Local authorities and the downturn: a review of issues, experience and options

This report considers the potential/appropriate role for local authorities (LAs) in relation to the downturn phase of the current recession. It focuses on the most valuable functions which they can fulfil in this context, and takes a cautious view about the potential for extending any boost to local authority activity beyond this phase. It offers a rapid survey of roles, opportunities and constraints, drawing both on general principles (grounded in economic analysis) and an appreciation of practical experience. It proceeds from a brief review/comparison of the experience of the last two recessions, via a typology of potentially relevant LA roles in the present one, to a set of general issues that need to be addressed in considering what they should/could appropriately do in this situation. It then focuses on two more specific issues. The first is the significance of financial and other constraints for what LAs are likely/able to do. The second addresses LAs’ role in the field of housing market/financial issues, which is identified as the one where their contribution can be most crucial. Key conclusions are that: local government can do very little without active central government support and cannot substitute for it in raising general demand; local expenditure will need rebalancing to meet shifting needs within constrained levels of overall activity; LAs’ most positive/appropriate role is to mitigate effects (on assets and vulnerable people) and relieve specific market/government failures; the emphasis should be on short term gains, rather than pursuing unrealistic development initiatives, though nothing should be done in the name of that is not long term viable/desirable; incentivising the private sector is crucial, since they will have to take the strain in the end; LAs should avoid area discrimination, by ‘shielding’ people and assets, rather than protecting places.