Councils need to work together to fund infrastructure

As the local government finance bill passes through parliament and parliamentarians debate the details of specific measures – such as a cut to corporation tax and a new patent box – it is worth taking a step back to consider policies on growth. A series of tax tweaks will fail unless the ground is better prepared to allow business to flourish. In the absence of a clear national plan, it is for local government to take the lead as activists for growth. As an interviewee for the New Local Government Network's latest research on economic growth put it, councils are the last man standing in this debate. It is a truism, backed by OECD research, that innovation, skills and infrastructure underpin a growing economy. While the finance bill is designed to encourage business innovation, local government has significant control over the latter two. Councils across the country are considering working together to become major investors in local economies as they seek to create jobs and prosperity. The abolition of the Regional Development Agencies, in particular, has led local authorities across the country to consider new approaches. This is more than simply a role of last resort. Economies grow in places and those places have specific needs and specific potential. Yet, the government's policy framework for local growth is incomplete. Funding is spread too thinly; governance structures are fragmented and ineffective. Local authorities recognise this. In a survey we carried out of over 50 councils they rated the new framework just 4.6 out of 10, where a score of 10 indicated they were very confident that they now had the power to drive jobs and growth. Some of the solutions lie in new national policy, such as measures included in the finance bill, but there is plenty more that local government can do to support business if it is given the right tools. To encourage the development of a skilled workforce we recommend a new scheme from the Department for Education in which 5% of an area's post-16 funding would be routed through its local enterprise partnership and spent according to the local economic strategy. The government could offer to devolve more money on a match funded basis. In other words, if a council – or more likely an LEP – can raise a sum equivalent to 1% of the local skills budget, ministers should match that sum. The money would be returned to skills providers on the condition that they meet agreed local economic goals. To maintain infrastructure investment we suggest that local authorities pool their capital funding and borrowing capacity and draw down further private money as required. To this end, local authorities should consider the creation of a new wave of "Revolving Investment Funds" that would seek commercial returns on land, infrastructure and public assets and even take equity stakes in local business. By making best use of their insight and ingenuity, councils have the potential to create a virtuous circle whereby the proceeds of growth – in human and physical capital – can be recycled to further drive local and national prosperity. Joe Manning is a senior researcher at the New Local Government Network This content is brought to you by Guardian Professional. Join the local government network to be kept up to date with the latest comment, analysis and debate