Link below to a report by the Audit Commission in the late 90s, just as DTIZ was first being proposed, on the role of local authorities in economic development. I remember it being reported at the time and a lot of it echoes what David says above - local authorities' first priority is to ensure they have the best infrastructure and services they can provide to make people and businesses want to move to their area.
http://www.audit-commission.gov.uk/subwebs/publications/studies/studyPDF/1348.pdf
One of the specific recommendations - "Maximise the impact of core services such as planning, education, street cleansing and highways on the local economy - for example through town centre management schemes or local business partnerships."
