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EUROPE not the problem but the COALITION sucking the regions dry

14 Jan

Met with Neil McKinroy, director of CLES to share thoughts on the dynamics underpinning regional economics and finances in northern cities. We met in Pinchjos (see new app on always a good place to meet if your in Manchester. I was interested in CLES’s work on whole system analysis which seemed to coincide with my own perspective on how local economic strategies.

Several good reports have been published recently on regional economies by IPPR North, CRESC which show that the North is not only suffering from continuing industrial decline and public sector cuts but also from government’s own commissioning  and investment policies. Perhaps we need to spend more time on how money flows and what type business is benefitting and which are not. Julie Froud et al at CRESC (University of Manchester) showed in a recent article ‘Must the ex-industrial region fail?‘ that between 1997 and 2010 43%of all private sector jobs created were in London and virtually none were in the North East.  They report a widening gap between incomes between those in Yorkshire & Humber, & West Midlands and the South east-  and  say government is the problem and adding to the  worsening of the north /south divide.

 IPPR North launched ‘Northern Prosperity is a National Priority‘ in Leeds in November which talks about the untapped potential in the northern cities, given that the North has  an economy twice the size of Scotland – a fact largely ignored in Whitehall and the London media. The narrative about the North is largely negative and the region is in desperate need of its own investment bank. 85% of the Coalition’s infrastructure investment is in the Southeast.  While Manchester, Leeds, York and others have leadership committed to innovation and change, without investment in integrative infrastructure, innovation and sustainable private sector growth they are hampered by the government complacency and forms of outsourcing which are taking out as much as they are putting in.

The purpose of good governance is surely find corrective mechanisms to support connectivity and fairness across the UK and to support the growth of SMEs, innovative supply chains and regional resilience. In the Southwest over 85% of all the private sector economy is in small businesses – which are greatly affected by their access into companies and the public sector. One of the things I learnt from the research on government’s procurement was that local, small enterprises in any sector are frozen out by the current gearing of public procurement, because government  is looking to transfer financial risk to larger corporates that have the assets to cope with delivery problems. This public procurement model is sucking the life out the private sector as well as undermining much public service provision.

Another example of how business financing is influencing the flow of capital from local firms into larger companies is in energy innovation. A medium sized company in Chester – developing eco-boilers was told by investment banks that financing the manufacture of the boilers would necessitate that they set up another company to become an energy supplier to compete with existing utilities. They did this and are now a competitor in the energy market, based in London employing highly paid traders; meanwhile the core business of technical innovators are removed from the heart of their business and are waiting for the manufacturing of the boilers to fail. What is clear in this case and many  others, is that the problem for growing companies developing innovative eco-products is not just a matter of finance but of understanding the current power of investment bankers to determine their business models.  Just as public procurement is geared to corporates are the expense of local, smaller companies,  investment finance is determining what is financed, the location of companies and what constitutes innovation.

According to CRESC economies in the ex-industrial areas depend on replumbing the financial circuits rather than national loan schemes etc.  I think the way outsourcing is working at the moment reinforces that view. They suggest that local leaders and activists could champion investment in regional infrastructure in particular social housing & mobilise pension funds into regional infrastructure and initiate new financial circuits.  I would add that regional banks are urgently needed to support SMEs and social enterprise;  current public procurement criteria changed,  devolvement of public finances from some departments into the regions for welfare benefits, FE training etc to regional commissioners,  and critique of the influence of investment bank power over utility companies and innovative new firms.

It is not Europe which is the problem but the current Coalition government – even Vince Cable thinks national schemes not regional potential


Beyond Fragility – Thank You Taleb

26 Nov

I welcome Taleb’s thinking, at last,  someone who policy wonks follow is saying that public leaders need to act less, weave their way through problems by responding flexibly and appropriately, not plan their way out of austerity through ‘one-size-fits-all’ models.  While it heartening to read Taleb  it is hard to fathom why his views are seen as so radical when adaptive leadership and appropriate judgement are hardly news,  this is how good public leaders operate across many partnerships in the country.  Women have been advocating similar views on leadership for many years.

According to the Observer yesterday, those thinkers influencing politicians and policy-wonks at the moment include: David Brooks (The Social Animal); Thaler and Sunstein (Nudge);Kahneman (Thinking:Fast and Slow); Sandel (What money can’t buy); Layard (Happiness);Kate Pockard & Richard Wilkinson (The Spirit Level) as well as Nassan Taleb. The Spirit Level is having an international impact on policy makers who needed  evidence of how inequalities impact not only on individuals but also on society.

Most of the above authors are not saying anything new or wrong – but it is worrying we need telling in 2012 that we are social animals, that money isn’t everything and  doesn’t buy happiness or that inequalities can lead to resentment, violence and despair. Perhaps the reason why policy-makers need reminding of the relationship between well-being, the economy and social cohesion is because the subject of psychology is itself so poor at grappling with the relationship between people’s behaviour and public policy.  I continue to be amazed at how universities attract thousands  to study psychology when the curricula is completely divorced from anthropology, philosophy, political and policy – in reality departments train social engineers rather than conceptual thinkers concerned with  agency and social change.    I should add have a psychology degree.

I like Taleb because he doesn’t seem to be marketing a product but exploring how leaders can better approach complex problems in a turbulent world and concludes responsiveness is better than control.   The problem is that in policy-making circles there is a continuing desire to control and to pick one new idea – for instance Nudge, and promote it as the only solution, when a better reaction would be to question the assumptions underpinning public policy implementation.   For instance, public procurement has become the international lever for achieving public efficiencies, savings and innovation all at the same time while also transferring the risk of delayed results from the tax-payer to large companies, that can carry this risk.  This is delusional there are trade-offs involved in the transfer of risk, efficiency models and services innovation in particular.  See my MBS report on DWP Work Programme Procurement.

It is the continuing lack of respect and contact for practice  within Whitehall which  leads to poor judgement within policy making.  If the Cabinet Office were to reconnect department policy-makers with locality partnerships the latter would learn how difficult implementing policies is, in practice, it would also counter the ‘gadfly’ tendency of politicians and advisors alike. If you find out how specific policies impact on people and their lives  you would be in a better position to anticipate problems and think in terms of ‘trade off’ rather than perfect solutions;  and anticipate what local practitioners already know.

In the pursuit of  improving individual services we have lost the focus on how to support the development of more resilient communities within a world which is currently showing us the power of the weather.  This would  mean trusting people, not always knowing what will happen or where money will be spent, in return policy-makers would engender engagement and a healthier relationship with those who are  doing the work. This was how Sure Start was set up originally – it was the policy wonks who sought short-term results for specific groups. New projects new the space and freedom to develop with the flow of the community not be subject to weekly changes in direction arising from changing political whims.

Public leadership is challenging but it has changed dramatically over the past five years, especially in cities and local government – these changes have not come about because of a new book or theory, although these can help individuals reframe their thinking and judgement – local leadership is ahead of the game and policy-makers should get out more.

A first step would be to find out more about the Local Government Yorkshire and Humber Innovation Awards -in Huddersfieldon the Dec 6th

See recent article – Public Leadership Driven by Values not Bonuses.