Local authorities are stronger together than apart

With the local elections coming up, its worth remembering that co-operation is key to development.

Cities across the country have responded to the wanted ad issued in the Localism Act. Politics outside Westminster suddenly looks very interesting. The impending referendums on elected mayors have grabbed the imagination and the headlines, but there is a quiet revolution in local governance that has been less commented upon.

Developments in the Leeds City Region remind us that championing localities is about collaboration as well as leadership. Leeds and its neighbour’s intention to follow Greater Manchester in establishing a combined authority shows that collaboration across functional economic areas is a growing phenomenon. The future story of local government will be as much about newly combined authorities as newly elected mayors.

Local champions can drive local economic growth. The areas in and around cities such as Leeds or Manchester, have vibrant economies – and what they often need most is internal and international connectivity. This description would equally apply to areas like Tyne and Wear or the Birmingham conurbation. If England’s cities and shires are going to fulfill their potential then creative approaches to investment are required. Mayors alone will not be able to provide this.

A good example of local investment to support business is provided by Northamptonshire County Council. The council made a £10 million secured loan to protect the future of the British Grandprix at Silverstone Circuits. It also made a £1.5 million contribution to a new high-tech business park to develop automotive innovations. The new technology park is expected to create 2,400 jobs and the loan could help protect 22,000 jobs in Silverstone and across the rest of the country.

Analysis in NLGN’s latest report – Grow Your Own: Skills and infrastructure for local economic growth – found that this investment can be scaled if councils are willing to pool their capital funding and borrowing capacity. The ten Greater Manchester authorities recently agreed a £1.5 billion revolving investment fund for major transport infrastructure. A single economic strategy gave the councils the confidence to allocate their own money and borrow substantial amounts to invest in a wide ranging programme of which extensions to the Metrolink are a centre piece. Joint borrowing helped to mitigate the risks that the councils faced in underwriting new investment.

The Leeds City Region wants to develop its own model for investment and is working with government in order to achieve this through the City Deal process. Leeds hopes that Whitehall will match fund £200 million worth of pooled investment cash. The money would be spent on new infrastructure to connect the sub-region’s economy. One way to encourage others to take up this approach would be to extend city deals beyond the core cities through a series of LEP deals.

Policy innovation is particularly important given the £4.9 billion spending gap inherited by local government and Local Enterprise Partnerships following the abolition of the Regional Development Agencies. The ability to pool investment is also the reason that combined authorities could have more clout than mayors in single authorities.

City mayors are often presented as business-friendly "one-stop-shops", providing clear points of contact for prospective investors. This potential will be limited unless they operate through the kind of collaborative local governance that is envisaged for the Leeds city-region.

In Birmingham there is much excitement over the potential of a mayoral race between Siôn Simon, Gisela Stuart and Liam Byrne. But their capacity to drive change will be undermined unless the city and its surrounding area cooperate. Currently the Greater Birmingham and Solihull LEP is struggling to agree on shared economic priorities with the neighbouring Black Country LEP. This makes no sense to a major multinational company making a major capital investment, such as Jaguar Land Rover looking to build a new automotive factory.

The government ducked the opportunity to support metro-mayors. Admittedly, the local politics of such a role could have proved one step too far for local cooperation. However, if mayors make narrow investment decisions based on authority boundaries they will exacerbate existing problems.

Elected mayors can be important figureheads for communities. They can also champion major investment projects, such as Crossrail, and help to attract future business investment. But local growth is equally dependent on local government. Combined authorities investing smartly – in everything from skills to infrastructure – may hold the keys to unlocking local economies.

A woman walks past Manchester City Town Hall. Photograph: Getty

Joe is a senior researcher at the New Local Government Network

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I was wrong about Help to Buy - but I'm still glad it's gone

As a mortgage journalist in 2013, I was deeply sceptical of the guarantee scheme. 

If you just read the headlines about Help to Buy, you could be under the impression that Theresa May has just axed an important scheme for first-time buyers. If you're on the left, you might conclude that she is on a mission to make life worse for ordinary working people. If you just enjoy blue-on-blue action, it's a swipe at the Chancellor she sacked, George Osborne.

Except it's none of those things. Help to Buy mortgage guarantee scheme is a policy that actually worked pretty well - despite the concerns of financial journalists including me - and has served its purpose.

When Osborne first announced Help to Buy in 2013, it was controversial. Mortgage journalists, such as I was at the time, were still mopping up news from the financial crisis. We were still writing up reports about the toxic loan books that had brought the banks crashing down. The idea of the Government promising to bail out mortgage borrowers seemed the height of recklessness.

But the Government always intended Help to Buy mortgage guarantee to act as a stimulus, not a long-term solution. From the beginning, it had an end date - 31 December 2016. The idea was to encourage big banks to start lending again.

So far, the record of Help to Buy has been pretty good. A first-time buyer in 2013 with a 5 per cent deposit had 56 mortgage products to choose from - not much when you consider some of those products would have been ridiculously expensive or would come with many strings attached. By 2016, according to Moneyfacts, first-time buyers had 271 products to choose from, nearly a five-fold increase

Over the same period, financial regulators have introduced much tougher mortgage affordability rules. First-time buyers can be expected to be interrogated about their income, their little luxuries and how they would cope if interest rates rose (contrary to our expectations in 2013, the Bank of England base rate has actually fallen). 

A criticism that still rings true, however, is that the mortgage guarantee scheme only helps boost demand for properties, while doing nothing about the lack of housing supply. Unlike its sister scheme, the Help to Buy equity loan scheme, there is no incentive for property companies to build more homes. According to FullFact, there were just 112,000 homes being built in England and Wales in 2010. By 2015, that had increased, but only to a mere 149,000.

This lack of supply helps to prop up house prices - one of the factors making it so difficult to get on the housing ladder in the first place. In July, the average house price in England was £233,000. This means a first-time buyer with a 5 per cent deposit of £11,650 would still need to be earning nearly £50,000 to meet most mortgage affordability criteria. In other words, the Help to Buy mortgage guarantee is targeted squarely at the middle class.

The Government plans to maintain the Help to Buy equity loan scheme, which is restricted to new builds, and the Help to Buy ISA, which rewards savers at a time of low interest rates. As for Help to Buy mortgage guarantee, the scheme may be dead, but so long as high street banks are offering 95 per cent mortgages, its effects are still with us.