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1 Introduction
What this book is about
In this book we take a critical look at closely related aspects of contemporary public policy around the core concept of public enterprise, a term which denotes the entrepreneurial work of the public sector and its partners in securing economic growth and development, regeneration and well-being. Our analysis will take us through the realm of innovation and the governance structures that have been used in supporting it. There is a particular focus upon partnership working in fostering public enterprise, and we begin to identify ways in which the balance of the public and private sectors has changed. We then consider the importance of local place, a term which captures the territorial location of public enterprise more accurately than the traditional designation âlocal governmentâ, and which recognises the porous and contested boundaries of what was previously a stable institution of local administration. Our focus is on international examples of the processes we describe, towards an overall depiction of how we can now understand both public enterprise and how it is led, for instance by directly elected mayors. Throughout, there is a twin concern with theory and with practice, and with structure and agency, in making sense of local public enterprise today.
Aims of the book
The first aim of the book is a relatively modest (though hitherto neglected) one, and that is the task of clarification, in which we seek to cut through some of the terms frequently used in local public policy â such as âdevolutionâ or âleadershipâ â and examine them for what they are, suggesting that on close examination such terms, although not without meaning, tend to mean less than they initially seem.
The second aim of the book is more ambitious, offering a way forward in understanding the overall topic in two senses. The first sense is a practical one, examining good practice within the local public sector and suggesting that the publicâprivate partnerships with which we have all become familiar can be recast along more constructive lines, again referring to positive international examples rather than the dispiriting experience of the public sector merely underwriting private sector failures. The second sense is a theoretical one, offering our conception of a New Public Enterprise (NPE), which seeks to advance current debates about power, institutions and locality, together with the future role of the local public sector, within a new theoretical framework.
Initial themes
Local government and economic development
In reviewing the role of the public sector in promoting local economic development, it has been characterised as a choice between a ârace to the bottomâ and a ârace to the topâ (Goetz et al. 2011). The former concentrates upon minimisation of costs to business; the latter upon investment and upon increasing innovation. This is a useful point for us to start. Writing in the context of the USA, Goetz and colleagues found, in their detailed quantitative analysis, no evidence that lower taxation contributes to growth, whilst advocating instead an approach based upon increased efficiency and expansion of entrepreneurship. Whatever view is taken of the validity of this, or its applicability beyond the USA, it points to the importance of trying to transcend ideological positions about taxation and growth with firm evidence. In the UK, local authorities have long contributed to economic development, although practice has varied enormously between councils geared up to provide economic development services through a dedicated department and those whose approach is more piecemeal. The current position in England and Wales is that councils may retain more of local business rates to support such activity, but this is in a setting of extreme pressure on local authority budgets as a whole. Such councils are required to produce a local plan, in which it is highly likely that local development plans are elaborated, and must also produce an annual economic assessment, to which a number of duties relate, including those involving the Local Enterprise Partnership (LEP), of which we will say more in this book.
The corollary of local leadership of economic development initiatives is, of course, that they are competitive. If I, in City A, succeed in winning a major inward investment contract, the consequence is that you, in City B, do not. It is a cliché, yet nonetheless true, that there are losers as well as winners in local economic development. This was demonstrated in the competition between northern England and Scotland for a new Amazon distribution facility, the latter country being much more geared up for attracting this kind of investment in a process that is likely to continue (Fenwick 2015, 13). The importance of collaboration for economic development between different cities in the USA has been assessed by Hawkins (2017), who concluded that the similarity of political institutions in different cities may minimise transaction costs, identifying ways in which local authorities may collaborate with one another to succeed in economic development. Perhaps this reduces the stark distinction between winners and losers that we suggested earlier, but, as Hawkins notes (2017, 756), the collaborative efforts of relatively autonomous US local polities are not necessarily mirrored in Europe.
Local autonomy and central control
An unresolved theme in reviews of economic development is the degree to which local agencies (local government or publicâprivate partnerships) are free from central government control and regulation and hence able to pursue local enterprise objectives. In some European countries and in the USA, the state or regional level adds a further layer of governance, which may be either enabling or disabling for local growth strategies. In the UK, moves towards âdevolutionâ may ironically mask a greater degree of centralisation based upon central control of resources, a topic we shall explore further in this book. The situation differs from one country to another. Keuffer (2018) refers to ways in which local autonomy in the federal system of Switzerland has impacted upon local reforms, including institutional changes, examining the âconsequencesâ of local policies (ibid., 427), where he detects, in a Swiss context, a gradual loss of local autonomy. He suggests, using published material on the topic, that âthe sphere of authority for policymaking resulting from the local context can be seen as an institutional prerequisite for local government to initiate proactive reforms in order to respond ⊠to the collective preferences of its citizensâ (ibid., 430). Certainly, a strong local economy would be likely to constitute a powerful local âpreferenceâ, but it is questionable how far such authority for local decision-making exists internationally. In the UK, the Localism Act 2011 gave local councils a âgeneral power of competenceâ, which can be used, amongst other things, for local economic regeneration, which, in a context of severe financial constraint, may be used in conjunction with private sector and third sector partners.
More positively, German central government has detailed the ways in which it seeks to enhance economic development in partner countries which we could characterise as âdevelopingâ, including the strengthening of government institutions, the development of such institutions alongside âcapacity buildingâ, refashioning the âdivision of competences among government players, the private sector and civil societyâ and building public participation into local decision-making (Federal Ministry for Economic Co-operation and Development 2008, 6). The European Charter on Local Self-Government dates from as long ago as 1988, and by 2010 had been adopted by 44 of the Council of Europeâs 47 members (Council of Europe 2010) in a continuing process. National experience continues to vary considerably. However, outside Europe, there are some pointers towards good practice. In South Africa, for instance, local economic development agencies have succeeded in leading economic development at local level where local municipalities have proven unable to do so due to a heavily bureaucratic structure and a lack of relevant capacity and skills (Khambule 2018). This has created a constructive and successful role for government as part of a âdevelopment stateâ where economic development cannot be left to market forces alone. Of course, for ideological reasons, this may not be attractive to Western states as a whole, but it does point to how the âdevelopedâ world may learn from its less developed neighbours.
Enterprise and austerity
Public enterprise takes place today in a climate of austerity, varying from country to country, where financial restraint is a common factor. In the UK, the previously permissive environment for local authority economic development, where local practice varied widely, has given way to a greater need for generating and investing resources locally, but in a setting where local government finds that difficult. To put it simply, the need for effective local government has grown, but the means of achieving it have become much more challenging. Partly, the solution lies in joint work between different local councils, partnership with private sector agencies and the work of sub-regional groupings such as the English Combined Authorities, which we shall go on to discuss.
âLocalities were to be the key to growthâ (Travers 2012, 5). In his report written for the Local Government Association, Travers (2012) goes on to note the obstacles to achieving such growth, the chief of which has been the cutting of funds from central government within the âuniquely centralisedâ British system of public finance (ibid., 7). This process has intensified in the years since Travers wrote his report in a climate where austerity has claimed almost mythic ideological supremacy and where, in a British context at least, it is almost an act of heresy to challenge it (notwithstanding the rhetorical claims of some politicians that austerity is over). Despite these challenges, Travers is able to report numerous case studies of local authorities that have successfully implemented economic development policies, perhaps, one might add, as a means of survival rather than a desirable extra.
Austerity may also have increased short-termism in the regeneration and development activities of local agencies as they strive to hit this yearâs targets rather than invest in longer-term growth strategies that are not so readily measurable. A specific instance of such short-termism is explored by Morris et al. (2017), who find that UK local authorities, given the responsibility for local domestic energy reduction, do not possess the resources or the freedoms to implement this. This re-emphasises our central interest in (lack of) local autonomy and in the insufficiency of resources to achieve objectives, as the authors again find that a general power of competence lacks meaning without adequate resources. âLocalism, if accompanied by adequate resources provided to LAs, could ⊠help realise not only benefits towards meeting UK energy and climate change targets but also contribute to local economic development and improved health outcomesâ (Morris et al. 2017, 884). This is significant, for it points to a key debate about the role (and capacity) of local government in economic development. This is a political debate. The neoliberal argument is that the financial disabilities of local government are not a problem. They simply require local government to work with new partners from the private sector and from other partner agencies â as though this had no cost and no consequences.
Nicholls and Teasdale (2017) examine the links between social enterprise and neoliberalism further. Using Kuhnâs concept of a nested paradigm, they argue that the micro-scale social enterprise paradigm is ânestedâ within a meso-level âmixed economy of welfareâ paradigm, which in turn is located within a macro-level neoliberal paradigm (Nicholls and Teasdale 2017, 324). This is important, for it reminds us that discussions about social enterprise and economic development are theoretically located and are not accounts or descriptions of purely empirical processes. We shall return to the topic of theoretical understanding in our closing chapters.
The misplaced emphasis upon structures
It is instructive here to consider the failings of relying upon structural change alone to deliver successful social enterprise. Successive local government reorganisations in England and Wales, and separately in Scotland, reveal a rather futile emphasis upon structure rather than agency. Leach et al. (2018, 3) refer to the changed relationship between local and central government in Britain from the 1980s onward, when the previous partnership between locality and central government was replaced by a more hostile environment, and structural reorganisation has reduced the powers and responsibilities of local authorities. Our own work (e.g. Fenwick and Bailey 1998) pointed to the lost opportunities involved in local government reorganisations, including the fruitless and inconsistent debates about âsingle-tierâ and âtwo-tierâ local government â still unresolved today â and the failure of the Local Government Review of the 1990s to produce any coherent result.
Yet, structural change of local councils continues to be an obsession of UK central government, perhaps based on the hope that it will somehow produce greater efficiency or effectiveness, or possibly, greater compliance. The English Metropolitan County Councils existed only from 1974 until their abolition in 1986 but, in retrospect, perhaps offered the prospect of a strategic structure for sub-regional governance upon which strategic action could be based. The UK government is currently pursuing a curiously similar path by the creation of Combined Authorities, normally â although not necessarily â associated with a directly elected mayor. In stark contrast, it might be remembered that in the heyday of Thatcherism in 1980s Britain, the minister Nicholas Ridley (Baron Ridley) became famous (or infamous) for envisaging a time when councils would meet only annually in order to agree contracts with private firms. At the height of compulsory competitive tendering, this did not seem completely outlandish, although it never happened even in the most ideologically sympathetic councils. It now looks completely inappropriate for tackling problems of industrial decline, economic inequality and lack of growth. These issues cannot be solved through a rhetorical flourish and require, instead, committed collaborative work, led by a confident and accountable public sector.
Problems of practice
The New Public Management (NPM) has come to mean a variety of things, but its essence is clear enough. It denotes a public service climate in which government has ceased to control and provide everything, moving much more to a position of coordination and oversight of what is provided by other agencies, a more humane vision for local government â some might say â than that offered by Nicholas Ridley. NPM gives a greater (though not unrestricted) role to markets than it does to the public sector, and places emphasis upon the âcustomerâ: a customer orientation rather than a producer orientation. It became, to varying degrees, the norm of service provision in Western societies as a whole. We have now perhaps moved to a position where NPM has itself evolved into something else, or a variety of other things, where the public sector may after all be called upon to directly provide what the private sector cannot, where the third sector may not be able to fill the gaps in service provision, and where â as in UK local authorities â there may be increasing instances of âcontracting inâ after the shortcomings of contracting out have become evident. A recent example of this from a local authority in the north of England notes that âfrom 1 April 2019, construction, housing repairs and maintenance services ⊠will return to the direct management of the councilâ. Public management has become more mixed, more variegated, and not easily reduced to the simple tenets of NPM. In this âpost-NPMâ environment, MoldenĂŠs and Torsteinsen (2017) draw attention to a ârepoliticisationâ of local enterprises in Norway. By this, they mean not the straightforward reversal of contracting out or the return of privatised companies to public ownership. They refer instead to the efforts of politicians to reassert control of local enterprises, counter to the âarms-lengthâ role for local politicians assumed by NPM. This is a process of tightening the âsteeringâ in a context where rowing has long given way to such steering, following Osborne and Gaeblerâs now classic formulation (1992) of the principles of NPM. MoldenĂŠs and Torsteinsen (2017) found a noticeable repoliticisation in the running of their case study municipality since its change to right-wing political control, a development perhaps running counter to assumptions, but justified in this case by local politicians seeking to âclean upâ the errors of the previous administration. One example cannot provide conclusive evidence of anything, but it does at least alert us to the fact that politicians âstepping backâ â one of the central principles of NPM â is much more easily said than done in practice.
Caloffi and Mariani (2018) suggest that, in Italy, different âpolicy mixesâ can have a direct bearing upon innovation and enterprise. The influencing factors for such policy mixes are political and economic, and at regional level, may fit with different theoretical understandings of innovation. Caloffi and Mariani investigated all Italian regional policies for enterpri...
