With talk of Brexit signalling a divided nation of haves and have nots, does the inclusive growth agenda offer a route to tackling inequality?  Neil Lee outlines its potential strengths and limits.

There are widespread concerns that, for many workers, economic growth has not been increasing living standards. These concerns are most obvious at the urban level, where inequalities are most acute, while cities in the UK have been given new powers and responsibilities in an effort to create local economic growth. In response, there have been calls for cities to follow an : one that  focuses not just on the pace of growth, but also its pattern. The idea is that by shaping the composition of growth, cities can ensure the benefits reach the most disadvantaged residents.

The Inclusive Growth agenda

The notion of Inclusive Growth has been on the agenda in the developing world for some time. World Bank economists have argued that while growth tends to reduce poverty, its impact on the poorest is much greater where inequality is low. Local factors also seem to matter, with the composition of growth in local areas an important influence in the extent to which growth reduces poverty.

The Inclusive Growth agenda has now become important in the developed world. Evidence on economic growth in UK cities in the 2000s suggests it did not reduce poverty, as does that for Local Enterprise Partnership (LEP) areas in the 2010s. Policymakers in the UK have also taken up this rhetoric. For example, the Scottish Government’s “Agenda for Cities” focused on the potential for cities to achieve Inclusive Growth.

Why are policymakers interested in the Inclusive Growth agenda? It has some significant strengths: it is a politically acceptable way of talking about inequality, but one which offers a positive message for how policymakers can act. Considerable effort has been put into efforts to stimulate economic development, but a consideration of who gains for these efforts is overdue. Moreover, in the context of reduced public spending it provides a relatively cost-effective way to addressing poverty. Providing a politically acceptable way of focusing on poverty and inequality is useful.

Mind the gaps

But there are some significant challenges with the agenda at present.

First of all, there are still significant evidence gaps. In a 2014 review of the links between Cities, Growth and Poverty we noted that the evidence base on what needed to happen was still underdeveloped. The research has moved on quickly since then – with the Inclusive Growth Analysis Unit a great example of this – but there are still a lot of unanswered questions about how growth can be made inclusive (for example, what  sectors might help reduce poverty?). And the policy frameworks are still under-developed – we know too little about what works in urban policy in this area.

Secondly, despite the boosterist rhetoric, it is far from clear if cities actually have the ability to achieve growth and shape it. The past twenty years have seen a pattern of uneven urban growth, with some cities – mainly in the South East – achieving relatively rapid growth but with other parts of the country growing more slowly. In many places, the problem hasn’t been achieving equitable growth, but achieving growth in the first place. We need a better understanding of how job creation in these areas can happen.

Choices and opportunities

Finally,  how much of the Inclusive Growth agenda is about avoiding hard choices being made? Inclusive Growth has become popular at the same time as austerity has led to declines in the share of national income devoted to public spending, with significant cuts to benefits coming alongside this rhetoric. It needs to be clear that the Inclusive Growth agenda has a meaningful chance of success, rather than simply being an attempt to avoid painful efforts at social change.

The Inclusive Growth agenda is an exciting opportunity – local economic development has tended to overlook distribution, new resources have been focused on inequality and living standards, and some cities are well placed to use growth to address poverty.

But there are still some challenges to be overcome before it moves from being an attractive idea, to a fully worked out policy agenda.