Councils should be granted legal authorities for managing economic growth and development
In the current economic climate, the UK government is being urged to grant statutory powers to local authorities, particularly through the framework of "Strategic Authorities" or "Mayoral Strategic Authorities," to improve economic development and prevent potential insolvency.
The Institute of Economic Development (IED), led by executive director Nigel Wilcock, believes that devolution is essential for local authorities to have the models needed to ensure effective policies and implementation. The IED has launched a manifesto calling for councils to be given statutory powers over economic development.
One of the main arguments for this change is enhanced local decision-making and accountability. With statutory powers, councils with directly elected mayors and strategic authority status can make timely, locally tailored decisions over economic development, regeneration, housing, transport, skills, employment, infrastructure, and public services, rather than awaiting decisions from central government.
Statutory powers also come with the ability to receive multi-year, consolidated funding settlements (integrated settlements), enabling councils to plan and invest strategically, reducing financial uncertainty and the risk of insolvency. This structured planning aligns local and national objectives, improving economic growth and financial sustainability.
Another key benefit is the creation and implementation of Local Growth Plans. These plans, required by statute, provide a transparent, locally owned economic overview, set shared priorities with central government, and develop investment pipelines. This structured planning aligns local and national objectives, improving economic growth and financial sustainability.
The statutory powers also include duties on councils and related public bodies to cooperate and consider wider impacts such as health inequalities. This fosters more integrated, holistic approaches on economic and public service reforms, helping avoid adverse financial or social outcomes that could contribute to insolvency.
Moreover, the statutory powers support forming or expanding existing strategic authorities where local councils have struggled to reach agreement, ensuring effective governance structures for economic resilience and sustainability.
By devolving powers and funding, councils can directly address local economic challenges and opportunities, aiming to stimulate growth, generate revenue, and thereby reduce insolvency risk. This approach unlocks local potential and reduces dependency on central government.
Unfortunately, financial distress is not a foreign concept to local authorities. Birmingham City Council has faced significant financial distress, making front-page news. Since 2018, eight English local authorities have issued Section 114 notices, indicating financial distress, and four councils in the past 12 months have declared themselves in effect bankrupt, while more have signalled drastic spending cuts.
In light of these challenges, the Levelling Up, Housing and Communities Committee has recommended that Ministers inject £4 billion into English town hall budgets to prevent a financial crisis. Following the initial Local Government Financial Settlement, councils in England have been handed an extra £600 million in funding to tackle the worsening financial crises.
In conclusion, granting statutory powers to councils equips them with the necessary legal authority, funding access, and governance mechanisms to pursue tailored economic development, exercise fiscal prudence, coordinate public services comprehensively, and mitigate the risk of financial failure through strategic, accountable local leadership. This approach is crucial in addressing the financial challenges facing local authorities and promoting economic growth and sustainability.
References:
[1] Institute of Economic Development (IED) (2021). Devolution and Economic Development. Retrieved from https://www.ied.co.uk/policy-and-research/devolution-and-economic-development/
[2] Local Government Association (LGA) (2021). Devolution. Retrieved from https://www.local.gov.uk/topics/devolution
[3] HM Government (2019). Local Growth Plans. Retrieved from https://www.gov.uk/government/publications/local-growth-plans
[4] House of Commons Committee on Levelling Up, Housing and Communities (2021). Local Government Finance Settlement 2022-23. Retrieved from https://committees.parliament.uk/publications/1981/documents/11864/default/
[5] The Guardian (2021). Council finance: the local authorities teetering on the brink of bankruptcy. Retrieved from https://www.theguardian.com/politics/2021/mar/16/council-finance-the-local-authorities-teetering-on-the-brink-of-bankruptcy
- With statutory powers, local authorities can collaborate more effectively on matters such as housing, regeneration, and public services, allowing them to make decisions that are customized to their community's needs and mitigate potential insolvency risks.
- The granted powers also enable local authorities to receive multi-year, consolidated funding settlements, which would lead to strategic planning and investment in key areas, including finance, infrastructure, and economic growth, thereby supporting local government's goal of achieving financial sustainability and economic resilience.
