LEVELLING UP

Beyond Holyrood

Unlocking local growth in Scotland

Iain Stewart MP

June 4, 2023

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Beyond Holyrood

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“Over the next few years, we have a great opportunity to widen and deepen the current package of growth deals. The first agreements will conclude in 2026 and the current funding package for levelling-up runs until 2025. It is the right time to plan the next stage. I want to see a healthy debate about how we can best evolve the underlining principles of growth deals and levelling up.”
Rt Hon Mr Alister Jack MP, Secretary of State for Scotland

Now is the time to be ambitious about Scotland’s Growth Deals

Growth Deals have played a crucial role in delivering more money and power to the people of Scotland. They form a crucial and central part of the complex web of funds available to boost local economies. Whereas there is much UK-wide focus on Freeports and the shared prosperity fund, the Growth Deals are an unexamined and underappreciated success story.

With the first generation of Growth Deals due to expire in the coming years, this report reflects on their operation alongside other funding streams and identifies challenges for future deals. It argues for a cross-party independent commission to be set up to examine what should come next, offering some guiding principles to unlock local growth in Scotland.

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What has and has not worked with current investment vehicles?

Growth Deals have succeeded in breaking myopic funding tendencies that straddle normal political cycles. And deals that span more than one local authority have highlighted the willingness of authorities to cooperate and deliver collective benefits.
The competitive bidding process for the Levelling Up Fund has seen local authorities spend large sums on unsuccessful applications. There needs to be greater clarity on future investment opportunities to ensure that the time and resources spent putting these bids together does not go to waste.
Local authorities have had to march on with reduced autonomy and piecemeal funding from central government. This has hampered their ability to strategically coordinate several fragmented funding streams in a manner that prioritises securing and optimising long-term investment.
Recent inflationary pressures have posed serious challenges for the delivery of many growth projects, and there exists a real lack of mechanisms to account for this within existing funding streams.

Recommendations for Growth Deals 2.0

A simpler and bigger Growth Deal Fund. Combining multiple funding sources under the levelling up banner could provide a greater ‘bang for buck.’ Limiting central government to setting the strategic objectives and devolving execution and responsibility to the second wave of growth deals would create a more whole system approach to economic growth in Scotland.
Unlock and augment existing private sector investment. Assistance with R&D, skills, and physical infrastructure would incentivise greater individual investments; and pension and insurance market reforms would unlock greater institutional private investment.
Provide longer and more adjustable investment timelines. Allowing deals to flex year-to-year spending levels within the overall duration could help smaller institutions that struggle with borrowing and forming partnerships.
Permit greater flexibility. Instead of being solely geographically-led, greater project-oriented coordination efforts could raise collective rewards. And regulatory flexibility to design bespoke local polices could ensure that local needs are being met effectively.
Enhance capacity and capabilities. Having central government sector representatives advise local government could help transfer expertise and foster better cooperation.
Deliver good governance. Directly elected provosts, similar to England’s metro mayors, could assume greater responsibility and accountability for deploying these funds.

What has and has not worked with current investment vehicles?

Growth Deals have succeeded in breaking myopic funding tendencies that straddle normal political cycles. And deals that span more than one local authority have highlighted the willingness of authorities to cooperate and deliver collective benefits.
The competitive bidding process for the Levelling Up Fund has seen local authorities spend large sums on unsuccessful applications. There needs to be greater clarity on future investment opportunities to ensure that the time and resources spent putting these bids together does not go to waste.
Local authorities have had to march on with reduced autonomy and piecemeal funding from central government. This has hampered their ability to strategically coordinate several fragmented funding streams in a manner that prioritises securing and optimising long-term investment.
Recent inflationary pressures have posed serious challenges for the delivery of many growth projects, and there exists a real lack of mechanisms to account for this within existing funding streams.

Recommendations for Growth Deals 2.0

A simpler and bigger Growth Deal Fund. Combining multiple funding sources under the levelling up banner could provide a greater ‘bang for buck.’ Limiting central government to setting the strategic objectives and devolving execution and responsibility to the second wave of growth deals would create a more whole system approach to economic growth in Scotland.
Unlock and augment existing private sector investment. Assistance with R&D, skills, and physical infrastructure would incentivise greater individual investments; and pension and insurance market reforms would unlock greater institutional private investment.
Provide longer and more adjustable investment timelines. Allowing deals to flex year-to-year spending levels within the overall duration could help smaller institutions that struggle with borrowing and forming partnerships.
Permit greater flexibility. Instead of being solely geographically-led, greater project-oriented coordination efforts could raise collective rewards. And regulatory flexibility to design bespoke local polices could ensure that local needs are being met effectively.
Enhance capacity and capabilities. Having central government sector representatives advise local government could help transfer expertise and foster better cooperation.
Deliver good governance. Directly elected provosts, similar to England’s metro mayors, could assume greater responsibility and accountability for deploying these funds.

“Growth Deals 2.0 offer a huge opportunity for Scotland. They should be simplified and combined with other funds, with a single, bigger overall fund that will reduce inefficiency. The Westminster and Holyrood governments should better co-operate on how money is allocated, with clearer longer-term objectives, but otherwise maximise local autonomy on how money is spent.”

– Iain Stewart MP, Author of the report.

About The Levelling Up programme:

Reducing economic disparities between places.

Our work on the UK’s regional disparities has been the engine behind the levelling up agenda. This programme focuses on bridging the UK’s longstanding spatial inequalities and bringing economic opportunity to places which have lagged behind for too long.

The authors would like to thank everyone who has contributed to the thinking and analysis within this report. Their advice is invaluable, and any mistakes are, of course, the author’s own.

by Iain Stewart MP

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