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Finance and Cities Finance and Cities

Why improve inclusive growth?

Cities have a crucial role to play in supporting inclusive growth. They are home to 54 per cent of the population, and 60 per cent of jobs. Cities are where people try to find new work, training or support to progress. And cities have a central role to play in creating an environment to enable this. But with few powers to control or raise taxes locally and after nearly a decade of spending cuts from central government, it is becoming increasingly difficult for authorities to fund these activities. While governments have been able to boast of record rates of employment in recent years, wages have stagnated and the levels of in-work poverty now exceed those of out-of-work poverty. This disconnection, with economic growth failing to translate into fewer people living in poverty, has driven inclusive growth up both the political and economic agendas. In this context, it is important that cities find ways to increase revenues, leverage returns on their investment, encourage investment from other stakeholders, and coordinate the spend of organisations within cities to support better outcomes for residents at all levels of the income distribution. This report explores the funding and finance options available to cities, and considers what types of approach are likely to be most appropriate. There are four approaches that cities could potentially take to fund and finance inclusive growth policy: 1. Taxes and fees – raising or retaining income from taxes, charges and fees 2. Partnerships with financial intermediaries – entering into financial partnerships to support inclusive growth and generate revenue streams 3. Asset and property management – ways of leveraging investment from the private sector to support economic regeneration 4. Convening private investors – maximising collective spend within cities and city-regions, and leverage further co-investment A long list of options in each of these areas were reviewed in turn with consideration for how they link to inclusive growth; how feasible or deliverable mechanisms are likely to be in the UK context and in different cities; and the scale of funds or leverage potential associated with different approaches. It also examines the ways in which national government can help widen cities’ access to funding and finance to support better outcomes for their communities.