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Why aren’t we more vibrant – economically, I mean?

Why aren’t we more vibrant – economically, I mean?

🕔23.Jan 2017

Chris Game delves into the Vibrant Economy Index, highlighted on the Files last week, to assess its strengths as an instrument and its messages for Birmingham and the West Midlands. 

For years my main awareness of Grant Thornton was through the references that, as convenor of an undergraduate public policy degree, I occasionally wrote for usually one of our better students to get on to the accountancy firm’s graduate trainee programme. Nowadays, it seems, I stumble across GT on virtually a weekly basis.  

For a start, they’re on my proverbial doorstep, having since Audit Commission times been Birmingham City Council’s (BCC) external auditors. They audit loads of other English councils too, but just at present Birmingham must be among their trickier clients.

For last November their BCC auditors concluded it was their duty to do something extremely rare and threatening. Given their serious doubts about the Council’s ability to fill in its nearly £38 million budget black hole and balance its books, they made a written recommendation in their Annual Audit letter under the dreaded Section 24 of the Local Audit and Accountability Act 2014, and “copied to the Secretary of State”.

That SoS bit signals a VERY big naughty step; as former Council Leader Sir Albert Bore described it, “the most concerning audit letter I have seen in all my years on the council”. In rugby terms, we’re definitely in the sin bin.

So Grant Thornton are clearly important to us locally in their traditional role, but, like other accountants-turned-multinational-professional-services-firms, they’re now also players in their own right.

The increasingly acrimonious battle over Oxfordshire’s reorganisation and/or devolution bid, for example, has become at least as much one between rival consultants – GT advocating a single county unitary authority, and PricewaterhouseCoopers favouring three unitaries – as between the respective councils.

Perhaps conscious that this kind of publicity isn’t necessarily all good, GT have also used the expertise gained from their auditing and consultancy work to provide what they slightly pretentiously call ‘thought leadership’ for the benefit of the local government sector as a whole. This includes an annual and useful ‘Financial Resilience Review’ of English local authorities, and Indices, which they love.

Two years ago, for example, we had the High Growth Index of Places (HGIP), which showed the role of cities, and London particularly, in driving economic growth. Outside London, some place called Manchester was ranked first, as having grown fastest over the previous eight years, with Birmingham, admittedly some distance behind, second.

You might think ‘high economic growth driver’ and ‘dynamic’ are near-synonymous, but not in the index game. For one of the HGIP’s constituent indices, the Dynamism Index, turned out to be about quality of growth – the Gross Value Added per job – and less a feature of core cities (Manchester excepted, I’m afraid) than of their hinterlands and of what are sometimes termed second-tier cities: Cambridge, Reading, Bristol, Oxford, Brighton, and the like.

Which brings us to GT’s latest venture, the Vibrant Economy Index (VEI), as noted in the Files’ editor’s recent review of news references to ‘Booming Brum’.  It was evident from Kevin’s summary that this new Index wasn’t unalloyed good Files news, with Warwick, at 24th out of 326 English local authority areas, ranked the “most vibrant place in the West Midlands”, and Birmingham – well, I assumed rather less Vibrant, let alone Booming, otherwise he’d undoubtedly have mentioned it.

I was right. As my tabulated summary of the VEI’s rankings indicates, Birmingham, at 223, is judged no fewer than 199 places less Vibrant than Warwick – some way adrift of Solihull and Coventry, but ahead of the other four West Midlands metropolitan boroughs.

 

 

 

 

 

Now I’ve nothing particularly against Warwick, and I know the National Grid has its HQ in its rather dinky Gallows Hill Technology Park. But leagues more vibrant than Birmingham? Even if we’re talking exclusively about the two places’ respective economies – surely not.

Talking of leagues, my first reaction was to adapt the Millwall football supporters’ chant. Not so much “No one likes us, and we don’t care!” as “We’re not vibrant, and we don’t care”.

But of course we do care about these league table exercises.  Just suppose the VEI had put Birmingham as high as, for instance, its 7th place in the other index whose results I’ve reproduced – the Government’s own DCLG Index of Local Authority Areas’ Multiple Deprivation. You can bet we’d have had a Council and Clancy press release about that.

So how should we take the VEI’s measures and messages?  Personally, I’d suggest with an unhealthily substantial pinch of salt, while at the same time respecting it as the, yes, self-serving but also serious statistical exercise that it is.

First, the salt. Like its predecessor, the HGIP, the VEI is a composite index, bringing together in this case six supposedly distinct indices comprising more than 50 separate measures.

Which sounds impressive, but also hints of desperation. For, as the researchers admit, “There are things we’d like to measure, but can’t” – because the data don’t exist, either at all or for all English councils. So they use what has been measured, or create so-called ‘proxies’ – substitute measures of phenomena they hope are broadly similar.

It’s a blemished methodology, which produces some very blemished results. One is that you end up with indices that are nothing like as distinctive as you hoped and as their chosen names suggest, and in some cases are barely distinctive at all.

My summary table shows for each index only the top two and bottom two rankings out of the 324 total. Yet in three of the indices those top two are identical, and there are several overlaps too among the bottom rankings.

Which surely suggests that, despite their different constituent measures, at least the ‘Dynamism/Opportunity’ and ‘Community/Belonging’ indices are in practice measuring something pretty similar – and in so doing, even discounting the evident overlaps with other indices, are skewing the overall VEI.

If that’s the general manifestation of the problem, a specific illustration is what I call the Hart Failure. That is, the apparent failure to recognise the ludicrousness of having the Hart district of Hampshire (95% white population; apparently all-white, Labour-free council; highest average house price-to-earnings ratio in England), and its principal town of Fleet (the “healthiest, happiest and wealthiest place to live in Britain”), No.1 in an Index of Inclusion and Equality.

Top of a Health, Happiness and Wealth Index, by all means; but a model of most people’s idea of Inclusion and Equality, I think not. And I’d think not even if Birmingham, at least sometimes described as Britain’s most inclusive city, weren’t in the bottom three of the same index.

Back in the real world, there is in fact another index that Hart tops – or would do, if we simply inverted the DCLG’s Index of Deprivation, referred to above. It turns out that the top four districts in the GT I&E Index are among the top five in the Index of Least Deprivation.

 

 

 

 

 

The serious point about all this is that there seems to be an unmistakeable bias – in what, remember, is supposed to be a measure of economic dynamism or vibrancy – in favour of smaller, second-tier or hub cities, market towns and the like, and against the big cities and conurbations that are increasingly recognised as potentially the key drivers or engines of economic growth.

However, even if, in my view, the Grant Thornton VIE is a flawed instrument, that’s absolutely not a reason for dismissing it. I’ve sought to emphasise its seriousness as a statistical exercise, and at least in general terms, therefore, its findings should be treated and where possible used seriously – precisely for the reasons Kevin reported being put forward by some of the mayoral candidates in the recent Villa Park debate.

Set aside the detailed rankings, the questionable index names, and any inherent bias. Just follow the VEI’s message, which, particularly to the WMCA and its future mayor, is that the city region and the Black Country in particular have yet to see the boosts and benefits that former Chancellor George Osborne’s project of geographically rebalancing the economy through devolution was supposed to bring – and that they’re currently our best hope.

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