05The role of policy
Stronger city economies offer consumers a wider, richer range of amenities than weaker city economies. As well as economic performance, policy decisions also influence the consumption offer of cities, as this chapter examines. Interventions range from local authorities giving high streets a facelift to the creation of cultural strategies and quarters. The objectives of these policies vary – some aim to fill a gap in the market, such as providing a theatre, while others aim for wider benefits, such as attracting highly-skilled workers.
Improving cities’ consumer offers is a prominent part of economic development policies
Many economic development policies have at their heart an assumption that consumption-based policies can kick start economic growth. Improvements in the amenities and wider consumption offer of a city are used to address long-term economic weaknesses, such as high unemployment or low wages. As a result, this is a policy tool often used in weaker cities that are looking to attract business investment and grow their economy.
Within this broad policy area, two types of consumption-based policies are particularly prominent.
- Reviving struggling high streets by focusing on improving and protecting amenities
The decline of the high street has become a major issue for policymakers in recent years. Policies to tackle empty shops tend to be consumption-led, focusing on updating and improving what high streets can offer, such as by hosting food markets or using technology to enhance the customer experience. By better serving consumer preferences, these policies aim to increase use of the high street and reverse decline.
Historically, policy aimed to revive high streets by improving their retail offer. This ranged from the direct provision of shops — such as the development of new shopping centres — to support for retailers, especially independent ones, with tax breaks to prevent closures. For example, the 2011 Portas Review advocated lower business rates to reduce the burden on retailers and local businesses. There are currently calls for increased taxation of online retailers to weaken their ability to compete with retailers that have a physical presence.
More recently, the scope of policy has widened beyond retail to consider how high streets can adapt to quickly changing customer demands. The Housing, Communities and Local Government Select Committee has recommended reforming use classes to provide flexibility for properties to change use easily, something the Government is now considering.16 The Government has also encouraged cities to consider lower parking costs to encourage residents to visit high streets,17 is piloting new ways to use empty units by partnering landlords with community groups looking for space,18 and is committed to supporting English cities with the £1 billion Future High Streets Fund.
- Culture-led regeneration uses the provision of culture to kick-start economic growth
Culture-led regeneration approaches focus on a specific part of a city’s offer to consumers: the provision of ‘culture’. This term encompasses a range of specialist amenities, such as theatres and museums, and events, such as music or literary festivals. By offering consumers a greater range of experiences and activities, cities aim to become more attractive places to live, work and do business. The ‘Bilbao effect’ has been an inspiration for many of these investments, which was the claimed positive economic benefit of the publicly-funded Guggenheim museum in Bilbao in 1997.
A high-profile example is the UK City of Culture award. Since 2013, the UK government has designated one city every four years a ‘City of Culture’. The winner hosts a year-long programme of initiatives to celebrate its culture. Inspired by the European Capital of Culture award, one of the main objectives is to act as a catalyst for economic growth. Cities bidding for the award must aim to “create a demonstrable economic impact from the programme, through investment and innovation in culture and creativity”.19 Hull City Council estimated its 2017 award would add £60 million to the city’s economy.20
Other culture-led approaches focus more specifically on physical amenities, and especially specialist amenities such as theatres, museums and galleries. The public sector is a major funder of many of these amenities, especially in weaker city economies across the UK. In the North East, Gateshead Council co-funds both the Sage concert hall and the Baltic gallery and Middlesbrough Council co-funds the Middlesbrough Institute of Modern Art (mima). In Wakefield, the council supports the Barbara Hepworth Gallery, which lists one of its aims as being ‘a catalyst for wider regeneration’.
But policies focused on consumption should not be expected to lead economic growth
Most consumption-led regeneration policies are based on two assumptions:
- Weak city economies have a poor consumption offer. In particular, the lack of specialist amenities in these cities — as shown in Figure 8 — is used as evidence that there is an undersupply of options such as theatres and museums.
- Making a city more attractive to consumers will attract high-skilled workers because it is a more desirable place to live, which in turn will attract the businesses that are needed to grow the economy. This is the argument made by commentators such as Richard Florida, who claim that the amenities of a place are the main factor that attracts or deters workers.21
These assumptions are flawed in the following ways.
Weak city economies are unlikely to be able to sustain more specialist amenities
The reason why weak cities have few specialist or premium amenities — as shown in Figures 8 and 9 — is because residents and workers have less money, on average compared with those in strong cities, to spend on an meal out or trip to the cinema. Similarly, high streets that mostly provide day-to-day amenities and have high vacancy rates struggle because of a lack of footfall and spending power.
The limited spending power of those living and working in cities limits their ability to use and benefit from new amenities and they may even be disadvantaged if property prices rise as a result of investment.
Cultural events and activities that are not part of a wider strategy of economic improvement also have a limited long-term impact given that they mostly provide a one-off injection of money into the economy. For example, studies evaluating the economic impact of cultural events such as the European Capital of Culture (similar to the UK’s City of Culture award) found little or no positive long-term impact on the local economy.22
Workers are more likely to choose a city for its job opportunities than its amenities
People, particularly those with higher skills, do make locational decisions based on the desirability of a place to live. This includes a place’s consumption offer, but tends to be more about housing, crime, school and the environment than specific amenities. But the main factor that determines where high-skilled workers live is access to jobs.23
Only when two cities offer similar work opportunities does the residential attractiveness — and so its consumer offer — become a deciding factor. Enrico Moretti cites Seattle to illustrate this point. While the cultural vibrancy and economic success of the city today could lead to suggestions that the former led to the latter, he argues the opposite is true: “it became a lively cosmopolitan playground for educated professionals after it started attracting all the high-tech jobs”.24 An abundance of theatres, festivals and restaurants will not be enough to attract workers if there are few career opportunities.
Consumption-based policies cannot fully address the fundamental reasons why businesses are not investing
Weak cities struggle to attract businesses because they cannot offer them the workers or business environment they need. For example, in Hull just 27 per cent of residents have degree-level qualifications, the seventh lowest of all UK cities, and Middlesbrough has the 10th highest share of residents (12 per cent) with no formal qualifications. They also have a relatively weak amenity offer, with few specialist or premium amenities.
In contrast, cities like Brighton and Cambridge with high-skilled workforces (50 and 58 per cent of residents have degree-level skills respectively) attract many more of these businesses. As a result, they also have a much stronger amenity offer.
This critique of consumption-led approaches to economic development is not an argument against cities investing in their consumption offers. Cities should be investing in amenities, culture events and leisure facilities. There are many good reasons to do so, such as widening participation in the arts or developing children’s interpersonal skills, as well as many economic benefits.
Instead, this is a critique of the view that these approaches can lead economic improvements rather than follow and support them.
As Moretti puts it, “a good quality of life does help cities attract talent and grow economically, but on its own, it is unlikely to be the engine that turns a struggling community into an innovation cluster”.24 It is only when investments in culture and amenities are paired with other policies to attract businesses that they are able to contribute to economic growth.