While National Government is preoccupied with Brexit, the Chancellor should seize the opportunity to help cities prepare for the future
Last year’s Budget, with its Transforming Cities Fund and city and devolution deals, gave some cause for optimism that the Chancellor had understood the cities agenda and was making it his own.
If 2018 has made one thing clear, it is that the Government’s bandwidth to deal with anything other than Brexit is extremely limited and this will only get worse. City leaders, meanwhile, as we saw at the party conferences, are chomping at the bit to address some of their biggest local challenges, and take advantage of incoming opportunities.
So what can Philip Hammond do to clear the way for them to get on with it?
Cities up and down the country want to know what will happen to their European Structural and Investment Funds when they are replaced by the UK Shared Prosperity Fund in 2020. The new fund should be focused on boosting productivity and skills levels in places that currently lag behind and have too many people locked out of their local economy.
The Chancellor should use his Budget to kick off the formal consultation on the new fund – and to confirm the size of the pot, including the value of current match funding, from 2020 onwards.
The health of the high streets is headline news. Our research has shown how resilient, bustling urban centres like Birmingham and Leeds reflect how successful some places have been in attracting productive, future-facing service firms – the kinds that favour city centre locations themselves and bring with them high-skilled, well-paid employment likely to withstand automation. These firms want a skilled workforce and a quality city centre – good office space, good transport links and an attractive public realm.
The Chancellor should recognise the fundamental importance of thriving city centres to the national economy by designating them as strategic economic infrastructure like motorways and rail links, and give cities access to the National Productivity Investment Fund to invest in attractive locations for both firms and workers.
Business rates are broken, but not for the reasons you hear most often in the media, which focus on the plight of individual retailers. Instead, business rates are unfair because revaluations are infrequent and, crucially, because rates are set so as to preserve a capped level of national revenue, so they don’t take into account local economic performance. That means what is supposed to be a tax on land use and location decisions can feel like an inflexible tax on retail.
The Chancellor should not fall into the trap of acceding to calls for more or temporary exemptions from rates – further reducing the tax base would make the situation worse. He should be bolder than last year – when he announced revaluations every three years – and opt for annual instead. If once a year is good enough for Budgets, it’s good enough for business rates.
And he should be bolder still, linking rates revenue to local economic success (by removing the revenue cap) and letting places keep changes in revenue from revaluations. By doing this, cities would have a clear financial incentive to improve their local business environment.
Centre for Cities’ research this year on the Future of Work has set out how people, particularly those living in cities outside the Greater South East like Mansfield and Hull, will need new skills if they are to thrive in a world where automation increasingly replaces routine jobs. But lifelong learning funding and provision is poor across the country. Meanwhile, there is too much focus on higher education, when a scandalous number of people in Birmingham (17 per cent), Liverpool (14 per cent) and Manchester (14 per cent) have no qualifications at all.
The Chancellor should reverse the decision to raise the earnings threshold for repaying student loans. It will do nothing to help those with no or low skills. Instead, the £2.3bn he will save should go into the critically under-resourced further education sector. And he should heed calls from city leaders on the Apprenticeship Levy and devolution of the Adult Education Budget.
Theresa May used her recent party conference speech to lift the cap on local authority borrowing for new council housing and announced an end to austerity in next year’s Spending Review. As well as giving a sense of what that end might mean for councils, the Chancellor should use his Budget to translate this renewed trust in local authorities into more of what places need to invest in their local economic success: restored flexibility on council tax and freedom from the Treasury to put new charges in place that will help fund new investment and deal with key issues like air pollution and congestion.
While National Government is preoccupied with Brexit, next week, the Chancellor has the chance to unleash cities’ energy to help them get themselves and the country fit for the future – whatever that holds. He should take it.
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