Speech by Dermot Finch, 14 November 2007
NWDA Economic Prosperity conference, Manchester

I’m Dermot Finch, Director of the Centre for Cities – an independent research unit, focusing on the economic performance of UK cities. I used to be from Clitheroe, Lancashire – now I’m from “Pennine Lancashire”.

The Centre for Cities has been working closely with the Core Cities since 2005. We’ve just completed research on Newcastle’s economy, and are about to publish new findings on transport investment in the Leeds city-region. We’ve also looked at city-centre living in Liverpool and Manchester, city leadership in Birmingham and Liverpool. And last week, we took part in the Core Cities Summit in Nottingham.

From reviews to delivery

Over the past year, we’ve had a long series of government reviews – Eddington, Barker, Leitch, Lyons, and the Sub-National Review. And we’ve had a lot of debate about governance structures – regions, city-regions, unitaries.

The Centre for Cities contributed to all these reviews. We played a big part in putting city-regions on the map, as a complement to streamlined and more accountable RDAs. We proposed stronger local growth incentives, and helped to shape the proposed new Business Rate Supplement. And we called for enterprise funding and business support to be more focused in deprived areas.

The Core Cities – and all local authorities – now have an emerging set of new powers and flexibilities, to promote economic development. Maybe not everything they wanted, but some good steps in the right direction.

It’s now time to move on from those reviews to delivery – and start using the new powers on offer, to deliver stronger economic growth in all our cities and regions. This will not be easy. Difficult choices will need to be made by city leaders and RDAs, on prioritising transport investment for example. And cities are now facing some difficult headwinds – slower national economic growth, tighter public spending, and increased globalisation pressures.

Our work

The Centre for Cities is helping UK cities to improve their economic performance, with new research on the latest trends and practical advice on delivery.

Our Two Track Cities report shows that the urban renaissance is “unfinished business”. Yes, the Core Cities have improved over the past decade – but they are not the best performers. We used three basic indicators – population growth, employment growth and adult skills – and found that Reading, York and Cambridge were among the top cities. Preston also did well. At the bottom were cities like Hull, Liverpool and Sunderland.

Michael Parkinson has just published a separate new report, ranking the Core Cities. Bristol and Leeds are doing best. Manchester, Liverpool, Nottingham and Birmingham are doing well. Sheffield and Newcastle are doing less well.

One other thing. Our city centres are pretty much sorted. But there are still very big disparities within the Core Cities, including Manchester. It’s now time to move the regeneration focus beyond city centres, to the underperforming areas around them.

Our latest report London’s Links shows that the capital is vital to the whole UK economy. New investment like Crossrail is essential. Manchester leader, Richard Leese, agrees with that. But the benefits of London’s success are disproportionately concentrated in the Greater South East – as Alan Harding has just explained.

London imports over £100 billion of goods and services from the rest of the country, supporting jobs and investment outside the capital. But almost half of this trade is confined to the Greater South East, and only 2 per cent of it is with the North East.

We think that all the Northern regions should do more to build up their trade and investment links with London. This requires better transport links between cities, and with London. This would help to support more jobs up North, and generate more even growth across the country.

Sub-National Review

So, how will the Sub-National Review affect the Core Cities? First, it’s worth remembering why the SNR was set up in the first place. The Treasury identified these problems: (1) the massive output gap between the Greater South East and other regions, (2) too many strategies, bodies and funding streams, (3) the lack of regional accountability, (4) decision-making at the wrong level, (5) weak local growth incentives, (6) unclear impact of RDAs, and (7) weak engagement between local authorities and business.

Here are the SNR’s answers to these problems.

1. Streamlining the regional layer of government, by phasing out Regional Assemblies from 2010 onwards. This is the right move, but should happen sooner.
2. Greater regional accountability, with new Regional Ministers and Regional Select Committees. Peter Smyth is right that Regional Ministers don’t really have a job description. I asked Liam Byrne (West Midlands regional minister) about this a while ago, and he said he only had “soft powers” – but he’s making the most of them.
3. A new strategic remit for RDAs, with new powers over planning, less in-house delivery and much tighter budgets. There’s some uncertainty about how well RDAs will develop into their new planning role – not their area of expertise.
4. New possibilities for city-regions, with 13 new Multi-Area Agreements announced last week – including in 7 of the 8 Core Cities (all apart from Nottingham). These will promote greater collaboration between councils on economic development – something we’ve called for. But MAAs mustn’t get bogged down in bureaucracy and delay.
5. New financial powers for councils, including the new Business Rate Supplement, reformed LABGI (local authority business growth incentive) and planning charge (replacing planning gain supplement). The Business Rate Supplement could have been more radical, and we still have doubts about LABGI. But rather than criticise endlessly, we’re now encouraging city leaders to start making use of these new powers. If they make a success of them, further new powers should follow.

One important point from the SNR: not everything has to happen in every city, and different approaches will emerge in different places. Greater Manchester, for example, is pushing ahead with its congestion zone scheme – but Richard Leese has said he’s not interested in the Business Rate Supplement.

As John Healey has said, this is a “portfolio approach” – with a menu of powers and flexibilities on offer. It’s not the biggest or most radical menu, but it’s a start. And it includes existing powers like prudential borrowing, which could be used more widely.

Core Cities – big issues

What are the big issues facing the Core Cities, following the SNR? I’ve already mentioned that massive output gap between the Greater South East and Northern regions. And tighter public spending.

Core Cities will also have to focus on prioritising transport investment and developing the right housing mix – where the new Homes and Communities Agency will be critical.

Meanwhile, city leaders face unpredicted population growth – with recent ONS data showing higher than expected increases in inward migration. Worklessness remains stubbornly high in many cities – and is now rising to the top of the agenda for Ministers and city leaders. Climate change is another big one – cities have only started to get to grips with that.

Devolution should help the Core Cities to address many of these issues more effectively than traditional Whitehall centralism.

New era of devolution?

So does all this amount to a new era of devolution?

Ministers definitely think it does. At last week’s Core Cities Summit, Hazel Blears said: “Gordon Brown has ushered in a new era of unprecedented devolution.” The Constitutional Green Paper, launched by the Prime Minister in his first week in office, says that the SNR will “signal a shift in focus to local authorities and open up the possibility of powerful city-regions”. And last year, John Healey went even further, saying: “Whitehall centralism is the biggest obstacle to progress.”

We should hold Ministers to their word. I’m glad they’re talking the devolutionary talk, but too often there’s a gap between Ministerial rhetoric and reality on the ground. Next time you hear a Minister say something like this, write it down – and quote it back at them. If the goal is “powerful city-regions”, then Greater Manchester should have more powers. If Whitehall centralism is the “biggest obstacle to progress”, then departments need to change their approach to local government. And if this really is an era of “unprecedented devolution”, that portfolio of powers needs to get bigger.

Meanwhile, local councils need to start showing that they can do a better job than Whitehall. The SNR gives them a bigger role over economic development –encouraging them to get a better understanding of their local economy, to collaborate with their neighbouring authorities, and to build up better relations with local business. We need to see action on all these fronts in every Core City, and elsewhere.

Finally, some big questions remain. Can Whitehall really devolve? How will the RDAs deliver on their new remit? Will statutory city-regions happen? Is local government ready for this new era? Can city leaders start to raise more local revenues?

And the really big question – can devolution improve our cities’ economic performance? That’s the point of devolution – not an end in itself, but a way of delivering better results on the ground in every city. Improved transport, better housing and more jobs.