Recession and Local Government

April 3, 2009

Chris Leslie, Director, NLGN
Public Service Review

In response to question: How should local authorities best counter the impact of recession, both within their own organisations and in their communities?

At a national level the debate between the activist and market-led schools of economic thought are well rehearsed. Yet the real test for whether the public sector can counteract the worst effects of the downturn will be measured locally and on the frontline. It is true that national monetary policy ‘easing’ and HM Treasury tax changes can alter the quantum of discretionary resource available to inject into the economy at large, but this recession is as much about individual business models, localised hotspots of hardship and behavioural psychology, as it is about the national and international trends.

Merely allocating budgets to public works, environmental activities or job creation programmes doesn’t actually make them happen; these are projects which need carefully operationalising on the ground, tailored to fit differing communities and the specific needs of individuals. A central command-and-control mentality will not be able to help those laid off in a regional car manufacturer as well as target support to white-collar office staff no longer needed in financial services.

Matching the supply of available labour to emerging employment opportunities requires a degree of local knowledge, coordination and networking with the business community that only local agencies can deliver. So there are hard-headed operational reasons for placing local authorities – elected and accountable – more in the driving seat in combating worklessness. But the role of councils should be expanded further. Councils used to give mortgage capital to local residents up until the mid 1980s when it was assumed that the private banks could take everything over adequately. Perhaps it is time to look to the stability of the local public sector as a route to boosting mortgage availability again as a means of supporting the housing market.

Councils are also best placed to catalyse new public infrastructure projects, kick starting the regeneration schemes that private developers have increasingly walked away from. If they are viable schemes but simply in need of capital, then councils should use their existing muscle – including pooling a share of the £38billion of reserves they hold on deposit – to step in where private financiers have receded. Local leadership is the key to practical, step-by-step economic rejuvenation, and Whitehall needs to wake up to this reality.


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