“Business is an act of citizenship”: using BIDs to promote inclusive economic growth in communities

The key to inclusive place based economic growth?

The principle of Business Improvement Districts (BIDs) is pretty straightforward, and the legislation in Scotland is flexible enough to ensure that pretty much anyone can create and act on a BID-based idea. There are currently over 30 live BID projects in Scotland, with BIDs Scotland stating in their latest annual report that they believe this number could almost double to 65 by the end of 2017 if upcoming and scheduled BIDs are also taken into account. The report found that, despite continuing tough economic conditions, there appears to be little evidence of a decline in interest in the BID model. If anything, more people are turning to BIDs as a way of improving local high streets using limited local funds, private investment from local businesses, and other local assets.

BIDs themselves can be seen as a cross section – a mix of the entire economic ecosystem of a place. They can encompass economic, business, local, political and social elements and bring them together in a strategic way to build revenue to support the different aspects of the BID area, including aesthetics, security and commerce. They are locally developed, locally managed, locally financed and locally delivered, giving a sense of authenticity which is becoming increasingly popular among consumers. This popularity is evidenced by the successful renewal of all of the BIDs in Scotland who have gone to reballot to date, with many actually increasing their majority in favour of the BID model.

Collaboration and embedding BIDS within their local communities

As BIDs have been developed, and new models, partnerships and ways of co- operating have been established, BID coordinators and councils in particular are thinking about how to ensure the legacy of the BID within their locality and, more importantly, how to ensure that the economic benefits of the BID are felt across the BID area, not just within the businesses.

This area-wide benefit can be created by for example, re-investing money in security, street lighting, Christmas lights, and flower baskets to improve the feel and aesthetics of a place – actions which are commonplace in BID areas. However, there are some who feel that BIDs could and should go even further in increasing their social value within a community, while not losing sight of the interests of levy payers. This balance, which requires recognition of the wider roles and responsibilities of BIDs, is something which will have to be carefully managed by BID managers in order to ensure that BIDs do not try to do too much, but at the same time act in a way which makes them a key part of their local community and economy. It is an interesting and, at times, difficult place for progressive BIDs to be.

In many areas, BIDs have provided an opportunity for increased community development, and it has been suggested that there could be a formal role for BIDs to play in the wider community development partnerships within localities. BIDs are now being developed to sit alongside existing community anchor bodies, helping to create strong local partnerships and independent communities.

Through collaboration and co-ordination, BIDs are working alongside other services and organisations to help develop sustained community empowerment, helping communities to lobby, providing work experience placements to local young people and acting positively in the form of events to promote increased community cohesion and empowerment, as well as continuing with “normal practice”- increasing footfall in their local area to benefit businesses.

Not all about the money

While generating additional income for the local economy is one of the biggest drivers of support for BIDs in communities, in some instances one of the biggest assets they bring to a community (especially once they are firmly established) is their leverage and collective bargaining power. They have the power to campaign and support other groups in the community on issues that are important to them, as well as offering greater bargaining power with local authorities or other businesses.

As well as commitment to the levy payers’ interest and to improving the local area for people living nearby, another of the potential roles of BIDs is not to act as direct income generators, but as catalysts or facilitators, to encourage new investment and wider growth beyond the BID area – to engage strategically with other partners to encourage investment.

 

Where next for BIDs

As we have already seen, the flexibility of the BID model in Scotland (there are some legislative differences in England) is such that groups may only be limited by their own ambition. Currently Scotland has what is thought to be the world first food and drinks BID and the first tourism BID this side of the Atlantic. Another innovation is the Borders Railway BID, which seeks to maximise the collective benefit to businesses that are located along the railway route.

It has been suggested that the BID model could be used in a more flexible way to generate income for other public service projects, including the suggestion of a BID for health and a BID for schools. Although the intricacies of how these would work in practice are still being considered, there is much that can be taken from how the existing models use community empowerment, and engagement between the public, third and private sectors to create sustainable and inclusive local economic growth in an area.

As well as their commercial enterprising side, BIDs are also realising their potential as agents of community development and improvement beyond that of economic input. The future currently looks bright for BIDs, which will hopefully mean that it also looks brighter for our local communities.


Business Improvement Districts Scotland is the national organisation for BIDs in Scotland, providing support, advice and encouragement to business groups, communities and local authorities considering and developing a business improvement district.

BIDs Scotland held its Annual Gathering on 28th March 2017 at Perth Concert Hall  with the theme of People – Place – Business: Business Improvement Districts – the key to economic growth.

Follow us on Twitter to see what developments in public and social policy are interesting our research team. If you enjoyed this article, you may also be interested in our other article on BIDs.

Information Service members can also access a research briefing on BIDs here (login required).

Graduate ‘brain drain’ – is regional economic growth the solution?

college graduates groupBy Heather Cameron

With the economic performance of cities and regions increasingly reliant on the skills of their workforce, the longstanding issue of graduate ‘brain drain’ to London and the south is something that needs to be addressed.

Although students attend many of the universities spread across the country, a significant number of graduates flock towards the capital at the end of their studies. According to a recent report from Centre for Cities, this deprives other cities of skilled workers and essentially damages the overall economy.

The evidence

A quarter of all new graduates in 2014 and 2015 were found to have moved to work in London within the six months of finishing their degree. And the highest achievers make up a significant proportion. While London accounts for around 19% of all jobs, of the graduates that moved city six months after graduation London employed 22% of all working new graduates, and 38% of those with a first or upper second class degree from a Russell Group university.

Although most cities experience an overall graduate gain, cities outside London don’t retain the majority of students that move to their city to study – the ‘bouncers’ that drive the brain drain overall, overshadowing any gain:

  • Manchester lost 67% of these students upon graduation;
  • Birmingham lost 76%; and
  • Southampton lost 86%.

Other figures show that 310,000 graduates have left the north in the past decade, contributing to a net average deficit of 7,500 highly qualified workers leaving annually, or 75,500 over a decade.

Northern regions have to some extent offset the effect of local brain drain by attracting enough highly qualified foreign workers to fill the gap. But with reductions in immigration, these regions could be left lacking.

Given the UK’s current position regarding the EU, concerns have also been raised over whether Britain faces a further brain drain of academics to Europe, following Brexit. A recent survey highlighted that 42% of academics said they are more likely to consider leaving Britain after the vote to leave.

Why?

While it may seem plausible to assume that higher salaries are the reason for this brain drain, it appears that the main pull for graduates is the availability of jobs and career progression, which London’s vast labour market offers.

However, as recent research from Homes for the North has identified, these are not the only reasons. It highlights the importance of additional non-work drivers of graduate location decisions, including the cost and quality of housing, quality of local amenities and the prospect of home ownership.

Of the graduates polled, 80% said the quality of housing was important, while more than 60% said the cost of housing was important. The quality of green spaces and local amenities was also deemed important by over 60% of graduates.

What can be done to redress the balance?

There have been numerous graduate retention initiatives at the local and regional level aimed at tackling the uneven distribution of graduates, such as graduate wage subsidies and local graduate job matching.  But it seems little has improved. The Centre for Cities research argues that these alone will not tackle the root cause of the graduate brain drain.

It suggests that cities themselves have a vital role to play in ensuring the local job market offers an appropriate number of graduate job opportunities that will allow them to both retain graduates and attract graduates from elsewhere. Policy should therefore broaden its focus to improve local economies by investing in transport, housing and enterprise, rather than focusing solely on graduate retention and attraction policies.

The chief executive of the Centre for Cities commented that the government’s new economic and industrial strategy should be used to strengthen existing devolution deals for city-regions such as Greater Manchester, extending their scope to grow.

Indeed, the industrial strategy green paper, published in January, clearly places emphasis on addressing the economic imbalances across the UK through a number of measures, such as working with local areas to close the skills gap, including new schemes to support the retention and attraction of graduates. However, the strategy has been criticised for providing little clarity on how regional rebalancing and sectoral deals will work in practice.

Final thoughts

While it appears clear that cities outside London need to improve their graduate offer with better job prospects, the evidence on graduate migration suggests it is more complex than this.

As has been argued, the provision of good quality affordable housing could play a role alongside high-skilled job creation and opportunities. With the cost of living in London so expensive, this would make sense, particularly as the average graduate salary in London is not that much higher than the average across other UK cities.


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Managing growth in historic towns

canterbury cathedral

By Heather Cameron

Predominantly set within environmentally attractive surroundings, historic towns and cities have a strong sense of place, offer a good quality of life, are often prosperous and represent models of sustainable development.

Research shows that businesses based in older places are more productive than the average for all commercial businesses across the whole economy. Retail and leisure businesses often seek to cluster in historic areas of towns and cities, and historic buildings are particularly attractive to new business start-ups, especially in the creative and cultural sector. Well-maintained historic places also enhance cultural life and community resilience.

As a result, historic towns are much sought after places to live and work, which has contributed to unprecedented growth.

Growth pressures

While growth is seen as a good thing for the future of town centres, managing it effectively in these areas of historic importance is not without its challenges. Older townscapes and buildings are a valuable and irreplaceable community asset that need to be protected.

Growth in historic towns creates pressure for new housing and development, and the infrastructure that is needed alongside it. It can also lead to increased congestion and depletion of suburban quality through redevelopment and loss of garden space. The traditional infrastructure in these towns may not be able cope with the increased capacity resulting in demand for suitable adaptation.

Managing these growth pressures is a particular challenge for historic towns as they need to try and meet local development need while both conserving the identity and sense of place of the existing town and nurturing the creation of sustainable new communities within them.

The Historic Towns Forum has highlighted that “there are challenges of infrastructure, partnership working, working with major national developers, the tension between modernity and pastiche and how to learn from the past and the present when building at this scale.”

In addition, the main political priority across all areas is economic wellbeing, taking precedence over any heritage considerations. A report from Green Balance in 2014 found that this principle concern was interpreted differently from place to place, with some local councillors viewing heritage as beneficial to a town’s economic and social wellbeing, while others viewed it is a burden and drag on investment.

As the heritage of places can be a particular pull for tourism, not preserving them could lead to a loss in economic wellbeing. The importance of achieving the right balance between sustainable development and heritage conservation is a theme that has been consistently highlighted in the research.

Smarter growth

So how do such places manage growth while also safeguarding both the character of the towns themselves and the settings around them?

According to the Historic Towns Forum, key issues in effectively addressing growth pressures in historic towns include:

  • planning and process;
  • partnerships;
  • finance and economics;
  • climate change;
  • community benefits and community engagement;
  • design; and
  • learning from the past and present.

It has been argued that a strategic approach to growth needs to be taken, such as the approach taken in Cambridge, where the Cambridgeshire Quality Charter for Growth is being used to help steer the creation of high quality sustainable communities.

Partnerships involving a range of local stakeholders, encompassing a shared vision and cooperation are also important for effective growth. Where strategic resources are lacking, which is often the case in smaller towns, community engagement can be of particular importance, as shown in Cirencester.

Key principles of good design have been highlighted to include:

  • learning from the past, including study of appropriate models;
  • localising by understanding local conditions; and
  • transforming action by applying appropriate, robust advances.

The overarching message seems to be that ‘smarter growth’ is required.

Good practice

There are examples of good practice where historic towns are managing growth in a way that protects their heritage. Cambridge, as mentioned previously, is one example. Sutton is another, where the challenges of growth are being addressed through the use of a Heritage Action Zone. The aim here is to balance growth with the management of heritage assets, providing lessons for elsewhere.

It is also important to look further afield. The historic town of Amersfoort in the Netherlands has been presented as a good model for managing housing growth to achieve attractive new settlements and create balanced communities. It has been suggested that this smarter approach is something that historic towns in the UK can learn from.

Another good example is Freiburg in Germany. Although different in terms of development to Britain, some of the issues applicable to British towns and cities have been addressed – including how to attract families to live at higher densities close enough to city centres to avoid car dependency.

As Historic England states:

“Learning is central to sustaining the historic environment. It raises people’s awareness and understanding of their heritage, including the varied ways in which its values are perceived by different generations and communities. It encourages informed and active participation in caring for the historic environment.”


If you enjoyed this blog post, why not read are previous posts on the civic use of heritage assets and the value of preserving our built heritage.

Follow us on Twitter to see what developments in public and social policy are interesting our research team.

Evaluations Online: evaluating economic development activity in Scotland

by Stacey Dingwall

Recently we profiled Research Online, one of the two research portals managed by the Knowledge Exchange team. In this blog, we focus on Evaluations Online.

Economic development activity in Scotland

Evaluations Online is a public portal providing access to a collection of evaluation and economic development research reports commissioned by Scottish Enterprise. Scottish Enterprise is Scotland’s main economic development agency and a non-departmental public body of the Scottish Government.

Idox won the contract to deliver Evaluations Online in 2007. The team developed a site which utilises a publishing platform designed specifically to deal with research material. Users can easily navigate to and assess the relevance of material thanks to specially-written abstracts and structured search functions based on a bespoke classification and record structure.

The site now contains over 500 evaluation and research reports commissioned by Scottish Enterprise, dealing with different aspects of economic development activity such as business support, investment, sector growth and improving skills. All of the reports are publicly accessible and free to access.

In 2011, the team won a further contract to refresh and improve the site, focusing on how the site could be refined to better meet the needs of key user groups including economic development policy-makers and practitioners across Scotland. In the last quarter of 2016, the reports hosted on the site were accessed over 30,000 times.

The importance of evaluation

One of the key reports hosted on Evaluation Online is the annual review of the risk capital market in Scotland. Scottish Enterprise commissions the report annually in order to consider the scale of new investment flows. The findings are also used to inform the nature of Scottish Enterprise interventions in the Scottish early stage risk capital market, such as the Scottish Co-Investment Fund and Scottish Venture Fund.

Scottish Enterprise commissions evaluations of projects and programmes each year in order to identify their contribution towards economic growth in Scotland, and particularly in terms of their impact on gross value added (GVA) and employment. As the findings of the evaluations inform decisions about public spending, it’s important that all of the appraisal and evaluation work is of a high technical standard.

We’ve highlighted the importance of evidence and evaluation on the blog several times before. It’s worth repeating that repositories of evidence can help bring about better policy in a number of ways:

  • improve accountability by making it easier for people to scrutinise the activities and spending of public sector organisations – this helps organisations meet Freedom of Information responsibilities;
  • improve the visibility and therefore the impact of evidence;
  • help identify gaps in evidence by making it easier to compare research findings; and
  • increase our understanding of what works (‘good practice’), not only in the activities covered, but also in evaluation and research methods.

We’re proud to support Scottish Enterprise in the dissemination of their evaluation and research output, through a portal which they believe increases the return on these activities.

You can find out more about the projects The Knowledge Exchange team has been involved in, and the consultancy services we offer, here.

 

Is the record high employment rate masking the reality of in-work poverty?

wage-packetBy Heather Cameron

The employment rate may have hit a record high of 74.6%, with unemployment continuing to run at an 11-year low, but in-work poverty has also reached unprecedented levels.

More than half (55%) of people in poverty are living in working households, including millions of children, according to the latest Monitoring poverty and social exclusion (MPSE) report.

And new research for the Joseph Rowntree Foundation (JRF) published last week says four million more people are living below an adequate standard of living and ‘just managing’ at best.

Statistics

The findings of MPSE paint a bleak picture for a substantial share of the UK population. It notes that the proportion of the UK population living in poverty has barely changed since 2002/03, remaining at around 21%. And at 55%, those in poverty in working households has reached its highest level since the data set began in 1994/95.

Of this 55%, four fifths of the adults in these families are themselves working – a total of 3.8 million workers were living in poverty in 2014/15, an increase of around a million since 2004/05.

Female employees make up the single largest group within this group at 1.5 million, followed by male employees at 1.4 million. However, the majority of workers in in-work poverty are male (53%) as there were 620,000 male self-employed workers in poverty in 2014/15, while there were 250,000 female self-employed workers.

The story is different for workless households, however, as the proportion of people in poverty in these households has decreased, with the number in workless or retired families having fallen by half a million. Despite the significant increase in the number of people aged 65 and over, the figures show there are 400,000 fewer pensioners in poverty. There have also been reductions in the number of children in workless households.

While this is clearly encouraging, as the MPSE report suggests, it is difficult to categorise this as progress since there has been little change in the relative poverty measure overall.

Moreover, the new research from JRF warns that millions of just managing families are on the tipping point of falling into poverty as 30% of the population are living below the minimum income standard (MIS). In addition, 11 million people were found to be living far short of MIS, up from 9.1 million, who have incomes below 75% of the standard.

So what is causing these worrying statistics?

Contributory factors

The labour market has undoubtedly had some influence on these figures, with low wages and insecurity. Although average incomes have begun to rise, they are still below their peak. Male weekly earnings are still lower than 2005 levels and female weekly earnings, although now equal to 2005 levels, are still below what they were in 2010.  And with inflation expected to return, it has been suggested that hourly pay is unlikely to reach its pre-recession peak before 2020.

However, this is only part of the issue. There are also a number of other contributory factors, including:

  • increasing cost of living;
  • housing market failures; and
  • cuts in welfare benefits.

The increase in numbers living below an adequate standard of living has been driven by rising living costs while incomes stagnate. The price of a minimum ‘basket of goods’ has risen 27-30% since 2008, and average earnings by only half of this. The JRF analysis suggests the cost of living could be 10% higher by 2020, a period when much state support has been frozen.

Housing is also an important factor. It is often too expensive and of poor quality, particularly in the private rented sector. The MPSE findings show that the number of private renters in poverty has doubled over the last decade, with rent accounting for at least a third of income for more than 70% of private renters in poverty.

Households accepted as homeless and those in temporary accommodation have also increased and landlord evictions are close to a ten-year high.

Added to this, is the four-year freeze on benefits, tax credits and Universal Credit (UC), along with a reduction in the overall benefit cap. The benefit cap mainly affects households with children and will increase the number of families affected, from 20,000 to 112,000.

All this puts those on the lowest incomes at risk.

Way forward

Clearly, strong growth in the number of people in employment does not mean an end to employment-related disadvantage.

To help end poverty, the JRF has called on the government to make a number of changes, including:

  • reversing cuts to the amount people can earn before their benefits are reduced;
  • ending the freeze on working age benefits;
  • extending support to low wage sectors to reduce the productivity gap; and
  • investing in a living rents scheme to provide more affordable housing.

As the MPSE report concludes, “solutions for in-work poverty require more than just more work.”


If you enjoyed reading this, you may also like our previous articles on poverty.

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‘Olderpreneurs’ – the new generation of start-ups?

Senior Man on Laptop_Fotolia_61314537_XXL.jpg

By Heather Cameron

Entrepreneurs are often portrayed as bright young things launching start-ups, but does the reality of start-up demographics paint a different picture?

Changing demographics

The UK has certainly witnessed a boom in young entrepreneurship in recent years – the number of under-35s starting businesses in the UK rose by more than 70% between 2006 and 2014.

However, recent research suggests that the boom in young entrepreneurs may be waning. According to research commissioned by Google earlier this year, the majority of young people are “not interested” in starting a business, with four out of five young people surveyed saying they would rather work for a well-established company. Particular concerns were also highlighted over risk and instability.

The UK is, however, still ranked in the top 10 countries with the most favourable conditions for entrepreneurs to start and scale new businesses. And official data suggests that the UK continues to see record numbers of business start-ups, exceeding 600,000 in 2015, up on the previous two years.

So if it isn’t the younger generation heading up this record number, who is it?

‘Olderpreneurs’

Despite media coverage of the entrepreneurial spirit of the younger generation, the average age of an entrepreneur in the UK has actually been estimated at 47.

And according to the latest data from the Global Entrepreneurship Monitor (GEM), the most notable increase in entrepreneurial activity has been amongst the over 50 age group.

Referred to as ‘olderpreneurs’, this group could arguably be the new start-up generation.

There has been a 46.5% increase in freelancers over 50 since 2008, an age group that accounts for 72% of all self-employed people. According to official statistics there are around 1.8 million self-employed people over the age of 50 in the UK.

With an ageing population that is also becoming healthier, perhaps this shouldn’t be such a surprise.

Motivations

Motivations for people starting up their own businesses include redundancy, retirement, family circumstances, growing older and life stage milestones.

As life expectancy increases, many don’t want to give up work at the traditional retirement age, as they still lead active lives. Retirement has been cited as an ‘important tipping point’ for some, with the main motivation not to make money or grow their business, but rather something to keep them occupied or earn some extra money while doing something relatively easy.

The introduction of pension freedoms last year has also led to more over 50s using their pensions to fund new business ventures. The over 55s cashed in more than £4.7billion of their pensions in the first six months after pension freedoms were introduced.

Economic impact

And such activity is good news for the economy. It has been suggested that if the employment rate of 50-64 year olds matched that of the 35-49 age group, the UK economy could be boosted by £88 billion.

Older entrepreneurs have also been shown to be more successful than their younger counterparts. It has been highlighted that businesses run by owner-managers over 50 drive up revenues at their companies three-and-a-half times faster than GDP growth – 11.5% compared with 3.1%.

And older entrepreneurs create jobs at a rate more than seven times faster than the UK economic average.

It has also been suggested by the Prince’s Initiative for Mature Enterprise (PRIME) that start-up failure rates in this age bracket are remarkably low. It recently revealed that 95% of its members were still in business a year or more after starting up, compared to the national average of just 66%.

Final thoughts

A significant percentage of the UK population is past retirement age. And the number of people aged 50 to State Pension age is expected to rise by 3.2 million, while the number aged 16 to 49 will have reduced by 200,000 over the next 10 years.

As a result, keeping this group economically engaged surely has to be a priority.


If you found this article interesting, you may also like to read our previous articles on entrepreneurship and self-employment

Follow us on Twitter to see what developments in public and social policy are interesting our research team. 

Night mayors: building bridges between businesses and communities

We’ve previously written about the importance of the night-time economy as a driver of tourism, leisure and business growth in towns and cities. And we’ve also blogged about the challenges facing night-time industries, notably the number of nightclubs forced to close due to economic factors and security concerns.

A growing number of city authorities are responding to these developments, and exploring new ways of meeting the distinctive economic development, public safety and quality of life demands presented by cities after dark.

The pros and cons of the after-hours economy

The UK night-time economy is substantial. One estimate has put its value at £66bn, employing 1.3m people. In London, an already thriving after-hours economy is set to grow by a further £77m a year following this year’s launch of the 24-hour Tube on the Victoria, Central and Piccadilly lines.

But a city’s nightlife is about more than commerce. Noise, violence and other forms of anti-social behaviour can upset nearby residents, and put people off living in or visiting a city.

Some authorities have taken a hard line towards areas with a reputation for trouble at night. The New South Wales government has introduced laws to crack down on drug and alcohol-fuelled violence in parts of Sydney. But, while the new rules – including 1.30am lockouts and 3am last drinks at nightclubs – have reduced street crime, their impact on Sydney’s night-time economy has been devastating. More than 100 venues have closed, and the once booming entertainment district of King’s Cross is now being described as a ghost town.

Night mayors: bridging the divide

There’s a balance to be struck between protecting communities from anti-social behaviour and enabling a dynamic night-time economy to flourish. One idea for bridging these competing interests is the appointment of an individual dedicated to the needs of the city after dark.

Shortly after the Night Tube started operations, the Mayor of London, Sadiq Khan, announced plans to appoint a “Night Czar”. The role of this new figure will be to engage with night-time businesses, residents and public authorities, and to create a “vision for London as a 24-hour city”. And on 4 November it was confirmed that the new Night Czar would be the writer, broadcaster, DJ, performer and campaigner Amy Lamé.

London is following a trend set by other cities that have recognised the need for a distinct approach to their after-hours economies. In 2014, Marik Milan was elected Amsterdam’s first night mayor. Previously a nightclub promoter, Milan leads a non-profit foundation funded jointly by the city council and the business community.

One of his early successes has been helping to establish 24-hour licences for selected nightclubs on the outskirts of Amsterdam. It’s hoped that the relaxation of licensing laws will help to relieve the pressure on the city centre, while regenerating pockets of the city lacking both daytime and night-time offerings. And, given that most problems happen when clubs are opening or closing, the 24-hour approach may also lower the chances of disturbances.

Marik Milan also wants to bring some of the positive lessons from music festivals into the centre of Amsterdam. He’s suggested that the presence of stewards, trained in how to de-escalate situations and report incidents, could make for a safer city, especially at weekends.

Milan believes his approach, in contrast to that adopted in Sydney, is more likely to bring positive results:

“Cities are always interested in solutions, but if they keep treating night life as a problem, they’ll keep having the same outcome.”

An idea whose time has come?

The successful deployment of night mayors in Amsterdam and other Dutch cities has prompted municipalities around the world to consider, and in some cases, to copy their example. In France, night mayors have been elected in Paris, Toulouse and Nantes, and they are also to be seen in Zurich and most recently in the Colombian city of Cali. Similar posts have been proposed for cities such as Berlin, Dublin, Toronto and New York.

Earlier this year, Amsterdam hosted the first Night Mayors Summit, at which city representatives could combine knowledge and share experiences on their night-time economies. This short film, from Monocle magazine, reports on the summit, and explains how the cities of Amsterdam, Berlin, Tokyo and Sao Paulo are exploring creative approaches to managing the night-time economy.

It remains to be seen whether London’s new night czar can win the support of local communities while championing the capital’s night time culture. But the experience of Amsterdam suggests that it’s an idea worth exploring.


If you’ve enjoyed his blog post, you might also like our other posts on the night-time economy

 

Rising household debt: a real risk to the economy?

pink pig and coins

While household debt is still below its pre-crisis levels, it began to rise relative to incomes in early 2015 and remains high by historical and international standards, according to the Bank of England.

With the current uncertainty surrounding the economy following the EU referendum, there are concerns that household indebtedness could present a big risk to the UK economy.

So what do the statistics mean and just what impact could they have on the economy? A recent House of Commons briefing paper highlights the latest statistics and forecasts for household debt in the UK, including international comparisons, and the effects on the economy.

The statistics

The level of household debt more than doubled from £725 billion in early 2000 to £1,600 billion in late 2008. The global financial crisis resulted in a decline in the household debt-to-income ratio, however, from 168% at its peak in early 2008 to just over 140% in recent years. The levels of debt have increased again over the last couple of years, with annual rates of growth of around 3% recorded since 2014.

The Office for Budget Responsibility (OBR) forecasts that the household debt-to-income ratio will increase in coming years, peaking at 167% at the start of 2020, close to the pre-recession peak. However, this has been revised down on earlier forecasts, such as December 2014, when it was forecast to reach just under 184%.

Despite these increases, the costs of household debt is expected to remain low relative to household income, and much lower than pre-recession levels, due to continued low interest rates. As a result, the debt burden is more affordable for households.

Benefits

The negative effects of debt on individuals has been highly publicised, but low levels of household debt can also provide benefits to individuals and the economy, as highlighted in the briefing paper:

“It allows people to buy things, like a house, that they would not be able to pay for in one go, raising their standard of living. In other words, it allows people to smooth their consumption over time, including during periods when their incomes temporarily fall. This can provide stability to the economy.”

Consumer spending can obviously be good news for retailers and the high street and high levels of mortgage approvals is good for the housing market.

The paper highlights evidence that the accumulation of household debt from 1996 to 2003 contributed to economic growth, with indebted households adding roughly 0.35% points a year to overall consumer spending growth of about 4.5% per year over this period. So a total of 2.5% was added to the level of consumer spending from 1996 to 2003.

Nevertheless, higher levels of debt can make households more vulnerable if an economic downturn occurs. And as the briefing paper shows, the households most likely to have debt (excluding mortgages) are those in the lower wealth quintiles – who are already vulnerable.

Economic impact

As the Bank of England has warned, the ability of some households to service their debts would be challenged by a period of weaker employment and income growth, which could have a wider economic impact through reduced expenditure. And higher interest rates may also lead to further reductions.

This could then have a knock-on effect on businesses which, faced with reduced revenues, may have to cut back on costs such as labour costs by reducing wages or the workforce.

Indeed, research on the impact of household debt on the economy highlighted in the briefing paper suggests that large increases in household debt prior to recessions tend to lead to longer and more severe downturns. And this is as a result of households with high debt levels cutting back on their spending by more than other households during and after a recession.

According to a 2012 OECD working paper, high debt levels can create vulnerabilities by impairing the ability of households and companies to smooth their spending and investment.  The paper also found that when household debt levels rise above trend, so does the likelihood of recession.

Other research has also found that large increases in household debt have preceded more severe and protracted recessions. And recovery following a recession was found to be typically slower in countries that carry the legacy of a large private credit boom.

Final thoughts

So it would seem that perhaps a certain extent of household indebtedness is good for individuals and the economy, in terms of maintaining growth. But when it rises above a certain level in relation to incomes, the evidence suggests it becomes a serious concern.

And with the current economic uncertainty, increasing household debt isn’t something to be ignored.


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Local Enterprise Partnerships – the story so far

 

Business strategyBy Heather Cameron

Following the abolition of the Regional Development Agencies in 2010, 39 local enterprise partnerships (LEPs) were established in England by 2012. Each was designed to represent a functional economic area and steer growth strategically in local communities. These business-led partnerships between the private sector and local authorities are central to government plans for local economic growth.

According to a new report from the National Audit Office (NAO), the role and remit of LEPs has expanded both significantly and rapidly but there are concerns over whether they have the capacity and capability to deliver.

Rapid growth

Since their inception, LEPs have rapidly developed from new start-up organisations to bidders and delivery managers for substantial amounts of national and European funding initiatives to strategic leaders of their local economies.

Between 2010 and 2015 total central government funding directed through LEPs was approximately £1.5 billion. Through the Local Growth Fund, £12 billion will be available from 2015-16 to 2020-21. Growth Deals were agreed with each of the 39 LEPs in 2014, through which £6.3 billion of the Local Growth Fund was allocated. With a further £1 billion allocated in January 2015, the total to date is £7.3 billion. LEPs estimate that the Growth Deals combined will create up to 419,500 jobs and 224,300 housing units.

On the whole, LEPs have been perceived positively and are well established as the main agencies for promoting local growth.

Development has been anything but uniform, however, with a varied pace of evolution. Considering the differing levels of size, urbanisation, population, and existing infrastructure within the LEPs, this is no surprise.

The most advanced LEPs have been identified as those with a history of collaborative working. Greater Manchester leads the way, having already been given powers over skills, welfare and transport, and to be given new powers over the criminal justice system as announced in the 2016 Budget. Greater Manchester has been working in partnership since the 1980s through its local government association, and formally through its Combined Authority since 2011.

And according to a recent Localis report, including London, there are at least a third of LEPs based in and around urban areas which are or could soon be in a position to take on greater powers, with 2017/18 a feasible timeline for them to assume greater powers.

Uncertainty

Despite their rapid development and increased responsibility for substantial amounts of government funding, concerns have been raised over LEPs’ power, resources and accountability.

The NAO report found that only 5% of LEPs agreed that resources available to them are enough to meet government expectations. Additionally, 69% of LEPs reported that they did not have sufficient staff and 28% did not think that they had sufficiently skilled staff.

A survey by the Federation of Small Businesses in 2014 found that: there is a disparity in the levels of funding and capacity across LEPs; a lack of clarity on the remit, purpose and function of LEPs from government has resulted in widespread misunderstanding and friction in practice; and inconsistencies in performance monitoring across LEPs is hampering accountability to local stakeholders and hindering assessment of LEP performance nationally.

Further recent analysis argues that their role and influence are being compromised by a fragmented and changing landscape of economic development governance and the absence of any longer term vision and plan for their evolution.

Given this lack of long term vision and strategy, the fundamental tensions yet to be resolved and their institutional shortfalls and limitations in authority, accountability, capability and resources, the analysis concludes that many LEPs will struggle to exercise substantive influence on economic development at the local level.

Indeed, LEPs reported to the NAO that they were uncertain about their place in the wider devolved landscape. LEPs were also concerned that the government had not made clear their role in economic planning and development as devolution progresses.

Further concerns were raised over funding in terms of pressure to spend their allocation within the year at the risk of not receiving future funding, which could potentially lead to LEPs not funding projects most suited to long-term economic development. And the sustainability of reliance on local authority support at a time of reduced local government funding was another worry.

Future direction

Going forward, the NAO report recommends that the government:

  • clarifies how LEPs fit with other bodies to which it is devolving power and spending
  • distributes Local Growth Funding to LEPs in a form that will give them medium to long-term funding flexibility, subject to performance, to reduce risk of funds being spent on projects that LEPs do not regard as offering the best value for money
  • sets out specific quantifiable objectives and performance indicators for the success of Growth Deals
  • ensures that there is sufficient local capacity within LEPs to deliver Growth Deals by taking a more explicit and consistent account of the financial sustainability of local authority partners
  • uses its approach to monitoring Growth Deals as an opportunity to standardise output metrics for future local growth initiatives, allowing for comparative performance assessment and reducing reporting burdens
  • tests the implementation of local assurance frameworks before confirming future funding allocations, and works with LEPs to ensure that the required standards of governance and transparency are being met.

Only time will tell whether the government expectation of LEPs to deliver Growth Deals effectively and sustainably will become a reality.


If you liked this blog post, you might also want to read our previous post on innovation districts and sustainable growth

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Budget 2016 – 5 messages for local government

One pound coin on fluctuating graph. Rate of the pound sterling

By Heather Cameron

Last week George Osborne revealed the details of his 2016 Budget, at the centre of which was a major deterioration of the forecast for productivity growth. Last year, the Office for Budget Responsibility (OBR) projected an average growth in productivity per hour of 1.9% between 2015-16 and 2020-21; that average is now 1.7%.

As a result, a further £3.5 billion of savings from public spending is to be found in 2019/20. While Osborne has suggested these savings are equivalent to 50p in every £100 the government spends, experts have warned that the figure is closer to £2 or £3 for services that haven’t been protected.

What does it mean for local government?

Despite no direct cuts for local government, it remains unclear where these savings will come from. And with ring fencing of much public spending, local government may yet again bear the brunt of these cuts one way or another.

Business rates

Concerns have been raised over the announcement to extend business rate relief, the revenue from which is 50% retained by councils. It was revealed that this will remove £7 billion from the total take in England over the next five years; 600,000 small businesses will pay no rates at all from next year.

While good news for small businesses, there are fears it could leave a huge hole in local government finances as all locally raised business rates are to be fully devolved by the end of 2020. This will be accompanied by the phasing out of central government grants, and the devolution of additional spending responsibilities.

The government says that “local government will be compensated for the loss of income as a result … and the impact considered as part of the government’s consultation on the implementation of 100% business rate retention in summer 2016.”

But details of how such compensation will work remain unknown. The Institute for Fiscal Studies (IFS) has suggested that the government’s plans for reimbursing local government is “nigh on impossible”.

According to the Joseph Rowntree Foundation (JRF), if protection for council budgets isn’t extended to beyond the devolution of business rates, councils stand to lose £1.9bn per year, or 2.9% of their total revenues.

Benefits cuts

Further cuts to welfare spending could also have a knock-on effect. The Chancellor outlined controversial plans to reform Personal Independent Payments (PIP) for disabled people, to save £1.3 billion. Overall, £4.4 billion will be cut from benefits for disabled people over the course of the parliament.

The cuts to PIP have been described as ‘devastating’ for disabled people, with many relying on them to live independently. They could therefore lead to increasing pressure on already stretched local services.

Even the government’s own party members criticised these cuts, which have since led to the shock resignation of Iain Duncan Smith and a government U-turn on the reforms to PIP, which will now not go ahead.

But there is no alternative plan to fill the hole left by this U-turn so local government may still need to brace themselves for cuts elsewhere.

Education

Under the education reforms, every state school in England is to become an academy by 2020 or have a plan in place to do so by 2022, ending the century-old role of local authorities as providers of education.

But, as our recent blog has highlighted, there are ongoing concerns over the academy programme with little evidence to justify it.

The plans have been criticised by councils and teaching unions. Chairman of the Local Government Association (LGA) children and young people board, said:

We have serious concerns that regional schools commissioners still lack the capacity and local knowledge to have oversight of such a large, diverse and remote range of schools.”

Ofsted rated 82% of council maintained schools as good or outstanding, while the results of recent HMI inspections of academies has been described as “worrying”. The findings also highlighted a “poor use of public money”, something that has been reiterated by the LGA.

In response, the LGA noted that “councils have been forced to spend millions of pounds to cover the cost of schools becoming academies in recent years”.

Devolution deals

There was some better news for local government in the form of new devolution deals with the West of England, East Anglia, and Greater Lincolnshire. The West of England and East Anglia will each receive a £900 million investment fund over 30 years to boost economic growth, while Greater Lincolnshire’s deal is worth £450 million.

New powers over the criminal justice system are also to be transferred to Greater Manchester and business rates are to be fully devolved to the Greater London Authority next year, 3 years before everyone else.

The LGA welcomes these deals as recognition of the economic potential of all local areas and calls for a return to the early momentum in which similar deals were announced last year.

Flood defences

Another positive for local government was the £700 million funding boost for flood defences by 2020-21, including projects in York, Leeds, Calder Valley, Carlisle and across Cumbria, to be funded by a 0.5% increase in the standard rate of Insurance Premium Tax.

Considering the extent of recent winter flooding, this was welcomed by local government as a “step in the right direction”.

However, the LGA has stated that councils will need further help from government once the full cost of recent damage emerges. It has also called for flood defence funding to be devolved to local areas so the money can be spent on where it is really needed.

Final thoughts

So despite no direct cuts for local government, and the welcome boost to local economies and flood defences, it remains to be seen whether local government will lose out financially in the longer term.


Read our related blog on the total academisation of schools.

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