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The Relative Effects of Local Authority Financial Assistance Policies

Centre for Urban and Regional Development Studies, the University of Newcastle upon Tyne

The provision of financial assistance to industry has formed a growing and important part of the economic development policies of many local authorities. However, assessments of these policies have suffered from a number of drawbacks. In particular, they have tended to focus on the employment effect of the local authority's assistance policy as a whole, and there have been few attempts to isolate the factors bearing on the success of these policies or to compare their effectiveness with schemes pursued by other agencies.

This paper examines the effect of local authority financial assistance on the operation and employment of establishments over the period 1980-84, using data collected as part of a survey of 201 establishments located in the North-East of England. These policies are compared with the two major instruments of regional policy: regional development grant (RDG) and regional selective assistance (RSA), and with national selective assitance (NSA). Different purposes of project are also examined using log-linear models.

The results show that local authority assisted projects perform well when compared with RDG, but that RSA/NSA assisted projects perform even better. Much of the local authority assistance has been directed towards new company start-ups, but the research shows that nearly two-thirds of these projects would have gone ahead without being assisted. In general, projects concerned with machinery and equipment were most effective in employment terms and they also had a range of other beneficial impacts upon assisted establishments.

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