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Booming London makes case for devolution, but whose fingers are pulling the strings?

Booming London makes case for devolution, but whose fingers are pulling the strings?

🕔27.Jan 2014

The debate about the size of London and its stranglehold over the UK economy has been around for a very long time. Oliver Twist, Dick Whittington, businessmen on the make over the centuries, have all been attracted by streets paved with gold.

London’s seemingly unstoppable growth has been a political issue since the middle of the 19th century, and more recently various governments have pondered what should be done, if anything, about the capital conundrum.

A new Centre for Cities report – Cities Outlook 2014 – casts a fresh look on this issue in the light of a damagingly unbalanced UK economic recovery since 2010. It turns out the green shoots are barely showing in the Midlands and the north, but in London there’s already a veritable jungle of growth.

This report hammers home the extraordinary divide between the economy of London and the rest of England and also makes a case for meaningful devolution of powers and budgets to the regions.

But Centre for Cities rightly dismisses any suggestion that London’s growth should be artificially constrained, pointing out that doing so would reduce national growth and risk global investment heading away from Britain, inflicting harm on cities like Birmingham.

The answer is to find ways of boosting city and regional economies while maintaining the level of growth that any country requires in its capital city. How, though, is this to be achieved in a balanced and fair way? And if powers are devolved down to city regions, just whose fingers are going to be pulling the strings?

The figures make gloomy reading for anywhere north of Watford.

  • Since 2010, 79 per cent of private sector jobs growth has occurred in London.
  • Britain’s next nine largest cities accounted for just 10 per cent of private sector jobs created.
  • Private sector jobs grew in Birmingham by 2.2 per cent between 2010 and 2012, compared with 5.7 per cent in London.
  • Business start-ups in Birmingham were 34 per 10,000 of population, but in London the figure was 76. Liverpool, Newcastle, Manchester and Nottingham performed even more poorly.
  • Birmingham’s employment rate of 63.4 per cent is almost the worst in the country.

Centre for Cities puts it like this: “The North-South divide is clearly visible. Bar Warrington and Aberdeen, all top-ranked cities are located in the South. Conversely, with the exception of Glasgow and Dundee all bottom-placed cities are in the north and the Midlands.

“In Birmingham, the city with the largest employment gap, an extra 112,300 Birmingham residents would need to find employment to bring the city up to the national average.”

It’s worth pausing here to reflect that the Greater Birmingham and Solihull LEP’s growth plan envisages a net increase of just 100,000 jobs by 2020 – and that is across the entire LEP area, not just in Birmingham.

The report adds: “Cities such as Birmingham and Manchester should be making a much larger contribution to the national economy than is currently the case and understanding how to change this should be an economic and political priority.”

The report talks about “the English question”. It notes the possibility of independence for Scotland as well as the certainty of more devolved powers for Wales, and the wide-ranging autonomy that already exists in London under its elected mayor.

The subtext is this: for how much longer are the great cities of England outside of London going to put up with being told how to run their lives by central government?

After all, the UK is already one of the most centralised developed countries in the world with local government raising just 17 per cent of its income from local taxation compared to the OECD average of 55 per cent.

As this report notes somewhat laconically: “This leaves cities with few levers to pull to tailor economic policy to their specific requirements.”

Centre for Cities puts forward a key recommendation: “In the context of the on-going English question, policy makers should be giving those cities that can demonstrate appropriate scale and capacity greater flexibilities and freedoms to tailor policy to their requirements.”

The report supports the desirability of a power shift from Whitehall to the regions and cities, although there is no direct mention of Local Enterprise Partnerships currently bidding for a share of the £2 billion Local Growth Fund and negotiating with the government for additional powers and budgets.

Possibly, given the LEPs’ fairly modest targets, the report’s authors don’t think these are the right organisations to be at the heart of devolution. But if it is not to be the LEPs, who is it to be?

Centre for Cities notes that London has been bestowed with preferential treatment when it comes to self-governance: “London is the one city in England that has already seen some devolution of power in recent years. While by international standards it has relatively few policy levers to pull, having a directly elected mayor sitting above 33 local authorities and power over its transport budget and its police force is significantly more than other English cities have.

“At a time when Wales and Scotland are already getting greater devolution and London is asking for more, are we also going to see other English cities get the same powers as London?

“London has been preferenced over other cities in recent years by national politicians in that it has been afforded a range of policy freedoms and flexibilities that have not been extended to the UK’s other cities.

“If policy makers are serious about increasing the contribution that other cities make to the national economy they need to extend the freedoms and flexibilities held by London to other large urban areas.”

There is no doubt, then, about what needs to be done. The question remains: how is it to be done, and who is going to be charged with doing it?

The LEPs are, at the moment, the only organisations in with a reasonable shout of driving forward regeneration through devolved powers and budgets. Metro mayors, mentioned before by Centre for Cities, would be on the agenda if Lord Heseltine had his way, but it seems doubtful that the government is prepared to go down this particular road at the moment.

Ministers should read the Centre for Cities report. And act upon it.

 

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