Two years ago, as the UK prepared for the 2015 general election, it seemed that the political and economic centralisation that had set the UK apart from the majority of its western peers was about to change. In the run-up to that election, each of the three main political parties was engaged in a ‘race to the top’ on cities policy and devolution – with the Chancellor George Osborne promising to build a ‘Northern Powerhouse’ (illustrated by the devolution deal with Greater Manchester struck in late 2014), Labour’s pledge to boost decentralised funding to the tune of £30 billion, and the Liberal Democrats’ proposals for ‘devolution on demand’.
As we gear up to go to the polls once again on 8th June, it would be a huge understatement to say that a great deal has changed in the last two years. The vote for Brexit, the departure of David Cameron and George Osborne from the political stage, and the ascent of a new Conservative government much more willing to intervene in the economy (and less confident about the benefits of open markets) has resulted in a dramatically altered political landscape to that inhabited ahead of the last election.
But while the Cameron/May governments were only around for two years – and despite the upheavals following the EU referendum vote – there has nonetheless been significant activity and progress on policies that relate to cities, devolution and growth in that time. Here are the five most important developments in the urban agenda – and some ideas on how the next Government can build on that progress:
Making the most of Mayors
Almost immediately after winning a slender overall majority, the then Chancellor George Osborne and Greg Clark (then the Secretary of State for Communities & Local Government), confirmed and ramped up their commitment to cities, devolution and the Northern Powerhouse, despite the scepticism of many in their own party (and the Labour Party). During 2016, Greater Manchester was joined on the devolution journey by firstly Liverpool City Region, West Midlands and Tees Valley, and subsequently the West of England and Cambridgeshire & Peterborough. Unfortunately the North East and Sheffield ended their respective journeys, and the Leeds City Region never left the starting line.
After a more vigorous and engaging set of campaigns than many anticipated, the first metro mayor elections took place last week. As expected, the Conservatives won in Cambridgeshire & Peterborough and the West of England (which includes the Tory-led councils of Bath & North East Somerset and South Gloucestershire as well as Labour-led Bristol). But back in May 2015, few would have predicted that the Tories would also win in the West Midlands and Tees Valley—places where Labour had 10 and 13 point leads respectively at the 2015 general election, but where concerns about Jeremy Corbyn’s leadership, support for Brexit and strong campaigns by Conservatives have put paid to Labour hopes.
Two years on, even Osborne (who has now exited the political stage) must be surprised at how successfully his vision has been realised – and while it is disappointing that not all of England’s big cities elected mayors in 2017, the progress made over the last 24 months should not be underestimated. The UK is one of the most centralised countries in the OECD and rectifying this will take time and continued commitment from Westminster, Whitehall and cities.
Return of Industrial Strategy
Some feared that a change in Prime Minister and Chancellor following the EU referendum would lead to a reduced appetite for local economic growth policies. However, the difficulties faced by Tata Steel in early 2016 combined with the Brexit vote resulted in the new Prime Minister Theresa May promising a new industrial strategy that would drive growth “up and down the country, in rural areas and our great cities”. The Government took a while before producing a green paper in January 2017 which was broadly welcomed for its scope and intent, but was also criticised for being too general, for not prioritising specific policy interventions, and for not being place-based enough.
During the current general election campaign Theresa May has repeated her commitment to the industrial strategy and further details are expected early in the next parliament. The big question is whether it will adopt a sector-based approach – which is typically what previous government approaches have been – or to adopt a place-based approach. The latter seemed to be the preference of the most recent Secretary of State for Business Greg Clark, but traditionally the Treasury have been less keen. Whatever form it takes, to be successful the strategy will need to reflect the nature of the national economy and how it is changing; recognising why businesses choose to locate and invest where they do, the global trends that influence which industries the UK is best-placed to compete in, and the policy mix needed to support them.
Shift from home ownership to building more housing
Despite a commitment by the Cameron government to build a million more homes before 2020, much of his administration’s housing agenda was very much focused on boosting home ownership (Right to Buy, equity loans, ISAs, etc.). It was only after the referendum that there was a shift in emphasis towards boosting supply. A key plank in this refocus was the Housing White paper which was finally published in January 2017 and billed by the government as the biggest shake up to the housing sector in thirty years.
Despite its rhetoric, it turned out not to be as radical as was trailed for two significant reasons – the lack of recognition of the different housing challenges that places up and down the country face and the solutions they need, and the failure to address the fundamental problem of land supply particularly in and around cities with high housing demand. In the field of housing, promises are easy to make but delivery is harder to achieve. New housing starts and completions are still below their pre-recession peaks and it will take more concerted effort by the next government to turn rhetoric into reality.
Reforming education and skills
Like many governments before it, the Cameron/May government sought to address the long-standing problems associated with the education and skills systems – reducing the stark disparities in school attainment across the country, providing greater parity between technical and academic education, connecting training and skills provision to the needs of business, encouraging businesses to invest more in training their workers – by introducing a raft of new initiatives, and reforming or removing existing programmes.
A flagship policy proposed by the Cameron government and introduced by the May government aimed at addressing some of these issues was the Apprenticeship Levy which came into force in April 2017, alongside a new digital apprenticeship service and the Institute for Apprenticeships. The Levy will raise over £2 billion in the government’s efforts to hit their 3 million apprenticeship starts by 2020. Concerns raised that the new reforms are unlikely to address the need and demand for apprenticeships where it is greatest – especially in Northern cities – or to lead to more genuine training opportunities for young peoples across the country are yet to materialise, but will be something that businesses and government will need to keep a careful eye on in the next parliament.
Reforms to the business rates system
Over the last two years cities have continued to see their budgets decline. The overall local government budget declined by nearly 5 per cent between 2015-16 and 2016-17 while the Revenue Support Grant, which is the main non ring-fenced grant for local authorities from central Government, decreased by 24.5 per cent in the same period. Alongside devolution deals, the Cameron administration also proposed significant reforms to the way local government is funded. In the future local authorities will have to adapt to a funding environment in which their budgets will be much more dependent on locally generated growth-based revenues – council tax and business rates – and much less reliant on central government needs-based grants.
The Government announced in the 2015 Spending Review that 100% of business rates would be devolved to local government by 2020. Following extensive discussions with the sector primary legislation was introduced in January 2017. While there has been broad support for more devolution of the business rates system, there have also been concerns raised about the complexity of the system, and particularly how the desire to strengthen the growth incentive within the system would be balanced with a redistribution mechanism. These concerns were amplified by the media reaction to the ‘winners and losers’ of the latest rateable value revaluation which came into being on 1st April 2017. Interestingly, the legislation to enable the devolution of business rates was lost because of the general election and it will be interesting to see if, and in what form, the new government reintroduces it.
It’s clear, then, that the past two years have brought significant developments in the cities agenda. The challenge for the next government will be to build on that progress, and to make the most of the opportunities it presents. That means, for example, extending more powers (including greater fiscal control) to cities across the country, and making the most of the newly elected metro mayors. It also means ensuring that place-based approaches, that reflect the diverse strengths and weakness of different parts of the country, are at the heart of economic policy in the coming years. Watch this space in the coming weeks for more analysis of the big issues in the 2017 general election, and how they play out in cities across the UK.