Amid the UK’s political and economic turmoil, Paul Frainer, Director of the Institute for Economic Development (IED), issues some timely reminders on growth and economic strategy
Earlier this year, I chaired a webinar on IED, “Good Growth – How Do We Look Beyond GDP to Support Tariffs to Net Zero?”. With the original endorsement of the Kwasi Quarting mini-budget, and now the new chancellor’s subsequent changes to economic strategy announced in October, it seems a good time to summarize some of the key points we discussed in that webinar because they resonate with much of the rhetoric that follows.
Growing up as a word is dangerous ‘catch everything’
Having worked in high growth areas, there are real sensitivities in how the term is used. Perceptions can be really problematic because we often combine population growth, development, and economic metrics like GDP into one issue.
This can be very sensitive, especially in areas that undergo a lot of housing development due to the high mobility of the labor market, where people often experience problems such as redundant infrastructure, social or environmental problems when policy planning is not keeping pace with the dynamic of change in that location, which It is often exacerbated by the stress on public services as a result. The result is opposition to inclusive development, much of which is needed but is seen alongside unscrupulous profit-based development led by unregulated markets.
There are also embedded system issues involving public institutions, markets, supply chains, and national politics and they are more complex than can be discussed here. However, we are going through a housing crisis, especially in these areas, and often those most in need of housing are those who cannot afford the vast majority of homes being built.
Unfortunately, confusion of the term growth is used on both sides of the argument. The outcomes of economic development differ from what liberalists call growth; Strong, healthy economies require shared prosperity and opportunity, and this requires economic strategy and social development, not unregulated growth.
Unregulated growth that relies primarily on a measure of success in GDP is harmful, and neoliberalism has done more harm to social cohesion, public institutions, and the environment in the past three decades than is often apparent (paradoxically the huge economic cost—think of 2008 banking crisis, bailouts, environmental disasters, etc.).
Local government as a “burning platform”
Obviously the biggest thing in my view, but this is appropriate in the context of all public sector organisations. Local government is absolutely key. Aligning local politics and redesigning public services can and should be a game-changer in economic strategy, improve local economies and, most importantly, lead us through the current economic crisis and cost-of-living implications.
One of the great concerns emerging from our newly formed government is the implicit idea of undoing further transfer of power. It would be of great concern to see the easing of ‘settlement’ as the benefits of more distributed autonomy in the local economy would be incredibly powerful, despite the caveat of the need to ensure local government reorganization with application of organizational design principles focused on Citizen and properly represented in transformation programs.
Regardless of this, local authorities have come under pressure over the past 10 years of austerity which often means they are only operating at the level of demand failure in terms of service design and policy. In addition to the problems faced by large legacy organizations such as outdated organizational structures, difficult digital architecture, and difficulty dealing with bureaucracy, they lack the resources and ability to clear the horizon for development on their own.
The main concern is that even with the renewed pressure on services from the current cost-of-living crisis, not to mention the exacerbation of these problems from the new government’s fiscal direction, this will be the straw that breaks the camel’s back and I. She fears that we will see some councils slide off the cliff financially in the coming months.
In my daily role at TPX Impact, I see the kind of support we provide to our local government partners turning to recognition of this through several recent projects specifically looking at dealing with issues of poverty, inequality and the cost of living increase in both benefit and number. However, the number of councils with key space or organizational maturity to pursue these types of interventions is still limited and in the minority. This is not just nice money because increasing poverty is not only unacceptable from an ethical perspective, but the cost to the public purse will be in the billions (see calculations from a 2016 report by the Joseph Rowntree Foundation).
The costs of poverty – at the national level
1. Public service costs
Healthcare (£29 billion)
Schools (£10 billion)
Police and Criminal Justice (£9 billion)
Children’s Services (£7.5 billion)
Adult Social Care (£4.6 billion)
Housing (£4 billion)
2. Knockout effect
Lost tax revenue (£4 billion)
Additional benefits (£2.4 billion)
Work and support allowance (£1.4 billion)
Pension credit (£1.3 billion)
For context, if you compare that again to the council area average and the percentage of those currently living in poverty at 10%, then even a ‘cigarette pack back’ account of 10% gives you £5-20 million in lost revenue taxes, and 1 £10m in fringe benefits, without even considering the indirect costs associated with housing, homelessness and health. This highlights the catastrophic failure of current government policy to understand the macroeconomic implications of the twenty-first century (Mariana Mazzucato wrote about this over 10 years ago!) It will be my top priority to highlight this in the coming months and open a more dynamic door. and diverse conversations about how we can join forces to address some of these challenges.
Systems change and short-term need
This is just a tag and needs to be expanded into a separate conversation, but I’ll always come back to the systems approach as the only real way to get the paradigm shifts we need.
Local governments are complex systems that must operate within multiple complex systems. If there are no knowledge systems, skills, and ways of thinking in an organization, it will probably at best tread on the water but often speed the path to failure – treading water may no longer be possible with the exponential growth of the challenges now common in the twenty-first century general. System change has to start somewhere, but it takes a long time. However, it is good to see some reflection on this approach as the only way to keep the future of their organization within their talent. Lichfield Council is just one local authority that I am aware of have specifically announced the start of their journey here.
As important as the need for long-term change is, it does not escape the short-term injection of the resources required to see us over the next 12-24 months while limiting damage as much as possible. This is the biggest concern of recent events for me as the failure of the flux economy becomes a tipping point, with the gap widening in depth and breadth and for those working at the vain end of business from one smoldering platform to the next.