LED: March update including thoughts on latest UK budget

A busy year so far!

Its been a busy few months (to be honest, I've been chained to my desk since October!) I'm really pleased to be involved in some challenging, thoughtful work. A downside is that the usual articles have been somewhat curtailed, as well as plans to do a podcast.

Highlights have included advice to a client to provide a more 'holistic' concept for a regional economic strategy that drew in health, inclusion, sustainability, climate change, as well as the usual economic development and growth concerns. Another piece of work has been to develop a low carbon transition economy and skills strategy and action plan.

March 15 Budget - quick thoughts

But first - to yesterday's budget. There's loads of great commentary out there, but my main takeaways are:

• The Greater Manchester Devo deal just got better. Single-pot / devolved nation-style financial settlement - read more here
• On the flip side it looks like LEPs are nearing the end of official endorsement "The government is committed to empowering democratically elected local leaders at every opportunity. To this end, the government intends for the functions of Local Enterprise Partnerships (LEPs) to be delivered by local government in the future. Therefore, the government is minded to withdraw central government support for LEPs from April 2024."
• Plus more institutional change for LED - Levelling Up Partnerships, a sprinkling of pots of funds for new or already committed projects.
• Investment Zones news - looks interesting. I will be looking to see how they differ from other supply-side business rates discount/ tax relief accumulator initiatives such as EZs and Freeports.
• Good for increasing the workforce supply, good news for parents who can use the increased childcare allowance (if the childcare sector can expand, and finds the government funding sufficient to cover their costs).
• There's not much in it for economic growth. The OBR released their revised economic and fiscal outlook here and estimated a marginal impact on growth. What is also worrying is that there was little to reverse the austerity and poor state of public services funding.
• The budget favours those on higher incomes, and with large pension pots or the capability to invest in private pensions. So the wealth gets put in a pension vehicle for later years? doesn't provide much stimulus. We all know that lower-income residents put more spend into their local economies - so I'd have preferred to see the reverse of the March budget - more money in lower-income households, not so much for the wealthy.
• The endless changes in business tax rates - how can that form a stable basis for business investment and long-term planning (useful article in FT here )? corporation tax rates jump from 19 to 25% in a month's time. R&D tax credits change again.

For me the Budget, and the process, signal a lot that is wrong with UK politics and economic policy - changes happen in the short term for political reasons, with big ramifications for long-term investment and business activity - but with no long-term big fixes for the main challenges facing the UK economy - which include lagging productivity, regional inequalities, income inequalities, education and skills, public services, and public transport. There is also little in terms of a blueprint for a low-carbon future - which should be imbued in every facet of government policy in my view.

Holistic economic strategies

It's been really interesting to look into how to approach holistic strategies. We have examples - from One Bristol - and its use of UN Sustainable Development Goals. To Scotland's National Performance Framework (which joins up the monitoring of progress, but not necessarily the policy process).

And I've enjoyed teasing out some of the complementarities. For example, decarbonization requires an increase in public transport, which can help with economic and labour market inclusion by improving mobility for lower-income residents and neighbourhoods.

The holistic economic strategy concept I've developed - I am really pleased with. I'll put out a more detailed article on this in due course.

Transitioning to the low carbon economy

I've been doing more and more low-carbon transition work. Between 2016 and 2021, a lot of this has been in the evaluation of ERDF and CRF projects. In the past two years, its been mostly about low-carbon economic strategies and the skills and jobs transition. It is very challenging for local economies in many respects. Some of the big challenges include:

Challenge #1 current investment and activity aren't enough to meet our net zero targets: based on current and planned activities (talking about genuine, funded plans here, not declarations) we cannot decarbonise to the pace and scale required, without rapidly and comprehensively scaling up low carbon solutions and activities to replace those that currently rely on fossil fuels. This puts some of the climate change declarations into perspective - localities simply have not done enough to hit the net zero targets for 2030, and time is running out.

Challenge #2 we don’t have all the low-carbon solutions in place yet. Some are already here and proven – such as renewable energy, EVs, and retrofit. In others, we have the technology but it is not widespread or dominant in the market – such as for ground source heat pumps, biomass energy, biomass buildings, and modern methods of construction. We don’t know which will be the preferred and viable solutions for hydrogen energy, large and plant vehicle power trains, and domestic heating, for instance.

Challenge #3 we can’t scale up the low-carbon solutions without the required policy and financial frameworks:

• Legislation and regulation
• Market incentives and mechanisms to incentivise demand and provide the supply to match this
• Skills and labour
• Financial vehicles to make the switch and transition to low-carbon financially viable

Some early thoughts on tackling the transition to the low carbon economy

This is my thinking to date - it's not perfect, and it won't solve every detail and individual challenge, but what I'm trying to capture is the essence of local strategy and leadership to address the economic challenges of net zero. At this stage I'm trying to avoid going into detailed discussions about sectors and technologies, and interpreting the challenges into some kind of constructive set of missions:

Move beyond declarations into action: There's a lot of good work out there, a lot of it in pilot projects and smaller-scale stuff. However, it's well past the time to 'go bold or go home' on climate change and being a bit more transparent about what needs to be done, and the resources and actions required.

Maintain and enhance market leadership: Help to ensure that regional market leadership is maintained and enhanced in established low-carbon sectors and markets.

Accelerate potential: Accelerate industries where there is existing capability and potential (for many regions this is in sectors such as Green Hydrogen).

Push new solutions: Help to enable and push regional capabilities into established low-carbon sectors and markets, and in emerging low-carbon technologies, industries, and markets – via R&D, innovation, and enterprise growth support and initiatives.

Build the market for low carbon: Helping to build the market-enabled low carbon transition, making it cheaper, quicker, and easier to implement known technologies and solutions. This can include activities such as public procurement; subsidies; public equity; loans and financial vehicles. Successful examples of this include the Retrofit Accelerator Homes project in London.

Proof of concept for inclusive solutions: Prove the concept of inclusive solutions where the benefits for the public sector, electricity grid, and households are high, such as district heating and energy initiatives. Often, actions at the community scale will be viable and will be more equitable. Worth considering.

Core and agile skills: It can be easy to go down a few rabbit holes in terms of identifying the skills needs of specific sectors, and activities. But we need to remember that the key principles probably relate to core and entry-level skills, and being agile enough to respond to emerging skills needs.

About Glenn

Glenn runs his own consultancy,?Mylocaleconomy. ?We help local leaders translate their economic ambitions into winning advocacy and solutions that get funded. We work all over the UK – from the Highlands of Scotland to Wales, Bristol, Teeside, North East England, Gloucestershire, London, Cambridgeshire and Sussex.

We love challenging assignments, complex opportunities, and intractable problems. Our vocation is to help city, region and local economies succeed and for prosperity to be sustainable and shared.?

Get in touch?via LinkedIn messaging or the contact form on our?website .