Policy conflict in intergovernmental relations: the changing role of local authorities in the goverance of local economic development in post-devolution Scotland.

• Author: Bennett, Mike
• Position: Report

Abstract

This paper explores the impact of devolution on Local Economic Development with specific reference to the role of local authorities, and locates this study within broader debates about policy change. We explain the institutional framework for Local Economic Development in Scotland inherited by devolution and we consider the process of devolution to date and recent policy change in this area, including Community Planning and reform of the Enterprise Network. Throughout the paper looks at issues of fragmentation, divergence and power in inter-governmental relations between key actors and institutions. The findings of original research into the attitudes and perceptions of local government actors are located within this context and compared with existing data. The analysis outlines the main area of conflict between central and local government in this area and suggests that economic development activity is becoming increasingly centralised post-devolution. In conclusion we offer suggestions as to what this tells us about broader inter-governmental relations ands the impact of constitutional change.

Introduction

In 2001, the authors (1) received funding from the Joseph Rowntree Foundation to research the impact of the new Scottish Parliament on local government. One strand of the project focused on the impact of the Parliament on the roles of local authorities in economic development.

Much of the recent literature on the nature of policy making and policy change has focused on the relationships between different institutions and actors in various policy communities. The key issues that arise from this literature concern the fragmentation and conflict within and between different levels of government. This "differentiated polity" (Rhodes 1997). The differentiated polity concept is used to describe the interdependencies between different institutions and actors including policy making and implementation agencies, specialised bureaucracies and different levels of government. Rhodes, for example, drawing on Wright, emphasises bargaining and dynamic exchanges between actors within structured political contexts. This emphasis on bargaining has recently been seen in the debate about the "dialectic" in policy networks in which agents interact with and change, yet are constrained by, their structural context (for example Marsh and Smith 2000; Dowding 2001; Marsh and Smith 2001).

The value of this description is that seems to take account of the agonistic (Mouffe 2000) nature of policy making in which policy values, conflicts over status and resources are all essentially contested. It is this understanding of power, conflict and politics between groups with different interests which informs our explorations of governance and change in the following sections.

In this context the paper explores the impact of devolution on Local Economic Development with specific reference to the role of local authorities, and locates this study within broader debates about policy change. We explain the institutional framework for Local Economic Development in Scotland inherited by devolution and we consider the process of devolution to date. We also consider key policy developments, including Community Planning and reform of the Enterprise Network. Our research into the attitudes and perceptions of local government actors is located within this context and compared with existing data. The analysis outlines the main area of conflict between central and local government and suggests that post-devolution economic development activity is increasingly centralised. In conclusion we offer suggestions as to what this tells us about broader inter-governmental relations and the impact of constitutional change.

Local Economic Development in Scotland

There is a long history of Local Economic Development in Scotland. By the mid-1960s, Scotland was developing a distinctive set of institutions for economic development (Fairley and Lloyd 1995 and 1998). This was one of a number of policy areas where Scotland had already acquired considerable autonomy (Paterson 1994) within the UK, prior to devolution.

The main institutions were the Highlands and Islands Development Board, set up in 1965; the Manpower Services Commission, a Britain-wide body set up in 1973 to oversee vocational education and training (VET) (Brown and Fairley 1989); and the Scottish Development Agency, which was established in the mid-1970s. In 1990, these bodies were abolished and replaced by Highlands and Islands Enterprise (HIE) and Scottish Enterprise (Fairley and Lloyd 1995, Danson 1999). These two bodies presided over 22 Local Enterprise Companies (LEC) which operated at local level.

Scottish Enterprise and HIE were set up during the Thatcher era when the rhetoric of neo-liberalism was the economic orthodoxy, and the political rhetoric was about 'rolling back the state'. There is an irony in this in that SE and HIE are the most powerful quangos ever to exist in the Economic Development field in Scotland. The two bodies provide strategic direction to the LECs in trying to achieve government objectives in Local Economic Development and VET.

The 22 LECs were set up as companies with management boards which were dominated by the private sector. They were intended to be executive bodies able to act quickly in response to local conditions, and to provide a degree of business-led autonomy in Local Economic Development. In 2000/01, changes were introduced to make the boards more representative of their communities, and to make the LECs less autonomous of Scottish Enterprise and HIE (Scottish Executive, 2000, 2001a). At this point the enterprise networks were spending around 450m [pounds sterling] per year.

Local authorities have a long history of involvement in Local Economic Development (Borrowman 2000, Fairley 1996, Fairley 1999, Davidson and Fairley 2000). Since the mid-1960s, local authorities increasingly worked in partnership with the Scottish agencies of central government, and it is likely that Local Economic Development became less of a grass roots process as a result. When local government was controversially restructured (Fairley 1995 and 1996), under legislation of 1994, to create 32 new unitary authorities, these were given a clear, permissive, legal power to act in Local Economic Development. Prior to this they had depended upon a discretionary power which was funded by the product of a 2p rate, (2) not that there is any evidence that any Scottish council was ever seriously constrained by this financial limit (Fairley 1999).

In terms of current activities, a partial survey of local authorities' Local Economic Development activities (EKOS 2000) showed a wide range of activity, including: small business support; support for micro-business and self-employment; provision of sites; provision of information; support for women entrepreneurs; trade fairs; tourism initiatives; cultural initiatives; and education and training. Local authorities declared direct spending on economic development was in excess of 100m [pounds sterling] per year. Furthermore, they tend to be very important to local economies as purchasers of goods and services, and as employers.

The creation of the Scottish Parliament therefore occurred against an historical context in which local economic development powers were shared (or divided?) between different organisations with little co-ordination or clear division of responsibilities.

The Scottish Parliament

The 1998 Scotland Act, which established the Parliament left control over macroeconomic, monetary and fiscal policies with the UK government. The New Labour UK government centralised control over its various 'new deals' to combat unemployment and poverty. The largest of these--a manifesto 'flagship' policy in the 1997 UK elections--was a 'workfare' scheme for 18-24 year olds (Fairley 1998) which was implemented in 23 'delivery areas' in Scotland. (3)

However, the Scottish Parliament had most of the levers of regional and Local Economic Development at its disposal. It exercised control over the enterprise networks as well as much of the resourcing of local government, and it was the implementing authority for EU structural funds (Danson et al 1999). There is also some research evidence that the Scottish electorate expected the Parliament to act to improve the economy, and in particular living standards and jobs (Brown et al 1999, Paterson et al 2001).

Within the Parliament one of the most interesting innovations is the system of policy committees (Lynch 2000). These are intended to operate as a check on the Scottish Executive, (4) and they are empowered to conduct research, hold enquiries and initiate legislation. They are cross-party in membership. The main committee for Local Economic Development is the Enterprise and Lifelong Learning Committee (ELLC). Its deliberations very quickly brought unprecedented levels of political debate and public scrutiny to bear on Local Economic Development and aspects of VET.

In 1999/2000 the ELLC held its first enquiry (5) on the provision of business support services. The ELLC (2000) was critical of the current arrangements which were said to show a large amount of duplication, waste and confusion. The Committee made a number of recommendations (Cameron, Danson and Fairley 2000), one of which was to establish a network of Local Economic Forums (LEF) on the same boundaries as the 22 LECs. The government responded positively to these recommendations and endorsed the establishment of LEFs, issuing guidelines for this process in 2001.

The LEFs were intended to tackle a number of issues, in particular:

* To form broad Local Economic Development partnerships in each local area

* To involve further and higher education institutions as full partners in...