Pre-Budget Report 2009: Submission

The 2009 PBR needs to set out how the Government will set the conditions for growth and fiscal responsibility. Building on recent steps to devolve powers to cities, the Government must now put cities at the heart of plans to create the conditions for growth and jobs.

Briefing published on 26 November 2009 by Centre for Cities

1.  The 2009 PBR needs to set out how the Government will set the conditions for growth and fiscal responsibility. We believe that Britain’s major cities have the potential to play a stronger role as drivers of growth going forward. Before the recession, cities accounted for 54% of the population, and nearly 60% of jobs. Building on recent steps to devolve powers to cities, the Government must now put cities at the heart of plans to create the conditions for growth and jobs.

2.  The Centre for Cities is a non-partisan research and policy institute, helping cities improve their economic performance.  We work with cities, central Government and employers, to develop practical policy solutions to help urban economies grow.

Spending priorities to boost growth in our cities

3.  As the Government puts in place plans to halve the deficit in the next four years, we believe that prioritising spending on the long-term drivers of growth is essential.  Investment needs to focus on creating the conditions for high-value job creation, most of which will be in the UK’s major cities.  To achieve this, we believe that the two priorities for growth in the spending decisions facing the Government are transport andskills.


4.  Transport plays a vital role in connecting businesses to markets, and people to jobs.  Investing in good transport in our cities is a critical condition for economic growth, and can deliver good returns – investment in urban transport networks creates on average £3 of benefits for every £1 of public money invested.  We support the findings of the Eddington Review to target transport investment towards smaller investments to tackle congestion hotspots and public transport bottlenecks in City Regions.

5.  While we recognise the constraints posed by the fiscal position, it is vital that transport investment does not remain depressed for a prolonged period.  While the effect of bringing forward capital investment in the stimulus will reduce transport spending in the short-term, we would like the Government to commit to maintain transport spending at no less than 1.5 percent of GDP over the next spending period.

6.  Given the fiscal environment, the Government also needs to find new ways to fund infrastructure investment.  The PBR should propose a consultation on the possibility of instituting a national road pricing scheme to raise the funds to invest in transport.  This could yield around £20 billion a year after administration costs – and therefore almost double the amount of money currently invested in transport infrastructure – and could form part of a national infrastructure fund.


7.  Improving the skills base of UK cities is essential to maintain long-term competitiveness, and to reduce structural unemployment.  While the Government has invested significantly in skills, the overall effectiveness of this investment is questionable, given the high proportion of people with low or no skills in our major cities – in 2008, 22 percent of people in Liverpool had no formal qualification.

8.  In the recession, rising unemployment has hit young people particularly hard, exposing how high levels of NEETS and youth unemployment have been holding back our cities.  The Future Jobs Fund has been a short-term sticking plaster, at best.  We believe that the PBR and the spending choices facing Government are an opportunity to refocus skills investment, and to deliver a more targeted approach for the longer-term to give young people the skills they need and the opportunities to be job-ready.

9.  Skills need to be a priority in the years ahead, but cuts in certain areas can allow investment to be refocused to maximise its impact.  Clearly the Youth Participation budget needs to be protected to fund the extra 330,000 young people in the education system when the school leaving age rises to 18 in 2015.  In this context,we believe thatcuts to the skills budget should be focused on Train to Gain – following its poor evaluation from the NAO, other aspects of the ‘employer-responsive’ budget and the skills capital budget.

10.  We support many measures in the recent Skills for Growth strategy, and the Government must now work with UKCES to radically simplify the skills system.  The PBR must set out an ambitious target for savings from simplification of the system, and a timeline for achieving this.  Many skills quangos could be cut back or merged, such as LSIS, BECTA and Standards Verification UK – already identified by UKCES.  But the Government needs to go further – the continuing involvement of RDAs in skills further complicates the architecture.  Major City Regions should have far more control over skills budgets.

Local efficiencies

11.  As the Government rightly focuses on how to reduce the deficit, a devolved approach to spending can lead to more efficient and effective outcomes.  We have welcomed the Total Place initiative, identifying how cross-agency working at a local level, and an area-based approach to public services can lead to better services at less cost.  We look forward to the interim report on Total Place at the PBR, and hope that the success of the pilots will enable the Budget 2010 to take further steps to more localised service delivery.

City Regions – devolution for growth

12.  We strongly welcomed the Budget announcement for two forerunner City Regions in Leeds and Manchester.  City Regions have the potential to enable the UK’s largest regional cities to develop more coherent and effective economic policies.  But it is important to maintain momentum in these two pilots – we would like to see the PBRcommit to real progress by Budget 2010, in particular for devolution of real power in the key areas of transport and skills.  The PBR should pave the way for the Budget 2010 to create Economic Prosperity Boards in the Leeds and Manchester City Regions.

13.  The Government should encourage directly-elected mayors in the two pilot City Regions.  This form of governance would result in better, clearer decision-making, and enable Government to have more confidence in devolving real power and resources.

Reinvigorating regeneration

14.  The recession has led to stalled regeneration projects in many UK cities.  The regeneration industry – previously a key driver of economic activity and jobs – is in need of a new model to finance the renewal of many of our most important cities.  As a result, cities need access to new and innovative financial tools to pursue major development projects.

15.  The Budget in April announced that the Government would explore with Local Authorities the potential feasibility of piloting Accelerated Development Zones (ADZ), and would report on progress in the PBR.  Several proposals have since been submitted, as cities have enthusiastically responded to take the agenda forward.  We would like to see the PBR pave the way for a pilot ADZ in at least one of the UK’s major City Regions, with a view to introducing a national scheme from 2011.  We believe that the Treasury should take a less stringent approach to the additionality of these proposals, as ADZs could provide an effective tool for unlocking stalled regeneration, as well as driving longer-term growth and development in our major cities.


16.  The economy is starting to emerge from a severe recession, and faces several major challenges ahead.  The 2009 PBR needs to set the scene for vital decisions to create the conditions for long-term growth, while maintaining fiscal responsibility.  We believe that cities need to be put at the heart of this debate.