Neighbourhoods and Exclusion
Authors: Robinson Peter 
Published: March 2003

The Labour government is formally committed to tackling poverty, unemployment and social exclusion and sees a major role for area‐based policies in dealing with some of these problems. The government’s flagship New Deals are primarily aimed at groups of individuals with high rates of joblessness. However, the New Deal for Communities is aimed at areas suffering from high concentrations of poverty and unemployment. In addition different government departments have launched their own zone initiatives in often‐overlapping local areas.

Much political discussion has focussed on the problem of coordinating all of this activity. However, behind these initiatives lies a decades‐long debate over how effective area‐based polices can actually be and it is this debate which is reflected in this issue of New Economy.

We also look at the argument that the big hole in the Government’s armoury is the lack of any policies to actually create jobs in areas of the country with high unemployment.

When at the Treasury, Daniel Hulls helped design the New Deal for Communities, which makes him well placed to explain the analytical basis for the government’s area‐based policies as well as to explore where those policies might go next. Their underlying rationale is that concentrationsof deprivation give rise to problems greater than the sum of its parts. So individuals with characteristics likely to put them at high risk of social exclusion are further disadvantaged if they live in neighbourhoods where there is a high concentration of people with similar characteristics.

Mark Kleinman takes issue precisely with this justification, arguing that the empirical evidence suggests that family and individual characteristics are more important than neighbourhood effects and that families and individuals should therefore be the primary target of policy intervention. There may still be a case for locally‐based service delivery and for area based programmes to supplement mainstream resources for the most hard‐pressed areas. Soit is not a case of targeting either individuals or areas – rather it is the balance between these two approaches which is under discussion.

In practice the area regeneration budget, at ??1.35 billion in 1999‐00, is only a fraction of the resources spent on families and individuals through social transfers and other mainstream public spending. Moreover, spending on regeneration at the end of this Parliament will be 11 per cent less in real terms than the Conservatives were spending in 1993‐94.

The Government, or more accurately the Treasury, points to the vacancy statistics to ‘prove’ that there is no shortage of employment opportunity anywhere in the UK. Few people living in the real world would agree with this view. David Webster presents the directly opposite argument that the New Deals cannot work unless more jobs are directly created in narrowly‐defined areas, especially in the cities, which have witnessed a significant loss of blue collar jobs.

While agreeing that the Treasury line is unsustainable, Ian Gordon agues that narrowly‐targeted job creation programmes will not work. Fundamentally, the case for such policies is that labour market imperfections prevent aggregate demand and employment in the economy as a whole growing fast enough without generating serious inflationary pressures. The problems of demand‐deficiency within ‘northern’ urban areas are essentially issues of regional policy, not urban regeneration, while the reduction of concentrations of high unemployment in London and most other ‘southern’ urban areas relies on sustaining employment growth at the national level.

Peter Tyler asks whether the policy recommendations of the Urban Task Force chaired by Lord Rogers ?t with the perceived needs of urban regeneration. The general answer is yes, though we need to be wary of who really benefits from tax incentives. However, if all that Rogers aspires to is to be achieved it will require far more resources than have currently been planned for.

Stephen Hall and John Mawson trace the evolution of regeneration policies and ask critical questions about how joined up the Government’s policies really are. It is only at the local level that programmes can really be made cohesive and they point to the importance of the New Commitment to Regeneration directly involving local authorities and other local partners.

Housing policy plays an important role in generating concentrations of deprivation. Sue Regan argues that it is increasingly difficult to generalise about social housing, with abandoned estates in the ‘North’ set alongside some well‐run, popular estates with vibrant tenant participation. There is a growing consensus about the benefits of mixed communities, which sits uneasily with the current composition of social housing.

The IPPR indicators section points out that the funds which have come from HM Treasury to promote regional policy are very unfairly skewed, with Scotland and Wales doing much better than equivalent English regions. The North East really does have something to complain about. With some irony the funds that have emanated from Brussels are much more evenly distributed according to need. There is precious little correlation between how a local authorityscores on the Index of Local Deprivation and GDP per head. According to the data used by the EU, 14 out of the 20 most deprived local authorities in England have GDP per head at or above the EU average. This might suggest that GDP per head is a poor measure to use for targeting resources at anything below regional level.

Andrea Westall and Marc Cowling question whether the proposed model for the Small Business Service will be appropriate and argue that the ‘one‐stop shop’ approach to offering business advice fails to recognise the differences between small ?rms, especially across sectors.

The article by Brendan Walsh is entitled ‘The Irish Economic Miracle’. Whether intended or not the irony of the title is that miracles defy rational explanation. The problem is timing: all the factors put forward to explain the recent excellent performance of the Irish economy have been around for many years and sometimes even decades. Why were these factors for so long associated with lacklustre economic performance, with the Irish economy only taking off in the early 1990s?

Graham Bird and Ramkishen Rajan revisit proposals for a Tobin tax in the light of the international financial crises of the late 1990s. They suggest that such a tax on currency transactions would work best in preventing crises from occurring by countering excessive inflows of capital in the first place. They also suggest that even if the tax had limited effects in this respect it could still raise a lot of revenue which could perhaps be used to finance a new international lender of last resort or to augment the resources of the IMF.

Eamon O’Shea questions the emphasis on education as the route to material well‐being and argues for a less narrow conception of human welfare. Education can play an important role in developing social as well as human capital and in so‐doing help underpin the micro‐institutional foundations upon which macroeconomic success is based.

Peter Robinson

Editor