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Spring Budget: Where next for economic growth, underpinned by net zero?

14 Mar 2024

Disappointing and divisive. That seems to be the mood around the Chancellor’s budget, which in reality brought little cheer for the general public or those working in local government.

Yes, three counties are to get devolution deals, the North East has got a trailblazer deal and 20 more towns have joined the government’s towns programme under plans announced, but fundamental issues with day-to-day funding of local authorities and public services remain.

The UK economy’s major challenges remain largely untouched and, as one commentator said, the real decisions have been “kicked into the long grass”. Economic growth, and the urgent need to move towards net zero, as arguably the two most pressing aspirations (and they remain aspirations) require large-scale public investment.

In our Grow Local, Grow National manifesto, which calls for councils to have new statutory powers over economic development, we set out six supporting pillars that we deem critical for success in our overarching call for prioritising local economic growth. Net zero is one of these.

We have emphasised our full support for the mission of the Blueprint Coalition’s Manifesto for Local Climate Action, a core part being recognition of the need for a place-based approach to tackle climate change and move towards net zero.

In addition, we ask for support for place-based climate action backed by adequate funding and support from national government; commitment to a cross-government department partnership approach with local authorities; commitment to reform and devolve funding streams and embedding climate action in devolution deals.

Finally, we call for expansion of a net zero neighbourhood approach, led by local government, and transition funding to enable viability gaps on local net zero schemes to be better overcome.

The outcome would be net zero transition being established through clear local delivery plans with the urgency that only a local focus could bring.

On climate action, based on our discussions around the manifesto to date, the government has told us it recognises that local authorities can and do play an essential role in driving local climate action, with significant influence in many of the areas across energy, housing and transport, which will be needed to achieve net zero.

They have reiterated the support outlined in the Net Zero Strategy and Net Zero Growth plan, which includes running the Local Net Zero Forum to bring together national and local government senior officials on a regular basis to discuss policy and delivery options on net zero, funding five Local Net Zero Hubs which support local authorities to develop net zero projects and attract commercial investment, and funding work to develop business models to increase private sector investment in local net zero.

Also highlighted were the use of devolution deals with Greater Manchester Combined Authority and West Midlands Combined Authority to pilot new approaches to funding retrofit from 2025, and making green business sectors one of the give priority areas for the new Investment Zones and requiring all Investment Zones to demonstrate their contribution to national net zero and environmental targets.

The Department for Energy Security and Net Zero’s new £19 million Local Net Zero Accelerator pilot programme, helping selected combined authorities unlock private investment, speed up their efforts to tackle climate change and help the UK reach its net zero target, was another example played back to us.

There is no doubt that local areas are making strides towards a net zero future and there are many examples of local action – but this could be accelerated by putting councils firmly in control of delivering national net zero ambitions.

In our manifesto, therefore, we also ask for local authorities to develop an accountable five-year economic strategy/strategic economic plan – led by upper tier authorities but taking into account function economic areas, supported by capacity funding, a single settlement funding pot approach built on more “trailblazer” devolution deals, and multi-year settlement approach, rather than annual spending reviews, shifting the dial.

We also outline the need for a more stable and long-term funding landscape to underpin all economic development and supporting projects, including an end to the micro competition for capital funding as part of the single settlement funding pot approach, with any funding settlement with government and wider government programmes, such as the UK Shared Prosperity Fund, operating over a longer timeframe and coinciding with a five-year economic strategy horizon. It is also recognised that enhanced devolution could also include greater freedoms for local authorities in raising their own revenues through different means.

This, in turn, we think can not only help us to deliver net zero but generate a far more sustainable approach to funding local government, and ultimately places and communities, beyond the existential crisis that we are seeing play out.

Nigel Wilcock is Executive Director of the Institute of Economic Development. This article was first published by Public Finance.