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Dr Neil Lee
Head of the socio-economic centre
T 020 7976 3611
Dr Neil Lee

Local innovation and freedom go hand in hand

Authors: Dr Neil Lee Dr Neil Lee

05 July 2012

Last December, Nick Clegg announced the City Deals – a series of tailored agreements between Whitehall and the core cities, giving them new powers and responsibilities. In his announcement he cited our work on innovative cities.

Since then the Cities Policy Unit – led by cities minister Greg Clark - has been working with cities to develop new areas of policy. The results have just been announced. They’ve clearly been working hard and have produced a package of measures that focus on job creation and growing apprenticeships– these are some of the highlights...

On skills, there are moves to create greater locally flexibility and responsibility. Sheffield gains a new local skills funding model. In Liverpool there is a move to more payment by results, also known as ‘outcome incentives’, with adult skills providers incentivised to support more people into work. Manchester gets a City Apprenticeships and Skills hub – potentially a great way of addressing the problems faced by SMEs in taking on apprentices. We think moves to improve local coordination are important and necessary. But, while local firms need to be involved, skills aren’t always a local issue.

For economic development and innovation, Bristol gets a ‘Growth Incentive’ and can retain 100% of business rate growth in five enterprise areas over 25 years. There’s a lot of focus on low carbon (see our event on the 19th), and Birmingham will get money for a life sciences unit. Manchester and Bristol will also have City Growth Hubs, providing one stop shops for business growth services.

There are also some welcome measures on youth unemployment. Liverpool will have a Youth Unemployment Task Force to develop measures to help address long-term youth unemployment, which as we’ve shown is a major and growing problem. Leeds and Newcastle also get measures to help tackle the high numbers of NEETs locally.

And there’s a general theme of incentives for growth, with local powers matched by local risk. Several cities are going to be borrowing against future development income. But, while investment is needed, we’ve warned in the past about the pitfalls of this approach.

While we welcome much of the city deals, we’re less keen on some other measures. A new venture capital fund for Nottingham offers £45 million to invest in high-technology firms. Venture capital funds of this scale are vulnerable to a few failed investments and there may not be enough potential in Nottingham for such a scheme to succeed.

But that’s the point of such localist solutions, it allows cities to tailor approaches to local preferences and develop innovative solutions to local problems. Some schemes will fail, but local failure is often cheaper than at a national level. The government has suggested that the next generation of city deals will be with smaller, more prosperous cities. The next round should learn from this set of ideas, and come up with additional measures to support city growth.