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Following a summer of discontent, mass resignations and a protracted leadership contest, Jeremy Corbyn has once again been elected leader of the Labour Party. He now faces the tough task of uniting a bitterly divided party which will meet in Liverpool this week for its annual conference. So where does the Labour leader, and his party, go from here?
Notwithstanding the inherent disruption it has caused, the leadership contest has at least forced both Corbyn and his rival Owen Smith to more clearly articulate a series of policy positions for the Labour Party to pursue in the years ahead. Responding in part to the challenge issued by the new Prime Minister of “building an economy that works for all”, the Corbyn campaign have been at pains to stress that only a Labour Party led by him can actually deliver such a vision. Corbyn’s biggest challenge now is to persuade dissenters in his own Parliamentary Party, as well as voters, that he is capable of winning power.
To do so, the Corbyn team will need to go beyond top line proposals and slogans, to developing practical policies that can be sold to voters on the doorstep. There is no doubt that the Labour leader’s pledges have so far been big on ambition – including promises to create a ‘new economic model’ by investing £500 billion in infrastructure, manufacturing and new industries, and to create a million new high-skilled jobs – but almost all require more detail if they are to persuade the majority of voters they represent a credible plan for Government.
To guide this process, Corbyn’s team should start with a robust assessment of the structure of the UK economy today and how it compares to our international competitors. Doing so reveals a country where cities are increasingly the engines of growth, job creation and higher wage levels – both for those who live there, and those who live in surrounding areas. Indeed, as the Centre’s latest research shows, UK cities play a bigger role in the national economy than in other countries – contributing 60 per cent of the UK’s GVA. In comparison, Spanish cities contribute just 45 per cent of their national GVA, German cities 36 per cent, and Italian cities 32 per cent.
However, the same research also reveals a national economy that cannot easily compete in sectors which prioritise low cost, low skilled labour. When we compare the UK economy to others in Europe, we see that the cost of labour in manufacturing is roughly three times lower in Poland and Hungary than in the UK, and about seven times lower in Bulgaria. Instead, the UK has significant advantages when it comes to creating and attracting businesses within the knowledge-intensive services sector, such as professional services, legal firms and accountancy.
Yet the data also shows us that despite driving the bulk of UK growth, too many of our urban areas continue to lag behind in terms of productivity. Yes, we have the biggest urban economy in Europe – London. But, as shown on the map below, nine out of 10 UK cities (57 out of 63) perform below the European average in terms of productivity, and more than half are among the 25 per cent least productive cities in the continent, including Sheffield, Liverpool and Newcastle.
In large part this is driven by poor skills-levels and low educational attainment. UK cities are home to the third largest concentration of low-skilled residents in Europe, behind only Spanish and Polish cities, and only six cities had a lower proportion of low-skilled residents than the European average. Three out of four UK cities – including major urban hubs such as Manchester and Birmingham – also have a lower proportion of high-skilled residents than the European average.
What does this picture mean for Corbyn’s emerging economic prospectus? Firstly, it shows that the UK economy is highly likely to continue to be powered by its major cities – both because they are the most attractive locations for business and because they have the scale to make a difference. If the Labour leader’s ambition is to create an economy that works for all, he needs to focus on how to maximise access to the opportunities that UK cities will provide, and ensure everyone can make the most of these opportunities, rather than seeking to spread resources and economic activity evenly across the country.
Secondly, it shows very clearly that any economic model cannot involve turning the clock back to a time when UK cities were powered by mass manufacturing and traditional industries. Despite the romantic allure of such a vision for many of Labour’s core voters, the UK simply cannot hope to make competing for jobs and investment in manufacturing the centrepiece of its economic strategy.
Corbyn’s pledges to invest in a new generation of manufacturing activities, and create millions of new jobs in the sector, are challenged by the fact that even China and Germany are seeing declining employment in manufacturing. The evidence suggests that where the UK is best placed to compete in terms of manufacturing – in advanced manufacturing and hi-tech – the impact on overall employment is likely to be limited. Manufacturing will continue to be important to the UK economy, but any economic strategy aiming to deliver more and better paying jobs has to have as its primary focus the need to equip places to thrive in knowledge-intensive sectors where the UK already has a competitive advantage.
And that leads us to the final big implication. Investments have to be in skills and education as well as physical infrastructure. New roads, train lines and broadband are of course important, and hold a particular political appeal in a world where public attitudes towards austerity may be shifting. However, making it easier to travel to and from places like Burnley, Sunderland or Hull will have little impact on the life opportunities of those who live there, if local people are not able to take on the jobs that the UK economy is most likely to specialise in in the future.
That’s why Corbyn should make improving educational attainment and skills levels of individuals from all backgrounds and across all parts of the country the central component of his vision for the UK economy.
Much of the focus will now shift to how Corbyn plans to unite his Parliamentary Party and build a credible programme for Government. Given this analysis and its implications for his economic strategy, he could do worse than look to echo the words of one of his predecessors as Labour leader (however unlikely this may be!) – the three big priorities for Corbyn’s Labour should be education, education, education.
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