This year, George Osborne delivered his Budget against a backdrop of better than expected growth, higher than expected employment, and a deficit reduction plan that exceeded previous OBR forecasts.
His speech, unsurprisingly, made much of the success of the “long-term economic plan delivered by a coalition Government and a Conservative Chancellor”. Yet the fact that our cities still lack the powers they need to fulfil their economic potential, and drive growth locally, will constrain future growth for large parts of the UK economy.
Without thriving city economies, there can be no sustained national recovery. Between 2010 and 2012, urban areas accounted for 97% of all net new private sector jobs created in the UK. London has been home to overwhelmingly the largest proportion of these new jobs, but cities like Edinburgh, Manchester and Liverpool all saw significant jobs growth too.
However,the biggest cities outside of London continue to perform below the national average across a range of key economic indicators, including skills, employment and new business starts. Many others, such as Bradford and Sheffield, have continued to lose jobs, despite the national economic recovery.
Of course there were individual announcements of extra funding or project support for urban areas – for example the £270m guarantee for the Mersey Gateway Bridge, or the extension for the Regional Air Connectivity Fund to include start-up aid for new routes from regional airports, and these are broadly welcome.
But only the announcement of the Cambridge City Deal, where the government is committing £100m to Greater Cambridge until 2019-20 to support their housing, transport and infrastructure proposals through a Gain Share mechanism, represented the kind of empowerment urban areas need to shape and drive growth in their areas.
Despite progress made by initiatives such as City-, and now Growth-Deals, the UK remains one of the most centralised countries in Europe. Indeed, the fact a national Budget included a challenge fund for pothole repairs for local authorities to bid into illustrates that, if an issue is politically important, then national government wishes to be given credit for progress. There is a persistent imbalance in the relationship between central and local government.
The biggest winner of new devolved powers in the Budget was not Manchester, Leeds or Newcastle, but the Welsh Assembly, who were given permission to borrow to fund infrastructure investments, ahead of a Wales Bill to devolve greater tax raising and borrowing powers.
Recognising the issues of national politics and cultural identity that underpin these reforms, it nevertheless suggests the UK is missing opportunities when UK city regions such as Greater Manchester and Greater Leeds, each of which boast larger economies than Wales, have so few powers to drive their economies.
A more radical transfer of powers and responsibilities from central government to cities would give urban areas greater control over their economies, while the prospect of retaining a greater share of the proceeds of growth would provide real incentives to attract and support business investment in their area. But it would also provide flexibility to adapt policy to local needs, driving much needed innovation and efficiencies in public services.
All around the world cities are driving growth. They are home to the most productive parts of the global economy – where new ideas are generated, businesses are started and expanded, wages are higher and people’s ambitions can be fulfilled.
In the Chancellor’s own words, this was intended to be a Budget for the “makers, doers and savers”. But while there were significant announcements on tax, pensions and housing, there was no discussion about the fact that things are made, economic activity is undertaken and money is saved, in places – primarily in urban areas and their hinterlands.
If we want UK cities to play a larger role in the national economy in the years ahead, then they have to be given the tools to grow their economies and respond to the distinctive local circumstances that they face. That’s how the makers, doers and savers will sustain economic growth in the years ahead.
* Alexandra Jones has been Chief Executive of the Centre for Cities since summer 2010.
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7 Comments
As the article is a good rationale for the “why” to move speedily to decentralisation, is there anyone who will argue for the “why not” side? I doubt it on LDV. However, let’s not forget that it is not just London and the Core Cities which contribute to GVA growth, county areas also have a significant role to play and should also benefit from similar freedoms and flexibilities. Then we can all benefit from the upturn in the economy.
Roger Bootle in ‘The Trouble with Markets – Saving Capital from Itself’, distinguished between creative activity and distributive activity. He writes, ‘Some of what we consume is created out of nothing and adds to the total available for all to enjoy; but some of it merely takes what would otherwise be available to others and therefore comes at their expense.’
It is quite an eye-opener to think in those terms. Distributive activities are not all bad but what is of concern is what happens when the proportions get out of balance.
On the above definition London is not really very ‘creative’. It is creative at innovating new ‘distributive ‘ activities, but it requires truly creative activities to exploit and is therefore much more dependent on ‘creatives’ than it likes to think.
This idea was strongly reinforced in a wonderful radio programme broadcast yesterday night; “The Country Formerly Known as London” – http://www.bbc.co.uk/programmes/b03zb7dr
Here is the blurb on the programme: “The year is 2030. What began as a whimsical notion, floated in the long aftermath of the banking crisis, has gathered steam as London powered ahead and the rest of Britain remained in perma-austerity. The campaign to break London and the southeast away from the rest of Britain has triumphed – like Singapore, London is now an independent city-state.
“This new country has a population the size of Switzerland, and a banking industry just as dominant. Its population is among the most multicultural in the world. But the new country also has world-class problems – the highest inequality of any rich economy with simmering social tensions to match, and house prices so high that London’s cleaners and baristas and firemen commute in from Hastings or further afield.
“This programme is a despatch from the future, sketching out the contours of independent London in 2030 – an affluent country with more liberal attitudes, and far more diverse, transient population than Britain, but with a lopsided economy all too dependent on financial services and an increasingly hollowed-out society. The programme also serves as a parable about what could happen if Britain continues along an economic divide between London and the rest. What might the rest of the UK look like in 2030, if London continues to suck in the spending? ‘When you pass Stevenage, it’s like someone turned the lights out’, we’re told.”
Presenter: Aditya Chakrabortty; Producer: Eve Streeter
HIGHLY RECOMMENDED and six days left to listen on i-player.
A nice corrective to some of the “ra ra London” contributions to this forum recently. As Ian Stewart comments we need to give our major cities the opportunity to thrive and that will require government redress for some of the imbalances that have been allowed to accrue over the last 50 years.
Like many London residents I am aware that I have a tendency to see London as a separate nation – I often find myself talking of crossing the M25 as “going to England”.
I think Bill is generous in describing London’s financial services industry as “distributive”. I would characterise much of it as “concentrating”: taking the wealth created by those who work in productive industry and skimming it to give a relatively small number of people a large amount of money for doing nothing very useful. Of course the Marxist(?) reference to distribution is neat as ultimately we cannot create wealth ex nihilo and London cannot exist without an England to exploit. But i think the comparison with Switzerland is dubious. At least Switzerland can fall back on the manufacture of cuckoo clocks and chocolate. What else does London do?
Like many London residents I am aware that I have a tendency to see London as a separate nation – I often find myself talking of crossing the M25 as “going to England”.
A,good friend of mine has spent virtually her entire life in London, has seldom taken holidays abroad or,elsewhere in the UK. She has always lived and worked in central London. We used to joke that she got edgy if she went outside the boundary,of The Circle Line. Her dad came from Jamaica, her mum from South Africa, she is in everymsense a Typical Londoner.
Hi Paul. I am not being generous, when you look at the definition of ‘distributive ‘and Roger Bootle’s thinking about ‘those who add to the total available for all to enjoy’ as contrasted with ‘those who merely take what would otherwise be available to others and therefore comes at their expense’. He does not mean some kind of cascade downwards or outwards of wealth! In fact in a forum elsewhere I asked exactly your question; what does London create? I got a lot of abuse and references to the film industry!
I am happy to see London earning in the form of invisible exports. I am less happy to see its services a) suck out talent and leaders from the so called provincial cities, and b) make excessive profits from the products and savings of truly creative industries (as defined by Bootle) in the so called provinces.
We do need our cities to work more closely together and we need rapid and comfortable transport between them. Actually, Conservative policy in the 1990s was to require them to compete against each other for funds, which was and is wasteful and divisive.
The truly remarkable stories of city regeneration in the last 20 years have been Manchester and Liverpool, both of which withstood the difficulties of the Great Recession far better than either would have without (for Liverpool) the Euro social funds and (for Manchester) the funds that followed the bombing.
HS2 should start in the north and work south. And “East-West is Best” approach would be a better way of using public finances at a time when there is a appetite and a need for a good supply of safe assets/gilts buy an economy still worried that these will remain in short supply.
Hi Alexandra,
Thanks for the article, but I disagree with its main argument. There needs to be a balance between harmonisation and localism. Too much localism can actually raise barriers to entry for investment. To give an example: at the moment I have to study EU and UK finance law, however mostly I am concentrating on England and Wales. If there is going to be different legal frameworks throughout the whole country then people will increasingly just prioritise the most attractive one – London. It can lead to a parochial environment where the city spends more time speaking to itself, rather than integrating with the rest of the world.
I am also suspicious behind the motives for this plan for city devolution. Why should cities be prioritised over other areas? Is it because they usually vote Labour? It seems to be that the Labour left has tried “tax and spend”, it has tried “borrow and spend” and now it is going to try “devolve and spend”, which for my reasons above has some unintended consequences. Maybe I am wrong, but I think suspicions are best aired and I am only repeating things I’ve read Labour people say.
Best wishes
The interesting question is how did London get a 6% growth in Public Sector employment? Likewise Hull its 6.5%? Sheffield’s increase I can understand. 🙂