ippr north

Community Kitty

The government has just launched a consultation on a strategy to roll out participatory budgeting across England by 2012, as part of the empowering agenda for communities.  This is both interesting and welcome.  For those that haven’t come across it, the model of participatory budgeting was first developed in Brazil – city of Porto Alegre to be precise – as a mechanism through which communities can engage directly with the local authority budgeting process.  This original experiment was partly about a desire to deepen democracy, and partly about the need to open up the budget process to combat corruption and patronage.

Whatever the original rationales, in Porto Alegre increased public participation in decision-making was certainly an outcome – it is estimated that 18% of the population took part in budget setting meetings over a five year period in the 1990s.  That’s pretty remarkable when you consider the turnout for local elections in England is often only around 30%.

In England a number of participatory budgeting pilots have been underway over the last few years – one in Hazel Blears’ home town of Salford, but also in Bradford, Newcastle and Sunderland to name some others.  An evaluation of these pilots suggests that many experiences have been very positive, but doing participatory budgeting well is resource intensive – in terms of money, council officers’ time and community development work.  This is not an argument against doing it - in fact it is right that we should invest in our democracy, and many techniques to increase participation are costly, especially if you’re targeting the most excluded individuals or the groups which traditionally have low interest in community engagement (e.g. youth).  I raise this issue merely to make the point that participatory budgeting is not some sort of easy option or silver bullet and will add value in a combination with other mechanisms aimed at enhancing participation.

In fact, doing participatory budgeting badly could be worse than not doing it at all.  If it’s not well planned and resourced it may be hijacked by small but vocal groups to further the interests of the few.  If it’s not seen to be a fair process it could serve to increase community tension, whereas there is some evidence to suggest that when done well participatory budgeting can have a positive impact on community cohesion.

Another big question about participatory budgeting is how central it is to council activity.  On launching the consultation Hazel Blears referred to participatory budgeting as providing ‘community kitties’ to areas.  This may simply be because the phrase ‘participatory budgeting’ is not the most accessible.  But a ‘community kitty’ to me suggests a small pot of additional money.  While divvying this up may offer some benefits, participatory budgeting is meant to be more ambitious than this, dealing with mainstream budgets in education, social care, and so forth, and involving communities in the hard decisions that have to be made between competing priorities.  It is participatory budgeting of this scale that would be truly ambitious and empowering.

The morning after

People have laid claim to the best hangover cure for as long as I can remember. Whether it is an arcane remedy passed down through generations or a new-age cocktail of herbs and berries, we all have methods that we swear by. Following the announcement of a 6% tax increase on booze – with future escalator supplements of 2% for the next four years – in this week’s Budget, it looks like we can all look forward to fewer hangovers. Looking at the bigger picture, however, is the forecast for the UK economy clouding over?

Earlier this decade the Nobel Prize winning economist Joseph Stiglitz reflected on the excesses of economic growth in 1990s America. He argued that Americans staggered through this decade, punch drunk on the affluence generated through unprecedented post-war economic growth. He was critical of the absence of long term financial planning, and predicted that the cost of this would be borne sooner rather than later. He was correct; attempts to maintain growth since the turn of the century have been dominated by a collection of regressive tax cuts that have succeeded first and foremost in deepening America’s social divisions.

In retrospect, maybe we experienced a similar period of growth in the UK at the beginning of this decade. At the time it felt normal, I don’t think many people felt like they were getting rich overnight or living ostentatiously. But looking back this was a strong period of growth, and there are now attempts to develop political capital by suggesting that the Government should have put money aside during this time.

Ultimately I tend to think that a hangover is best dealt with in one of two ways. You either go back to bed or you get up and get on with it. The first option isn’t palatable for the British economy, the second is the reality. The predictions for the future are not for recession and not for a terminal slowdown. This budget reflects that; it isn’t radical and will have a small impact on everyday life; the rest is down to us.

A cautious New Year to you all!

We enter the New Year with a cautious tone running through many economic predictions. Figures released in the US last week showed a downturn in fortunes in the US. One thing that 2007 taught us was that changes in the economic conditions in faraway places can impact a lot closer to home; I’m sure we’re all more familiar with the US sub-prime mortgage market than we were this time last year.

Yet despite this cautious outlook, according to new research from Oxford Economics, people in the UK are now wealthier than their American counterparts for the first time since the 19th century. During the last 15 years, the UK has overtaken many of its competitors and now boasts a GDP per head of £23,500 per year. This, coupled with the much-heralded sixty quarters of uninterrupted economic growth, paints a far more positive picture.

Looking forward, though, our average GDP per head will only ever tell part of the story. The nature of an average is that some people will fall above that line and some people will fall below it. The way wealth is distributed in the UK is something that concerns some more than others, but reflecting on what has caused our economic growth over the last few years – and importantly the undesirable consequences that have materialised – will help us in the future. We’re not alone in having this debate now; Germany is currently reflecting on the impact strong economic performance has had on residents there.

Marching forwards

It feels as if the North East is slightly under assault at the moment as major organisations within our region have been at the centre of media storms, ‘disk-gate’ looks like a story which will run and run while we all hope NR manages to stabilise as around 6,000 jobs in the region rely upon the business.

While issues such as these often become politicised it makes it all the more important that the North East’s policy is driven by evidence and not just opinion. This month we’ve been releasing the results of two major projects which provide a good example of how to move forwards.

Along with Centre for Cities we reviewed Newcastle City Council’s performance against OECD recommendations and criticisms from last year, based around the city-region’s economy and lack of leadership. Amongst other things we found that the city had to find a bigger role for business leadership and improve a fragmented regional transport system.

There is a need for leadership and shared focus, the time for territory and tribalism is over, with higher expectations demanding sharper and more strategic alliances between local, regional and national players. We must also look to pull in more high value public sector jobs.

The latter point is also reinforced in our latest research The Northern Economy in the Next Decade which will lay down a blueprint for the region for the next 10 years. For more information on any of our work email north@ippr.org

A new capital city?

Last week I appeared on BBC 5 Live’s Victoria Derbyshire show to discuss a theoretical northern capital. This is of course in an alternative universe, and it was decided to consider how this could work if we moved the capital to Haltwhistle, which happens to be the geographical centre of Great Britain.

The show was great fun, Terry Christian also appeared as the ‘northern’ voice and was especially good value. I was there to discuss the logistics behind the idea. While we obviously aren’t advocating moving England’s capital city it was very interesting how much ‘blue sky’ thinking can actually translate into real policies and ideas.

What we can say is that the UK is an over-centralised nation.  For example in the USA, broadly speaking, functions are spread around the country – government (Washington), finance (NY) and high-tech (LA).  While in the 1980’s the Italian Stock Exchange was moved from Rome to Milan. The city has changed markedly from being viewed as an industrial centre to now making its mark as a cultural and fashion centre internationally.

In the UK, overheating in the South impacts on quality of life issues, notably in London. Boosting the economic performance of less prosperous regions in the UK would make it easier for the South East to cope with the problems that current levels of relative economic prosperity pose such as congestion and affordable housing.

ippr north will shortly be publishing A Northern Economic Agenda which will set out how best to revive the economies of the North. One of our key recommendations will be that more high-end jobs in the public sector should be relocated to the North. While over 7,000 of these have been moved already, most of these jobs have been low and medium qualified positions. We would argue that while the North of England has a strong heritage of heavy industry and an abundance of contact centres, there is currently a deficit in high-skilled jobs, which also means the region’s existing academic potential is not being tapped.

So although moving the capital to Haltwhistle may be a pipedream, a rebalancing of policies to ensure sustainable growth benefits all our regions should not be.

The Spending Review

Now there is time to reflect on Alistair Darling's CSR, after the initial media rush and comment on headline grabbing topics such as inheritance tax (read my thoughts here), non-doms, and capital gains tax, it's interesting to focus on the areas which cross-over into ippr north's work and recommendations.

Of particular interest to me, as it ties heavily into our work around A Northern Economic Agenda, was the Government's approach to Public Service Agreements (PSAs).  For the uninitiated, PSAs (of which there are 30) set out the Government's 'key priority outcomes' for the next spending round and are underpinned by Delivery Agreements with the relevant departments. 

Unlike previously, when PSA targets had been assigned to specific departments, from now on they will be delivered jointly by all responsible departments (with occasional, entirely reasonable exceptions).  This is a welcome step in ensuring strategic, cross-departmental work and may even give greater flexibility to local service providers.

One of these targets aims to 'Improve the economic performance of all English regions and reduce the gap in economic growth rates between regions'.  This is underpinned by an increased number of measurements including growth rates of Gross Value Added per head (GVA – an economics tool to measure output), GDP per head compared to the average from the 15 old EU member states, GVA per hour, and – importantly for the North East – regional employment rates.

This approach gives a far truer picture of disparities and is in line with our recommendations this summer. We also recommended a change in the headline aspiration as we believe Government should be aiming to reduce the absolute gap in economic output between regions, rather than just slowing the relative gap in regional growth rates as the current PSA target specifies.  If this is not tackled we may end up with some regions improving performance, but forever lagging behind others.

The Sand Timer

Where you live can affect your likelihood of being in work and, to some extent, we do live by post code lottery.  Geographical variations of worklessness throughout the UK underline the need to look at what more can be achieved at a local labour market levels.  This certainly shouldn't mean an end to common standards of welfare provision but should be about setting minimum standards centrally and giving local areas the flexibility to deliver in the most appropriate way.

Last week we published The Sand Timer which looked at the remaining challenges for reaching full employment in the North West of England and on Friday held an event in Manchester looking at these issues with the Secretary of State for Work and Pensions, John Hutton.  One of the themes of the conference, and our research, was greater devolution within the welfare to work system; empowering local areas to better understand and respond to their local labour market conditions.

There has also been much talk of benefit reform and the next steps for welfare to work over the last few days in response to the publication of David Freud's review of future welfare to work options.  These debates are critical for this government in light of its aspiration to have 80% of the population in work, and it's no surprise that Blair and Brown are standing as one on this issue. For a progressive think tank such as ourselves full employment is not just about economic efficiency and making sure that no talent is wasted, it's also about work as the best route out of poverty. Also let's not forget that working increases levels of wellbeing, self-esteem and confidence.

Our research (alongside anecdotal evidence from our conference) shows the ability to coordinate activity locally is often constrained by a lack of coordination centrally. So while Freud's discussion of contracting, personalisation, rights and responsibilities in the benefits system and the potential merits of a single benefit are all important, they are not the whole picture.  Undoubtedly great strides have been made in improving the employment rate in recent years, and while we are closer to full employment, we are still not close enough.