Growth battlelines

By Heather Jameson | 03 October 2023

The vexing issue of UK productivity has dogged governments of all colours for decades.

Michael Heseltine’s regeneration mission, John Prescott’s regional development strategy, George Osborne’s Northern Powerhouse, Boris Johnson’s levelling up agenda – there is an endless list of national politicians who have strived to push forward the national economy in tandem with local government.

The problems are articulated but the solutions and structures swing back and forth – from regional development agencies to Local Enterprise Partnerships, to mayoral combined authorities.

In the past week alone, the Prime Minister himself drew the battlelines between towns and cities, launching a long-term plan for towns – complete with a towns taskforce reporting directly to Rishi Sunak himself – just days after the RSA and Core Cities launched their latest strategy.

While the tiers and the politics may differ – Mr Sunak spoke to his Conservative heartlands at the annual party conference, while the cities look directly to the left – there were some similarities in approach. Both call for an end to endlessly bidding for small pots of cash and for the creation of a long-term plan, created in partnership with local stakeholders and the public.

Mr Sunak’s plan came with cash attached, too. Fifteen towns, each receiving £20m over the next 10 years. It is not an insubstantial amount, and will make a difference to town centres, but it is unlikely to offer a solution to the productivity problems facing the country.

And the big bugbear for local government was the top-down approach – focusing less on local government and more on the involvement of local MPs – while the language of the Prime Minister appeared to take a side swipe at councils.

In his foreword he explained: ‘Over the years when governments have tried to help towns, the story has always been the same. Short-term funding pots, often put in the control of councils that are already failing, with little or no consultation with the people that really matter – local people.

‘It’s time to invest directly in the places that need it most, not politicians that squander the most.’

While he told his social media followers: ‘We need to change the way this country does politics. We need to change our economic geography – away from cities.’

Chief executive of think-tank Localis, Jonathan Werran, told The MJ: ‘If you look at the political calculus of a looming General Election, there hasn’t been big votes in the cities for many years.’

He suggested councils are the ones that can ‘make stuff cohere’ at a place level, while the involvement of local MPs harks back to the early days of levelling up funding.

But it was the business involvement that he focused on. ‘Like the Duke of York, businesses have been marched up and down the hill on economic growth. Do they have the time, commitment and stickability to work on this over the next 10 years?’ he asked.

If the Government was serious about boosting towns, Mr Werran suggested there would be a far better route to helping all towns and cities – ‘addressing some of the tax and regulation issues would be a better place to start,’ he said.

The PM’s focus on towns, actively moving away from cities as the driver of productivity, may not be the most effective use of the public purse. Speaking at an event for think-tank Onward at the Conservative party conference, West Midlands Mayor Andy Street explained it was cities that drive the economy, with high concentrations of good quality jobs.

‘Those cities then serve the regions around them. That does not mean towns don’t have a complementary role.’ He added: ‘We have to concentrate on lifting the performance of our core cities and our key cities.’

That is the problem that has vexed city leaders. In the past decade, the RSA and Core Cities partnered to create the City Growth Commission in 2014, and the inclusive Growth Commission in 2017 in a bid to improve prosperity.

Last week saw the latest tome in the series, the result of the year-long Urban Futures Commission, jointly chaired by former Bank of England chief economist turned RSA chief executive Andy Haldane and Core Cities chair and Bristol Mayor Marvin Rees.

It clearly set out the issue it was trying to address – there may have been pockets of extraordinary regeneration within our cities, but productivity outside London and the South East remains stubbornly low. We have anaemic rates of growth, flatlining rates of pay and an increasingly divided society. And the UK has bucked the trend of other global cities where productivity grows alongside city size.

The report’s lofty ambitions for global growth lie in contrast to the PM’s attempts to boost town centres and raise the quality of life for people living in them.

The last two RSA reports called for radical devolution, but it has trickled downwards. Levelling up has shifted from a national priority to an unwieldy, inarticulate bill, and the flagship infrastructure project to bring prosperity to the North – HS2 – which, as The MJ went to press, looked like it would go no further than the Midlands, and even then stop short of central London.

Indeed, Mayor Street pointedly told the Onward fringe event: ‘If you tell the international investment community you are going to do something, you bloody well have to stick to your word.’

The messages from the latest RSA report included a plan for cities, a call for more power and fiscal devolution and a reintroduction of the industrial strategy. But it has gone further than the previous reports: it comes with a ringing endorsement of pulling in the private sector to access the finances.

The payoff for success is huge. The report predicted bringing UK cities up to the productivity levels of their European peers could add up to £100bn to GDP each year – ‘quite a dividend in these troubled times’, as Mr Haldane told the report launch.

Like Andy Street, RSA head of policy Amy Gandon also took aim at the policy flip flop over HS2 – albeit with far more subtlety. She told the launch event: ‘The systemic under investment in our transport system outside London is holding them [our cities] back,’ she said. ‘Unleashing our cities’ full potential will not come cheap.’

According to the report, there is an estimated £1trn price tag attached to getting our cities up to scratch. It may seem like a huge catch, but not according to Mr Haldane.

He claimed: ‘The world is awash with cash. There’s buckets of money…not just in the UK, but globally.’ But the real question, he told delegates was this: ‘How do we mobilise those monies.’

There is, he said, £300bn tied up in local government pension schemes. There are billions of pounds in public sector assets, a trillion pounds in private sector pension schemes. ‘That is before you even get to the rest of the world.’

If you think his assessment was optimistic, he is not alone. Speaking at the Onward fringe, Tracy Blackwell, chief executive of the Pension Insurance Corporation said: ‘We expect to invest around £200bn into infrastructure investments over the next two and a half years. Our huge problem is a lack of things to invest in.’

A recent survey by the Purposeful Finance Commission, of which she is a commissioner, painted a bleak picture of a lack of expertise in planning, and a failure to come up with development schemes.

Ms Blackwell added: ‘Planning departments have been decimated…It takes so much time for projects to get done they become unviable.

While she said she was working with authorities to assist them, ‘there are some that don’t want to talk about investment at all’. She added: ‘It really does come down to vision and leadership.’

But perhaps Ms Gandon encapsulated the real issue for central and local government, quoting third-hand a piece of advice, given to her via Local Futures Commission co-chair Marvin Rees: ‘Make a plan. Any plan. Just make a bloody plan.’

RSA Recommendations: A three-point plan

1) Create a plan

• Local government should create a city coalition, develop a local prosperity plan and increase citizen participation

• National government should reinstate the industrial strategy

2) Give cities the powers to execute the plan

• Local government should establish a cities investment hub and an urban wealth fund

• National government should give councils a statutory duty to generate prosperity, give councils and combined authorities streamlined, long-term flexible funding and end bid funding. It should accelerate devolution.

3) Secure investment to finance the plan

• Local government should harness private sector investment via joint ventures and special purpose vehicles, using public sector assets to leverage capital, sharing risks and rewards. It should set up publicly capitalised investment funds and commit to a cities’ investment compact.

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