Urban Growth in the UK: a Mancunian Call to Action 1

Urban Growth in the UK: a Mancunian Call to Action[1]

1. Introduction

The world is urbanising at a rate faster than ever before. More than half of the world's population, 3.4 billion people,now live in urban areas and over the next two decades, this figure is expected to swell by another 2 billion (McKinsey Global Institute, 2011).This is not just an important demographic trend, it has huge significance economically too. Collectively city economies already generate some 80% of global economic output and, as that figure continues to grow, the result will be that increasingly the success or failure of national economies will be determined by the strength of their city economies.In a global context Britaindoes not appear to be capitalising on the potential strength of its urban economies. The largest 56 towns and cities in the UK account for just 61% of national economic output (Centre for Cities, 2011), a meagre proportion that is even worse when considered alongside the fact that London alone contributes 21% of national GDP. In modern history, London apart, Britain’s cities have not punched their weight on the international stage and have not been able to drive national growth to the extent that seems to be the case elsewhere in the world.

In this paper we argue that successive governments have failed stimulate and support growth in the UK’s major urban areas. The UK’s highly centralised political and economic structures have left cities without the policy levers and revenue raising abilities that most other globally leading cities have been able to deploy to drive growth.This, we argue, has not only impacted on the growth of cities outside London but has had negative effects on the economic performance (and future potential) of the UK as a whole. We argue that a select group of cities have the potential to ride the international growth wave urbanisation presents and improve their economic performance to such an extent that it will improve overall national macro performance. However, unlocking this potential will not be easy and will require a significantdeparture from the status quo.

Our overarching analysis leads to three interrelated calls to action to achieve this goal. First, perhaps surprisingly, this paper is a call to academic economists, geographers, and researchers from any other discipline with an interest in economic growth to focus relentlessly on analysing and influencing the trade-offs and decisions policy-makers routinely face and to put sub-national issues squarely at the centre of the national economic growth debate. Our experience of working with national politicians and senior civil servants suggests that they do not believe that regional or city regional policy really can make a significant difference at the national scale and this perception urgently needs to be corrected. There is no shortage of research that suggests regional policy does matter but, to date, the collective efforts of academia have not supported sub-national actors in making a resounding case to national decision-makers.

Second, this paper is a call to action to the UK Government – politicians and civil servants – to recognise the role that the UK’s major cities have in national growth and to reform national policies and frameworks to support these significant agglomerations to achieve their economic potential. Up until now there has been no spatially disaggregated recognition of growth and therefore no incentive to create it, with public spending decision simply reinforcing the historical position. The first step needs to be recognising that not all places are equal. We argue that a handful of big cities have the potential to shift national economic performance and should be the Government’s economic growth priority. The second step is putting the big policy levers on the table in devolution discussions – welfare, skills and education, planning policy, and international trade all need to be in scope for big cities looking to change their economic trajectory in a way that influences national aggregates. The political implications of this will not be palatable for all, and that’s why the final step will be to involve senior politicians and civil servants in the development of sub-national policy and the devolution process. Too often engagement with cities has been left to junior officialswho are empowered only to instigate small scale initiatives, with Ministers brought intoo late to sign off agreements headed if not failure then for the archives of missed opportunity. A deeper level of engagement is needed to tackle the cultural norm of ever greater centralisation within the national system and embed an understanding of what is needed to make places work functionally. This in turn needs to be reinforced by a relentless focus on the outcomes of spatially disaggregated policy on growth. Lord Heseltine’s report provides the basis for the policy shift we advocate. This paper might be read as our interpretation of how the report should be understood and implemented.

In the final two sections of this paper we put forward Greater Manchester, with its well evidenced growth potential and mature governance structures, as one of the few places in the UK that, with the right support,could meaningfully support improved UK prosperity in an increasingly urban and competitive world. We argue that a framework is required (including, but not limited to, devolution to the city level) that recognises the different challenges, opportunities and delivery ability of individual places. Greater Manchester’s unique proposition is that it brings together the requirement for a set of tools to deal with growth pressures more familiar in the South East (releasing housing supply in desirable locations, commercialising world leading academic research and so on) with the need for levers to deal with a legacy of decline so common in much of the North (persistency high levels of worklessness, substantial public sector dependency and so on). It should also be noted that while this paper focuses on the growth potential of large cities because of the economic opportunities they present, it is also the case that large cities are the location of a significant proportion of national social spend. Thus increasing growth in large cities also reduces the burden of past economic decline.

Changing policy takes time, and changing cultures takes even longer, so our final call to action is to those already working in Greater Manchester: to use the knowledge and powers we already have to maximise the impact of the city. An uncomfortable truth for many is that, for the conurbation truly to realise its full potential, getting discretion from central government even in key policy areas is not going to be sufficient. More integration of strategies, services and, ultimately, finances across authorities is likely to be required. Greater Manchester needs to be bold in following through the logic of the evidence and doing what is necessary to drive growth.

1. The Quest for Balanced Growth and the Flat Earth Society

When considering the role of cities in creating national economic growth there are two dominant broad theoretical perspectives. The first, associated with geographers and regional economists, focuses on economic efficiency. Persistent regional disparities are argued to be inefficient at the national scale, as they reflect the underutilisation of labour and capital in less advanced regions. Regional disparities, it is argued, can also restrict the effectiveness of national macro-economic measures to support growth, with policies resulting in inflation hotspots and employment bottlenecks. Advocates of this position tend to argue for policy aimed primarily at spatially rebalancing growth (see, for example, Harding et al, 2006). The second perspective, associated with economists and, at present, particularly the ‘new economic geography’ movement, argues that regional imbalances and spatial agglomeration of economic activity may be efficient and positive for national growth. As economic activity naturally gravitates towards certain agglomerations – because of their advantages in terms of business density, access to markets, skilled talent pool, universities, infrastructure and so on – policies that favour the regions that go against these natural agglomeration forces in an attempt to reduce economic disparities may be economically inefficient at the national scale (see, for example, Glaeser, 2012. For a full discussion of the debate see Martin et al, 2010).

Whatever the merits of these perspectives, the geographers’ concern for distribution tends to come at the expense of a less convincing account of growth and how and where it can best be stimulated. Conversely, the economists have too little to say about the social consequences – which are profound – of their analysis or the sustainability of the implied growth model. Taken literally, neither helps those of us whose concern is the exercise of policy choices.Economically, socially and politically both the creation and distribution of wealth matter.The key debate is not therefore ‘growth or distribution’ but the trade-offs policy-makers face. Academic economists and geographers need to do more to focus on these real world policy choices so that the insights their analysis raises actually influence the actions of key decision makers. By taking highly theoretical polarised positions, academic economists and geographers of all descriptions risk marginalising themselves in the policy making arena.

Our research and discussions with academia leads us to a hybrid position which seems to balance the arguments and allows us to make a more rounded and plausible set of assumptions on which to base policy.This is grounded in the general consensus that economic benefits arise from the spatial concentration of economic activity (Garretson et al, 2011). In the UK, these effects have been largely untapped as successive governments have sought to balance the economic benefit of fully exploiting areas of opportunity against the political risk of creating ‘postcode lotteries’. Our concern, though, is that generally political risk has won out with the result that there has been little differentiation in the policy approach between cities alongside, paradoxically, an increase in regional disparities.The exception of course is London where political risks are routinely ignored allowing it to consistently win implicit lotteries. London really is too big and important to fail. This is not an argument that policy should try to move activity out of London, but rather a plea that research is needed to detail how national policy has supported London to identify what could be replicated elsewhere. As an aside, the recent independent Budget for Greater Manchester found that, whilethe London economy is six times the size of GM,its devolved transport funding is 170 times greater.£15.7 billion was committed to the cost of constructing Crossrail in 2007, which has a modest benefit to cost ratio of 2:1 under the Department of Transport’s own estimates. The Northern Hub offers a benefit to cost with twice the rate of payback, yet the project has struggled to secure investment of just £0.5 billion.To reiterate, we are not arguing that London should be penalised; it should be supported. But so too should the other major urban economies which could drive growth. Our basic argument is that greater differentiation is needed by policy between places based on their particular strengths and their capacity to deliver.The evidence for our position is less than comprehensive, though we, as a city, have done as much as anyone could ever expect to fill the gaping holes in the national research. We need more and better research from academics and government,starting with an acknowledgement that this is a question of national importance. The rampant urbanisation we see elsewhere in the world ought to be something we can tap into for the benefit of the whole UK.

At present and in the meanwhile, cities arefaced with a disjointed mix of national, regional and local policies and programmes which, at best, do not complement each other and, at worst, actively counteractone another. Moreover, these policies are often at odds with what the most important policymakers in HM Treasury and the Department for Business, Innovation and Skills view as ‘real’ economic policy. We advocate a more spatially sensitive economic framework which prioritises the potential engines of growth – the major cities – something successive Government policy has long resisted, as we explore in the next section.

1. (Anti) urban policy in the UK

The UK is one of the most centralised major democracies in the world – to illustrate: the proportion of central government expenditure in a German locality is 19%, in more centralised France it is 35% and in the UK it is no less than 72% (OECD, 2011) – meaning the national Government’s vision for urban development has huge significance for the growth of individual places. The history of ‘place specific’ policies such as land-use planning, housing, transport, skills, international trade, welfare, science and technology and so on, is that they have been spread across different central departments and,until relatively recently, there has been little co-ordination among relevant government departments and different tiers of government to address the issues and opportunities associated with different places. Even now it is tentative and relatively weak. Our analysis of the situation today is that at its heart the breakdown is founded on the tension between functioning labour markets on one hand and a national drive for growth on the other. The lack of relationship between the two has resulted in an array of mixed incentives that mean the priority of delivering growth is marginalised. To take threeexamples: housing – a national crisis that is played out at the city region level – is considered on a locality base, as if it is the same as emptying bins. Skills policy on the other hand has traditionally beenprioritised nationally with almost no regard to differing labour market need whatsoever. Reform of public services, if it is considered at all, is a low priority and links only to public sector costs and efficiency not how it could support economic growth.

We argue that this policy disarray is in significant part an outcome of the history of urban and spatial policy in the UK, which can be characterised as anti-urban and poorly co-ordinated. The roots of this run deep. In Anglo-American urban development there has been a strong attachment to suburbanisation and the linking of town and country. In the UK, in reaction to the ‘unhealthy urbanity’ of the nineteenth century, Howard (1902) conceptualised the idea of the ‘Garden City’. These new settlements would bring together the virtues of the town (jobs, culture, opportunities) with the virtues of the countryside (greenery, fresh air, quietude). In Britain, this ideal was taken up as a powerful normative theory of planning in shaping the form of urban growth through much of the twentiethcentury (Pichler, 2007). The idea of a green belt surrounding the city first arose at this time, although this idea would onlygather real traction in post-World War II reconstruction. While the early twentieth century Garden City movement of this time was not especially transformational, its influence has in many ways survived until today.

Much of the 1950s and beyond was a period still marked by the impact of World War II. Urban problems were largely conceived of in physical terms: such as housing redevelopment to counteract wartime destruction and to deal with obsolete stock. The British government invested in planned urban expansion schemes to absorb the overspill from post-war reconstruction, slum clearance programmes in the inner city areas, and to accommodate population growth and rural-urban migrations (Pichler, 2007). The task became urgent in response to the growing needs for new family housing, and these developments often took the form of Garden City-inspired ‘New Towns’, built in lower densities (Power, 1993). The process of suburban development coupled with the relocation of industry resulted in severe inner city decline. Additionally, Green Belts deliberately restricted the natural expansion of cities in an effort to encourage density and the reuse of previously developed land.In practice this often resulted in ‘leapfrogging’ to less urban, but also less accessible locations, and the rapid growth of New Towns which were unhindered by restrictive planning frameworks and had relatively few costly contaminated sites.

The economic stagnation of the 1970s put an end to the post-war economic boom. The periodbecame synonymous with‘urban decay’ with significant outward migration experienced from the core cities – a trend which continued into the 1980s and 90s. By the mid-1970s, however, ‘urban decay’ was increasingly seen as problematic which led to a clear shift in national urban policy.The 1977 White Paper on inner cities recognised that the causes of inner urban decline and poverty were located in wider economic and social conditions, particularly deindustrialisation. The response was the Inner Urban Areas Act of 1978, the main feature of which was the creation of partnerships between central and local government in an attempt to harness private capital for urban economic revival (Crowley et al., 2012). It also involved giving local government more powers to aid and attract industrial development. However, this response to urban deprivation was poorly funded and even its modest aims failed to be realised as local budgets were squeezed in a climate of national fiscal retrenchment. Curiously, during this period, the government’s anti-urban New Towns policy was in full tilt, counteracting the impact of the new inner city urban policy.In effect, the government was sucking out activity from cities by promoting growth in New Towns whilst simultaneously attempting to refill these very same areas. The advantages held by New Towns over inner cities –a surfeit of virgin land with limited usage restrictions chief amongst them – and the meagre funding of urban programmes meant that the competition was never a fair one and the decline of the UK’s cities continued.