how these new powers are used. And LEPs – successors to regional development agencies (albeit with a third of the budget) are dominated by private sector representatives.

The Chairman of Sheffield’s LEP, businessman James Newman, welcomed news that its city deal would see business leaders able to:

influence local funding allocation decisions – so that future investments are prioritised on creating new growth opportunities.

Sheffield’s city deal also includes gaining control of the skills budget. James Newman argues that this:

gives businesses unprecedented control over the way in which our skills system works, so that we can make sure we have a highly skilled workforce which corresponds with the City Region’s business needs.

Business leaders may indeed welcome having ‘influence’ over funding decisions and ‘unprecedented control’ over skills policy, but their interests are not synonymous with the public interest. The danger with this approach is that it accentuates the view that the public sector is the problem and that removing it from the driving seat is the way to unlock economic potential.

This is highly contentious stuff. Of course our late, lamented regional development agencies were business-led too, but their governance included a wide range of voices, including, ultimately, Whitehall. LEPs, in contrast, are not so much localist as parochialist; a hotchpotch collection of fragmented, under-equipped bodies that are still finding their feet and have it all to prove in what Business Secretary Vince Cable once conceded was the government’s ‘Maoist’ approach to economic development.

The two main risks inherent in the city deal model are first, that regeneration focuses narrowly on the interests of vocal local employers – especially in cities – crowding out the needs of smaller businesses and peripheral parts of the city-region, especially those areas without a vibrant private sector.

The second is that public money is used to cover things the private sector should, rightly, be paying for. The main problem we have in skills policy, for instance, is that just 66 per cent of employers provided training last year for just 53 per cent of their employees, according to the Commission for Employment and Skills Employer Skills Survey for 2011.

With a third of employers paying nothing to address skills problems, why should they be allowed to offset their responsibility to the public sector while at the same time holding the reins on how public money solves their mess? To properly respond to industry’s needs, skills shortages are best resolved through compulsory industry skills levies rather than doling out public cash.

The private sector is entitled to partnership status, but it must not be given carte blanche to drive the agenda around how our cities’ grow. Power without responsibility about how scarce public funds are spent is not partnership – it is domination.

Kevin Meagher chaired the Mayor4Sheffield campaign and was a strategist in the Yes for the North West regional assembly campaign in 2004 © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

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