This is an edited version of an article first featured on the Marple Leaf blog
The Economist recently ran a piece about how Preston has used the power of its “anchor institutions” (the NHS, Preston’s College and UCLAN), to create the model of a smart-procuring, entrepreneurial state for a guide to how Jeremy Corbyn will govern and encourage a thousand co-operatives to bloom.
It seemed like an attempt to do what economists (as opposed to The Economist writers) often do, look for something that’s working and apply a theory to it retrospectively, but it has been the product of some interesting work with the Centre for Local Economic Strategies and Preston City Council.
Lancashire is no stranger to experiments in economic planning and innovation. In much the same way, Lancashire County Council in the 80s was hailed as the cradle of New Labour. Under leader Louise Ellman in 1983 the council created Lancashire Enterprises, who’s chief executive was urban regeneration visionary David Taylor. It was the very model of a pump priming activist state, much of the thinking leading to the strcuture of the regional development agencies under Blair and Taylor’s friend John Prescott. The longer term corporate legacy was a utilities support business Enterprise PLC, now part of Amey PLC, in turn the UK subsidiary of Ferrovial. But it also spawned Enterprise Ventures, now part of Mercia Technologies, an active venture capital investor in growth businesses in the North, the Midlands and Scotland.
Preston City Council’s recent ambition has been created out of a response to local government cuts to its budget. just as Lancashire’s response in the 80s was to the wholesale collapse of northern industry. One is a brave, necessary and innovative response, that feels strategic, but is intensely tactical. The earlier one, similarly, fashioned an ambitious response that grew and grew as it proved to have a relevance and need. It’s not to spot the virtue in a locally based procurement strategy, supporting local businesses.
Much of the work on the Preston example, has been done by Neil McInroy from the Centre for Local Economic Strategies. As this from the Guardian explains, more of the £1bn plus public sector budgets were spent locally.
Taking that on a stage, Neil’s outline case here, where he argues for ‘a new economic agenda’, that can replace failed neo-liberalism. But I found myself asking at the end of each paragraph, but what about the businesses who’ll create the jobs?
The four pillars of Neil’s argument are: to recognise decline; understand technological shifts; build on local strengths; and invest in the economy of care. In many ways it’s a bold and suitably broad synthesis. But I kept coming back to a common niggle I have with many conversations with people on the left, wouldn’t life just be so much easier if everyone worked for the NHS?
And then the other question, but where are the businesses?
My starting point is that wealth is created in a business by someone having an idea, spotting an opportunity, selling that service or those value added goods for a surplus and growing that enterprise, employing people, their families spend that money locally, pay their taxes, replicate that across the entire economy and that’s what makes the world go round. Larger existing businesses are enticed to stay, to relocate, and a careful co-ordination of their presence almost certainly contributes the conditions for even more people to take risks, build another business, that in turn makes that place even wealthier. The fewer people want to do that, or do it well, then that place gets poorer.
There’s a line at the end of paragraph three that says: “Cities need to invest in social infrastructure and social enterprise and above all, support indigenous small business activity.” My question therefore is how? To use Lancashire as an example again, the red rose county isn’t short of initiatives from the public sector to “support” small business activity. There’s the very noble Boost Business Lancashire for a start, which I should declare I have done some work for. But despite these valiant efforts and more, many of the same systemic issues continue to hold northern towns back and no amount of smart procurement can patch it up.
It brought to mind something Peter Mandelson said as long ago as 2013, that all too frequently ambitious industrial strategies are little more than ‘pea-shooter’ initiatives; haphazard and ineffective programmes too small to make any kind of difference.
And in this context, are we facing something similar? And what does “democratise” the economy mean, other than letting committees of part time councillors decide where to spend money? Spending more state money locally isn’t a new economic strategy, it’s arguably a good thing to do, but it isn’t a paradigm shift it’s been cracked up to be.
There is also need for a regulating, guiding and protecting state, more than has been previously fashionable. But my sense is there are two elephants in the room which the “new economics” thinking doesn’t acknowledge. The first is big business. In Lancashire, again, the major anchor institution of Preston isn’t even in Preston, but the city would be stuffed were it not for BAE Systems at Warton and Salmesbury, and its supply chain.
The second is that hard infrastructure works. It’s not neo-liberal economics to build better roads, rail links and make housing an integrated strategic plank of an industrial strategy, it’s sound social investment. The Treasury methodology needs fixing, and an industrial strategy needs to reach deep into all parts of government, including the Treasury if it is to be effective. Afterall, the return on investment model for Crossrail will not be the same for the Todmorden Curve, but both are necessary.
How we solve a problem like the northern towns and smaller cities hasn’t been taken seriously enough for decades. But we start from where we are, not where we’d like to be.