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Cuts to welfare payments could deal another blow to struggling local economies, with the Government’s reform programme, which aims to move people off benefit and into jobs, taking an estimated £19 billion a year out of working age social security between now and 2015.

Research published by the Financial Times shows that these welfare cuts will particularly hit the local economies of northern towns and cities due to the greater dependence of local communities on benefit payments.

According to the research, in some areas, the reliance on social security is so great that the changes could eliminate years of real household disposable income -growth. It is estimated that Blackpool, the hardest hit town in England, will lose on average £914 a year for every working age adult. This could have real impact on economic regeneration and business prospects in the area, with a large chunk of spending power effectively removed.

However not all businesses are struggling in Blackpool. As the Blackpool Gazette reports, payday lenders are on the rise. Increasing reliance on high interest loans can increase the cycle of economic decline as money is sucked out of local communities in the form of high interest payments.

Local Economic Partnerships (LEPs) and local authorities have a critical role to play in supporting local economic growth and managing the impact of welfare cuts. Small and medium-sized enterprises (SMEs) are widely acknowledged as the bedrock of economic growth. Blackpool Council, part of the Lancashire Enterprise Partnership, is investing in its own initiatives, for example funding the first dedicated business development hub for new and growing creative companies on the Fylde Coast. Meanwhile Lancashire LEP is providing funding for super fast broadband and businesses wishing to expand.

But LEPs and local authorities across the country could all do more to support new businesses to start up, stay up and grow. This can range from encouraging entrepreneurial skills development to supporting Community Development Finance Institutions (CDFIs) which can provide affordable finance to both business and households, providing an alternative to high interest lenders. For example, Lancashire Community Finance covers the Blackpool area and is supported by Lancashire County Council.

None of these initiatives are likely to have sufficient impact to soften the immediate impact of benefit losses. But in an age of austerity it is unlikely that any government will reverse the cuts. Sustainable economic development is the key to moving communities out of deprivation. Local partnerships are best placed to drive this.

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