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Regional economic growth threatened by ineffectual Whitehall

Press release issued: 27 October 2010

Efforts to reinvigorate regional economic growth could be derailed because of Whitehall’s fears of losing control, despite Coalition pledges to give powers back to local areas.

That is the warning from researchers at the University of Bristol who, having analysed New Labour’s rhetoric on devolution and decentralisation, say that the Coalition risks the same shortcomings unless it demonstrates a genuine capacity and willingness to deliver on its stated aims.

The Comprehensive Spending Review announced that the Regional Growth Fund, launched by the Coalition government to support economic growth in areas most dependent on the public sector, is to be extended to three years and will increase in size from the £1 billion announced at the Budget to £1.4 billion. 

However, Whitehall departments struggling with financial deficits are likely to retreat from supporting such initiatives and scupper any longer term outcomes that genuine decentralisation might afford through helping local authorities to channel their budgets into the areas of greatest local need.

Dr Sarah Ayres, from the Centre for Urban Studies at Bristol’s School for Policy Studies, said: “There is a lack of commitment across many departments for budgetary discretion, particularly when departmental resources might be siphoned off to meet the objectives of other departmental activities. The amount of money afforded to local discretion is often miniscule in comparison to overall national spend, which limits the efficacy of local projects. And unless local priorities fit with national objectives they are unlikely to receive government backing.”

The Regional Growth Fund aims to encourage private sector enterprise and job creation, which is most likely to be realised in buoyant areas such as Bristol, London and Reading.  However, given the underlying economic disparities between areas, vulnerable cities such as in the North of England will be hit hardest and require assistance from central government, leading to contradictory pressures on how best to spend the limited Fund.

The Government’s aim to create jobs and stimulate growth in a balanced way across the country is a colossal task. Past governments of all persuasions have tried to deal with the problems of uneven economic development with minimal success.

Expenditure under the Regional Development Agency set-up, since replaced by the Fund, amounts to £12.3bn between 1999 and 2010. Yet even this level of resource has been insufficient to make a significant impact on regional economic disparities over a period of relative prosperity in the UK.

However, on a positive note, Dr Ayres said that the findings indicate that there has been growing awareness in Whitehall of the need to boost the competitiveness of economically weaker regions and localities and improve service delivery through decentralisation and coordinating government tiers.  Nonetheless, individual departments have their preferred mechanisms and levers for economic growth, which can lead to tensions at the centre. Dr Ayres added: “If the Coalition is serious about promoting decentralisation, Whitehall squabbles should not override local initiatives.”

The research was funded by the Economic and Social Research Council.

Further information

Please contact Aliya Mughal for further information.
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