Spring Budget 2017 Review

By Ben Walters

This was the last spring budget (by current plans), and it was fairly muted in tone. That was expected: with all the uncertainty surrounding the UK economy, the Chancellor had no desire to add even more moving parts. But despite the lack of major announcements, there was something of interest for cities and LEPs.

We have also seen one of the fastest and most significant u-turns of a recent Budget. The reversal on self-employment NIC taxation after one week has been damaging to the Chancellor’s standing and will undermine the ability to reform self-employment and terms & conditions in the medium term. It creates a shortfall of £2 billion which will force the government to have to find these savings elsewhere. For Philip Hammond’s first budget as Chancellor this could have an effect in changing the balance of power in the Cabinet, and risks making the Government look weak and vulnerable to back bench pressure for policy change.

State of the economy

With significant revisions to economic forecasts over the last 12 months, it was no surprise that there were even more announced by the OBR. But, while many focused on the 0.6% increase for 2017 (1.4% growth upgraded to 2%), with lower growth from 2018-2021, both forecasts predict virtually identically sized economies in 2021. There were announcements that borrowing will fall, bringing borrowing down and the potential for a surplus by the next Parliament closer. This signals a continuance of austerity budgeting, which will concern local authorities who have experiences significant cuts since 2010.

Austerity

Many planned welfare cuts will hit in April of this year (£12bn of day to day spending cuts over the next 3 years), with a bigger impact than any other announcement in this Budget, while median earning won’t exceed the 2007 peak until 2022. This continued austerity will hit local government particularly hard: from £8.2bn in 2016/17, down 34% to £5.4bn in 2019/20. This is the 2nd biggest fall in any department resource budget. With significant efficiency savings already having being made, it seems inevitable that services will be even further effected. Local Government has worked hard to mitigate cuts through service transformation and devolution. The role of Combined Authorities alongside the Northern Powerhouse, Midlands Engine and Great Western Cities will be important to ensure places can work together to deliver effective services at various spatial levels whilst continuing to grow in the coming period. Both the budget and recent announcements around Local Growth Fund and the Industrial Strategy Green Paper suggest that Government will fund projects and programmes which support UK growth. The challenge for places is to develop effective propositions which can tap into these funding sources.

Devolution

There were signals that devolution and regional working continue to be supported by HMT. Already there are 13 areas in England which have received devolution deals, and 6 will (for the first time) be electing mayors in May of this year. The Midlands Engine Strategy was announced, codifying much existing thought, as well as allocating the £392mn announced in the Autumn Statement for its LEPs, and again confirming the importance of Mayors (with LEP funding per head over 30% higher than areas without a Mayor, similar to the Northern Powerhouse funding allocations). A further deal with London was announced, building on previous work around infrastructure funding, business rates, justice, health, skills and employment support. While much written about devolution tends to look at its ability to spread decision making away from Westminster, and reduce regional inequality, recently we have seen more devolution to London. Finally, Greater Manchester was confirmed to be in further talks about transport funding.

Inclusive Growth

According to recent findings from the Inclusive Growth Commission, 55% of the 13.5 million living in poverty in the UK are working families. The Prime Minister has previously referred to wanting to create an economy which works for everyone. In the Budget the Chancellor referred to inclusive growth, linking it directly to “investing in skills and education”. A key part of this is reform of technical education through ‘T-Levels’ and a revised technical skills system, following from the work of Lord Sainsbury and Baroness Wolf. There will be support for students through maintenance loans for higher level technical courses. There were also announcements of changes to schools (including more free schools, and opening to door to more selective schools, and more money released).

This is a small step in the inclusive growth agenda. The IFS predicts that the overall changes to the tax and benefit system means that the bottom 10% of earners will see a fall in annual net income of £1,300, over 11% of their total income, and the bottom 70% of earners seeing falling incomes. The poorest decile of working-age families with children will see a £3,250 fall in annual net income, and a typical lone parent not in work will see over 20% of their income cut (and in work over 10%), while a typical ‘DINK’ (dual-income-no-kid) couple would see theirs rise. The impacts of these cuts will be significant, and demonstrate that Inclusive Growth will need more focus and support to achieve the Prime Minister’s ambitions.

Industry Strategy - Two Cheers

BY Mike Emmerich

The much awaited Industrial Strategy Green Paper has arrived. The Metro Dynamics team have run the rule over it, looking at what’s in it and what it means. Two cheers rather than three is our view. It’s a start and not a bad one at all, but it’s what happens next that matters most.  And that needs local places as much as central government to be bold with their ideas and proposals.

It’s hard to argue that the Green Paper is, in essence, wrong. But it’s equally hard to argue that the Government or indeed places have yet to rise as fully as we need to the challenges facing post-Brexit Britain.  On the one hand this is fair enough, those implications are not yet clear.  But the nation is hungry for a new approach to business and growth. The Government has fed us a little, and yet as we digest the voluminous Green Paper sandwich it has offered, we’re left wondering: where’s the meat? The Green Paper is very necessary indeed. But is it sufficient?

The Government is promising continuity. There are elements of very welcome certainty. The world around us looks like a very different place to the one we knew even just a few years ago. On the other side of the Atlantic, the new administration looks set to rein in free trade in a quite significant way, promising stiff penalties on some movement of capital. There is little sign of that in the Industry Green Paper. On the contrary, it is clearly and deliberately international in tone, even if the means by which we will trade with the EU is changing through our impending exit from the single market. The Green Paper also looks set to continue with an approach where the supply side of the economy is at the centre. Its emphasis is firmly on creating the conditions for business to grow, on ensuring adequate skills, investment, infrastructure and innovation. These are among the ten pillars supporting the new approach. So far so good.

But the Government is also promising change. Its tone is more activist and there is a clearer signalling than ever before on the role of the state in direct stimulus to innovation, skills and a focus on supporting key sectors of the economy. The Government’s role, so long cast as the handmaiden, the servile facilitator, is now more central and its tone, more assertive. The Green Paper is the most explicit recognition in years that Government can intervene to make things happen. If the Green Paper was meant to mark a departure, without a jarring volte face, then in its broad intent, it has succeeded.

But it is a Green Paper, not a White Paper: a signal of the Government’s broad intent not a final and definitive statement of its settled will; the Government is open for responses. The problem is that for a very Green Paper, it is surprisingly loaded with lots of small announcements. Perhaps this is another sign of continuity: Government’s desire to announce small things often rather than to focus on the ideas that will really deliver the change Britain needs in our industrial fortunes. It also has more than its fair share of re-announcements. The danger in this approach, as ever, is that these small initiatives will dominate as we digest and respond to the paper. The better reading is that they are pilots, examples and, like the Green Paper itself, statements of intent. But that may not be what Whitehall thinks. In fact, our view is that Whitehall has done a good job in difficult circumstances.   But there is much yet to be done if what follows is to deliver what urban Britain needs.

As we look to life beyond the Green Paper and its translation into policy, it is vitally important to stay focused on the big issues, not endlessly debate the announcements it contains or get distracted by chasing funding from new or existing pots. We pick out six in particular:

1.  More and better transport and infrastructure. Creating certainty that the big population centres will be linked by fast road and rail. HS2, northern powerhouse rail and the Manchester/Sheffield road are all needed. We need the certainty that they will be delivered along with better intra-city connections and bolder plans for broadband too.

2. We need to build more housing, and support more communities in all the big cities of a kind that people want to live in: in city centres, in suburbs and at city fringes: investing in the schools and amenity to drive quality of life up, making every neighbourhood feel more ‘liveable’.

3. We need major investment in near market research to bring together city business and universities: creating strong local institutions that push the boundaries of the possible in innovation, creating jobs and growth.

4. We need similarly strong local skills institutions: funded and led by employers and the state, driving high quality skills into local labour markets with a focus on the long term.

5. We need to do all the above to create jobs for the people left who got behind in cities but also give them a leg up into those jobs though high quality temporary jobs in the community.

6.  We need to cut out the guesswork where we can. Cities and other places need detailed, granular understanding of the reality of their local economies and industry sectors. A new approach needs to be underpinned by cutting edge economic data, that pinpoints opportunities and threats in local economies and to underpin investment decisions.

To achieve all of this cities need some wriggle room: devolved powers and funds from Government alongside bolder ambition and strong leadership of their own. There are positive signs from the Government. Its ideas for building institutional strength in places chime with our thinking. Places not just Whitehall have roles to play. But the policy proposals so far look timid. If cities, not least those with Mayoral arrangements don’t rise to the challenge and help embolden the Government’s approach, they will probably remain so. In this respect, though not others, there is a lesson we need to heed from the USA. Its time to put some meat in the sandwich.

Further Reading                                  

More detailed analysis of the Green Paper is available below

Details of Mike Emmerich’s forthcoming book Britain’s Cities, Britain’s Future are here [http://londonpublishingpartnership.co.uk/britains-cities-britains-future/]

Green paper - Industry Strategy

By Ben Walters

On the 23rd January, the government released a green paper on its new Industrial Strategy, as a public consultation. This is the first major strategy since the new government, and further clarifies the changing economic approach that will be taken over the coming years. It continues an increase in interventionist policies (such as the 2016 Autumn Statement), as well as a focus on regional inequality and productivity. While the main influences of these policies (Theresa May, Greg Clark and Phillip Hammond for the Autumn Statement) of the strategy were not ‘Leavers’, they are all seen as governments response to the referendum, and how to adapt the economy to best meet the challenges and opportunities this presents. The Green Paper mentions how many of its policies are targeting improvements in the long-term, rather than short term fixes. Below are the three main objectives of the strategy:

·         Build on our strengths and extend excellence into the future.

·         Close the gap between the UK’s most productive companies, industries, places and people and the rest.

·         Make the UK one of the most competitive places in the world to start or grow a business.

The paper outlines the strengths of the UK economy and labour markets, before discussing the lack of real wage growth since the 2008 recession, as well as faltering productivity levels, particularly by ‘per hour worked’ metrics, as well as increasing disparities among productivity between different regions of the UK.

In order to meet these objectives, the strategy also outlines 10 ‘pillars’.

1.       Investing in science, research and innovation

2.       Developing skills

3.       Upgrading infrastructure

4.       Supporting businesses to start and grow

5.       Improving procurement

6.       Encouraging trade and inward investment

7.       Delivering affordable energy and clean growth

8.       Cultivating world-leading sectors

9.       Driving growth across the whole country

10.   Creating the right institutions to bring together sectors and places

While all of these pillars have been created equally, I have highlighted some that seem to have a greater backing than others (whether through policy support or political rhetoric). On skills, there will be an increase in technical education around the UK, focusing on STEM subjects, with dedicated technical centres for non-university education. Infrastructure had significant support in the Autumn Statement, but less of substance announced today. The Inclusive Growth Agenda supports the 9th pillar well. And the 10th is supported by the devolution, as well as both the Northern Powerhouse (more info below) and the Midlands Engine.

In regards to cultivating world-leading sectors, slightly more content has been released today. Government is designating industry ‘Champions’ for 5 sectors (Life Sciences, Ultra Low Emission Vehicles, Industrial Digitalisation, Nuclear, and Creative Industries). They do not commit to financial support, but to encourage industries to “come to the Government with proposals to transform and upgrade their sector through ‘Sector Deals’”. These deals are open to all sectors, not just those with designated ‘Champions’.

While the green paper did not announce any new money, it does tie together a number of funding opportunities. For example, the ‘Industrial Strategy Challenge Fund’, which invests £4.7bn in research and development, will partially be used to support the Industrial Strategy. £556mn for the Northern Powerhouse was also allocated to individual LEPs (after being announced in the Autumn Statement), often towards projects supportive of the Industrial Strategy. And the Industrial Strategy will also guide further government economic policy, making possible the introduction of further funding at a later date. For example, in his introduction, Greg Clark links its strategic approach has been used in decisions on Hinkley Point C, Heathrow’s 3rd runway, other private investment announcements and the Autumn Statement’s increase in R&D funding.

While much of what was released matches what has been rumoured or openly discussed, several policies have been left out. These include widening corporate takeover rules, as well as corporate governance. The consultation runs until the end of April, so the white paper targeted for ‘early 2017’ has likely been pushed back to the summer.

Autumn Statement Review

By Ben Walters

On Tuesday, Philip Hammond delivered his first Autumn Statement as Chancellor, and gave the Treasury a chance to react to both Brexit and new fiscal forecasts. Below, we have discussed some of the changes which may impact on cities.

‘showing the Treasury’s reaction to both Brexit …’

Local Growth & Devolution

The Autumn Statement announced the allocation of round 3 of the Local Growth Fund to Local Enterprise Partnerships (LEPs) across England. This was previously announced in the 2016 Budget, and totals £1.8 billion: £556 million will go to the North of England, £543 million to the Midlands and East and £683 million to London, the South East and the South West (specific LEP allocations will be announced in the coming months). Alongside this, Government will consult on lending up to £1 billion to local authorities at a new ‘local infrastructure rate’ (of gilts + 60 basis points – which would currently total approximately 1%) for three years, to support high value for money infrastructure projects.

Whilst not as detailed or expansive as in previous years, Government has reaffirmed its commitment to devolution: working towards a second devolution deal with the West Midlands Combined Authority, and beginning talks on future transport funding with Greater Manchester. Government will devolve the budget of the Work and Health Programme to both London and Greater Manchester, and it has reannounced the devolution of the adult education budget to London from 2019-20. Additionally, Government has confirmed the Greater London Authority’s (GLA) affordable housing settlement (£3.15 billion to deliver over 90,000 housing starts by 2020-21). The publication of the Northern Powerhouse strategy by Government, and the upcoming Midlands Engine strategy, demonstrates the continued focus on raising productivity.

Finally, there were further signals of increased government support for local investment, as Government will allow mayoral Combined Authorities to borrow money, with a borrowing cap. It also confirmed arrangements for the Northern Powerhouse and Midlands Engine Investment Funds, which will start supporting SMEs in early 2017.

In Scotland, there was continued support for city deals. The Government confirmed city deal funding in Aberdeen and Inverness, as well as indicating progress towards a deal with Edinburgh. It will also work towards a city deal for Stirling and will consider deal proposals with the Tay cities; this means that all Scottish cities have the opportunity to agree a city deal. In Wales, there has been good progress towards a city deal for the Swansea Bay City Region, and the indications of shaping a deal in north Wales. It’s also continuing to support the implementation of the £1.2 billion city deal for the Cardiff Capital Region.

Infrastructure & Investment

Infrastructure investment features strongly in the Chancellor’s speech. First, Government has made significant changes to its ongoing infrastructure policy. The National Productivity Investment Fund will spend £23 billion over 5 years, including £1.3 billion into road transport networks, £1 billion into Digital infrastructure investments, £2 billion into R&D spending, £1.4 billion into affordable housing and £2.3 billion going towards the Housing Infrastructure Fund. It has highlighted the central role it would like the independent NIC to play in policy advice, inviting it to set out recommendations each year, on the country’s strategic infrastructure needs and how to meet them. It’s set out a fiscal remit for these recommendations, increasing infrastructure spending (from 0.8% currently) to 1% of GDP by 2020-21, and between 1 and 1.2% of GDP between 2020 and 2050. And, it aims to increase transport spending by 50% to invest £61 billion this parliament, and increase economic infrastructure investment by almost 60%, from £14 billion in 2016-17 to £22 billion in 2020-21.

Secondly, the government has endorsed the NIC study on the Cambridge-Milton Keynes-Oxford corridor, welcoming the interim report and its recommendation for an Oxford-Cambridge expressway, providing £27 million in development funding, and it will bring forward £100 million to accelerate construction of the East-West Rail line. It is also considering the NIC’s work on delivery models for housing and transport in the corridor, and asking for a new study on how emerging technologies can improve infrastructure productivity.

Other Key Points

As on devolution, while the policies of the Autumn Statement have generally been accepted positively, there were some notable policy areas which have been generally left out. This could arguably be due to the Chancellor wanting to limit the Autumn Statement and not cover all policy areas. Whilst there has been a renewed Government focus on justice and inequality, there was only a small mention of inclusive growth measures – external analysis suggests only a limited impact on lower income deciles. And there was little talk of any investment into the skills budget, whether through education or other investment. As skills have a major part to play in productivity, this may come under focus at a later date.

There have also been a series of announcements which allude to the significance of an upcoming Industrial Strategy. While many of the policies which were announced did have relevance to an Industrial Strategy, there is no official word on when we will have hard information on it (although unofficial rumours speculate there could be an announcement soon).

Finally, in terms of process, there are changes to the future of fiscal events in the UK. Namely, while there will remain two forecasting events, the primary event (the Budget) involving significant fiscal changes will be moved to the autumn, while the secondary event (the Statement) will be moved to the spring. The Statement will also be reduced to minor responses to the forecasting in hand, only making significant fiscal changes when necessary. This was a stated aim of Philip Hammond when he became Chancellor, and means that there will be both a spring and autumn budget in 2017 (and no spring or autumn statement).

Inclusive growth: the new challenge

By Ben Lucas

At the Core Cities Summit last week, city leaders were understandably frustrated by the suggestion that inclusive growth is on the agenda because of the EU referendum.They didn’t need Brexit to tell them that the economy is not delivering for their residents. But, as chief market strategist for Britain and Europe at JP Morgan Asset Management, Stephanie Flanders, said to those leaders, Brexit has created a unique opportunity to change our economic model

Prime minister Theresa May has said her number one priority is to develop an ‘economy that works for everyone’. In her speech on becoming prime minister she asked to be judged on the extent to which she succeeds in this.

She has already committed to economic reform, a new industrial strategy and a renewed focus on productivity. And we await an Autumn Statement in which the Government will set out a new fiscal and economic framework.

It was due to these changed circumstances that the RSA Inclusive Growth Commission decided to publish an interim report last week.

If there is a debate going on about economic priorities and the new framework for policy, then we want to do what we can to influence this.

Of course, the commission was launched before the EU referendum and the issues we are looking at have a global as well as national dimension. That is why the Organization for Economic Cooperation and Development (OECD) has also recently embarked on an Inclusive Growth project.

But the circumstances of Brexit create a specifically British opportunity to rethink our economic model. The starting point for this is the recognition that growth is not working for millions of our citizens.

Average earnings have stagnated since the early 2000s. Employment may be at record levels, but so is in-work poverty.

Research by the Joseph Rowntree Foundation shows the majority of those in poverty are now in work.

In former single-industry towns, too many relatively well-paid, high status jobs have been replaced by jobs which do not provide a basic threshold of decency and respect, let alone pay.

At our evidence session in Sheffield, we were told that what is needed is not just jobs, but quality jobs. This, against the backdrop of the growing concern about terms and conditions at Sports Direct, which has a big facility on the edge of the city region.

The scale of the challenge is huge. Such is the difference between poorer and better off areas in the UK that if all our towns and cities were to have gross value added per capita at the rate of the national average this would add another £192bn to the economy.

So it is not one or two shiny new policies we need, but a sustained and substantial long-term strategy to improve economic outcomes for those who have been left behind.

In our interim report we argue for a different approach to social and economic policy.

We need better, more employment-focused skills and training, but we also need stronger business demand for high value jobs in less prosperous areas.

We need urban environments which are attractive to live and work in and we need social policies which support families and enable children to be schooled and then work-ready.

We need better education standards, particularly in stem subjects, just as we also need affordable, quality housing.

Where social and economic policy can effectively be brought together is in towns and cities and around functional labour markets and population-based public services.

The Government’s re-affirmation of its commitment to devolution and its emphasis on supporting all cities to succeed is, of course, welcome. But in the Autumn Statement there should be a clear commitment to ‘grown-up devolution’.

We need to see more innovation in the way in which social policy and public service reform are linked with local economic growth.

That means bringing into scope the programmes and functions of departments like the Department for Work and Pensions and Department for Education, which have so far been the most devolution-resistant.

To finance this, we will look at the case for treating spending on social infrastructure as a form of investment, on similar terms to those which apply to physical infrastructure.

To paraphrase Barack Obama’s former chief of staff, Brexit is too good a crisis to waste.

The Inclusive Growth Commission will maintain the momentum with ideas which can spread prosperity across our towns and cities. What we need is for local government to rise to the challenge with us.

This article originally appeared at the MJ.

Metro Dynamics supports the newly launched West Midlands Land Commission

Metro Dynamics are acting as strategic advisor and secretariat to the West Midlands Land Commission (WMLC). The role of the West Midlands Land Commission is to take a fresh look at matters affecting the West Midlands' land supply.

The commission will provide independent advice and recommendations to the authority as it seeks to secure an improved and balanced supply of land to meet its goals for economic growth, new jobs and housing.

The WMCA’s commitment to the Land Commission was outlined in the Autumn 2015 Devolution Deal. In that document, the Government outlined its support for the Land Commission and agreed to work with the WMCA in undertaking the Commission.

The Terms of Reference for the Commission can be found here.

The Call for Evidence can be found here and submissions should be emailed to wmcaland@metrodynamics.co.uk

The closing date for receipt of written evidence is September 30, 2016. 

Press Release:

West Midlands Combined Authority launches Land Commission

An independent commission to look at ways of ensuring an improved supply of land for future development was today (September 8) launched by the West Midlands Combined Authority (WMCA).

The West Midlands Land Commission (WMLC) will take a fresh look at matters affecting land supply.

It will consider measures which could be initiated and undertaken to improve the availability of sites which can support the growth ambitions of business, the housing needs of residents and the future diversification of the region’s economy.

The scope of the WMLC will extend to public and private sector land in the area covered by the Black Country Local Enterprise Partnership (LEP), the Greater Birmingham and Solihull LEP and the Coventry and Warwickshire LEP.  It will cover land for both housing and employment uses.

Paul Marcuse, a senior and highly respected figure in the real estate sector, has agreed to chair the WMLC. The other commissioners are:

  • Jerome Frost – leader of Arup’s UK & EMEA consulting business, and former head of design and regeneration for the Olympic Delivery Authority
  • Bruce Mann –  executive director of the Cabinet Office’s Government Property Unit
  • Bill Oliver – retiring chief executive of St Modwen Properties, one of the UK’s leading regeneration companies
  • Bridget Rosewell – the prominent UK economist and a member of the National Infrastructure Commission

The commission today released a ‘Call for Evidence’ seeking evidence on a number of lines of enquiry which are designed to consider the challenges in developing land, identifying blockages in the system and to recommend measures which could be implemented to secure a sufficient supply of land for development.

The Call for Evidence can be found here and submissions should be emailed to wmcaland@metrodynamics.co.uk

The closing date for receipt of written evidence is September 30. 

The commission expects to report to the WMCA before the end of the year and to publish its report early in 2017.

Cllr Sean Coughlan, WMCA lead for housing and land and leader of Walsall Council, said: “We can’t make any more land and that means we need to make the very best use of the land we have.

“The WMLC will provide an opportunity to consider the many aspects which affect the supply and usage of land across the West Midlands. 

“In launching the commission we have assembled a team of leading practitioners in the property and infrastructure arena.

“I know they are looking forward to hearing the views of the many stakeholders across the West Midlands who are interested in the outcome of this work.  I look forward to working with the commission over the coming months.”

Mr Marcuse added: “WMLC is being established at a time of unprecedented opportunity for the region. 

“A combination of the recent establishment of the WMCA and its devolution deal with Government and the very significant infrastructure investment being planned for the region provides a singular opportunity to review the wealth of complex issues affecting the supply of land.

“I am delighted to have been invited to chair the WMLC and look forward to working with Cllr Coughlan and colleagues from local government, the real estate industry, and employers across the region as we jointly address the many issues which affect the supply of land in the West Midlands.”

For further information on the West Midlands Land Commission, please visit https://westmidlandscombinedauthority.org.uk/what-we-do/commissions/land/

ENDS

 More information from the WMCA Media Office on 0121 214 7073 or 0121 214 7278 mob 07887 794 241 or 07824 626952 / email; steveswingler@centro.org.uk or marklangford@centro.org.uk

Notes for editors:

  1. The terms of reference for the West Midlands Land Commission can be viewed here
  2. The commission is being advised by Sarah Whitney at Metro Dynamics, the leading city economic and strategy consultancy
  3. Bilfinger GVA has been appointed to advise the commission on local real estate markets
  4. The West Midlands Devolution Deal was signed on November 17, 2015 and includes £40 million a year funding from Government to the WMCA, driving an £8 billion investment package aimed at improving productivity and skills, delivering new transport infrastructure and homes and increasing the general prosperity of the region’s four million people
  5. The West Midland Combined Authority was created on June 17, 2016 and comprises of;

 Constituent members:

Birmingham City Council, City of Wolverhampton Council, Coventry City Council, Dudley Metropolitan Borough Council, Solihull Metropolitan Borough Council, Sandwell Metropolitan Borough Council and Walsall Metropolitan Borough Council.

Non-constituent authorities with reduced voting rights:

Cannock Chase District Council, Nuneaton and Bedworth Borough Council, Redditch Borough Council, Tamworth Borough Council, Telford and Wrekin Council

LEPs:

LEPs (Local Enterprise Partnerships) are voluntary partnerships between local authorities and businesses. They determine local economic priorities and lead on economic growth and job creation within their areas. They are:

Black Country LEP, Coventry and Warwickshire LEP, Greater Birmingham and Solihull LEP

Observer organisations awaiting membership:

Stratford-on-Avon District Council. Shropshire Council

6. Subject to Parliamentary processes, a mayor for the West Midlands will be elected in May 2017

 

Dark Fibre Cities – the upside of Brexit

By Caroline Haynes

There aren’t a lot of jokes about regulators. Here’s one. A regulator marches into a compliance manager’s office and slams down a stack of 3,331 complaints. He yells that the (banking/pharma/telecoms) company has until next Friday to respond. “And if we don’t?” “You’ll have 3,332 complaints” the regulator responds sheepishly and slinks out.

Last week, yet another UK regulator followed the script of that joke. Following an extensive investigation, Ofcom, the communications regulator, has decided to leave BT’s quasi monopoly over the UK’s broadband infrastructure essentially unchanged. This is not just bad news for the country. It is really bad news for UK cities.

The UK has a broadband infrastructure that can at best be described as mediocre. According to Akamai’s latest State of the Internet, in Q1 2016, average Mbps in the UK were 14.9, making us 19th in the global broadband speed leagues; it is quicker to download a video clip of a clapping panda onto your hard-drive in Romania than it is in the UK. And these slow speeds are often down to Openreach’s architecture which relies on two stages: the first stage is ‘fibre to cabinet’, otherwise known as the “fibre broadband” element. The second stage is ‘old fashioned copper from cabinet to front-door’ and funnily enough does not have a fancy name. These two stages are the technology equivalent of travelling by bullet train from station A to station B and then riding an exhausted donkey from the station to your house. You may get from Station A to B quickly and reliably, but does that really help you when there is a high likelihood that the donkey will collapse on the way to your house? The Ofcom ruling does little to tackle this, other than file a few more complaints (in this case requests for additional investment) that if not followed, will simply incur additional complaints. See joke above.

But that’s not my real gripe. My real gripe is the fact Ofcom’s investigation did not raise substantive questions about the structure of the broadband market. Under the current market structure, fibre providers like BT build and run large fibre networks which they then sell customers access to. If you are using BT Openreach, your zeros and ones are running up and down BT installed lines. If you are using Sky broadband, you are using Sky-installed and owned fibre lines. Cityfibre? Ditto. They are a series of mini-fibre empires, just like the early days of the American railway. Individual railway companies paid for and lay railway tracks and then ran their rolling stock along them exclusively, charging whatever they could. Instead of owning connections between cities, today’s Fibre Barons, fight to own the infrastructure within individual places.

If the fibre market was functioning healthily, businesses and households would have an array of different fibre providers to choose from. But they don’t. Across much of the country, there is only one provider, BT Openreach, subsidised by the Government to the tune of £1.6bn to lay the ducts and fibres. Even though there is a bit more competition in our major cities (most have at least two competing providers) broadband speeds remain pretty patchy.

Fibre is important and will only become more important. Today young people make decisions on where to live on the basis of broadband speed and mobile coverage. Many of the emerging high growth industries are broadband voracious. Companies that process huge datasets need fibre to access and simultaneous process data on the cloud. Yet, today, if you head up a city and wish to introduce a game-changing increase in broadband speeds to capture all of these high value residents and businesses, the options are limited. At most, you can try and persuade a fibre company to take the challenge and invest in your city. But fibre companies are wary of making new significant capital investments in places that already have two or more providers. The risk vs return maths just don’t stack up.

But there is another way.

We could instead encourage cities to co-fund the creation of their own dark fibre networks. These new networks could be built as ‘fibre to the premises’, as opposed to ‘fibre to the cabinet’. In other words, all bullet-train and no donkey. And most excitingly, cities could then lease space on the dark fibre networks to any retail broadband provider, whether Vodafone, BT or even Pokemon Go. Because the cities would own (or co-own) the infrastructure, they would have direct control over network speed and future investment and would create valuable revenue-earning assets. In other words, cities would have direct control over one of the most important competitive levers they have. And even better, city streets would not be ripped up multiple times by different fibre providers. The intertwined mess of cables, ducts and sewers growing under parts of cities would be halted.

To date this has been an impossibility thanks to onerous European state aid rules. In one instance, a UK city invested in dark fibre under a small spatial area of the city and even that was shut down as a breach of state aid. However, with the UK’s vote to leave the EU, direct investment by cities in fibre infrastructure is now a possibility. And with the wealth of funds sitting in infrastructure investment funds itching to be vested, now is the time to break the mould. Or even snap the copper. Let’s help UK’s cities become known not just for having some of the fastest and most consistent broadband speeds in the world, but also for having some of the most progressive infrastructure investment models.

City leaders need to channel spirit of Chamberlain

By Ben Lucas

This is a moment of great risk and opportunity for British cities.  Post EU referendum, post Cameron and Osborne, the stakes have never been higher.  Cities have patiently and persuasively made the case for rebalancing growth and power, and for devolution to combined authorities with Metro Mayors.  They now face some big challenges, as we set out in Adieu: the impact of Brexit on British Cities - on EU funding, trade, investment, universities and the progress of their devolution deals.

But the underlying forces driving devolution to cities have never been stronger.  If unbalanced growth was a critical issue before the referendum, it is now the biggest domestic economic and policy challenge.  Moreover, the anger directed towards Brussels was no less strongly felt about Westminster. The message of 'taking back control' rings true for our towns and cities as much as it does for Britain. 

We now have a new Government and the outlines of a new approach to social and economic policy, all of which give Cities a big opportunity.  Theresa May has said that she wants a plan to help all our cities and has signaled a willingness to look at bond financing for major infrastructure projects.  She has appointed Greg Clark, the architect and champion of city deals, to head up a new department of economic reform, that will cover Business, Energy and Industry Strategy. And she has put Sajid Javid, who recently proposed a £100bn investment fund for schools and housing, in charge of the Department of Communities and Local Government.

So what do we know now and what does this mean for cities?

1. Austerity is no longer the main frame for policy – while austerity will continue to be a reality, not least because of the cuts still in train, the 2020 deficit reduction targets have been removed. Theresa May has signaled that she wants to move away from a single minded focus on austerity and Chancellor Phillip Hammond has said that we are moving into a new phase in which the fiscal and economic 'parameters are not yet clear'.

2. The need for economic stimulus is strong - dealing with the 'economic shock' of Brexit and seeking mitigate any economic downturn are now the macro-economic priorities for the Chancellor and the Bank of England. The indications are that further stimulus measures particularly on infrastructure are top of the agenda and the new Government will be looking for quick announcements that can generate jobs and keep the economy moving.

3. Inclusive growth that delivers for working class communities is the new political imperative - Theresa May in both her main campaign speech and her Prime Ministerial address has said that the test for her Government will be whether it delivers a better deal for working class people, with an economy that 'works for everyone'. She has set a high bar against which to be judged and this has set the tone for her Government's domestic policy priorities.

4. No emergency Budget and a new economic strategy for the autumn statement – Philip Hammond has said that he will develop a new economic strategy for the UK over the next few months and this will be set out in the Autumn Statement.

5. Brexit negotiating agenda to take shape over the next couple of months – David Davis the new Secretary of State for Brexit has said that he wants to consult all affected parties, including businesses, universities and cities before determining his Brexit negotiating agenda.

6. Chamberlain is the new lodestar - Joseph Chamberlain has been cited as the inspiration for the social and economic policies of May's Government, because of his record in improving the lives of working people.  His most notable achievements were as Mayor of Birmingham in the late 19th Century where he was credited with pioneering what was later dubbed 'municipal socialism' including establishing a municipal gas company, providing clean water, free education, and good quality mass public housing.

These developments are all potentially very positive for British cities. But they need to be set against the inevitable uncertainty created by Ministerial and Departmental changes, which have raised questions about what will happen next on devolution and whether the model and process will remain the same.  All this suggests that cities can't just wait to see what happens, they need to seize the initiative and show how they can be central to driving social and economic reform.  To do this they need to channel the spirit of Chamberlain. That means developing bigger, bolder and more imaginative ideas on growth and social reform.

There are four priorities for cities collectively over the next few weeks:

  • Restating the case that our main city regions are best placed to drive balanced growth across the UK, and that continuing to generate agglomeration benefits through better connectivity, and improved skill levels will be key to this. As part of this it will be critical to articulate the role of smaller growth hubs and the economic benefits that need to spillover into non-metropolitan areas.
  • Showing that cities have the big ideas about projects that can generate jobs and inclusive growth and that these will best spread economic benefits across the urban conurbations of city regions to the areas that are most economically and socially disadvantaged.
  • Demonstrating that the city region structures that have been developed over the past few years – LEPS, Combined Authorities and Metro Mayors – have the capability and capacity to deliver both their existing growth strategies and major new projects across their functional economic areas.
  • Determining what good Brexit looks like for cities.  The opportunity is there to work with the Government both on the process and priorities for Brexit. Cities need to develop a combined strategy for this so that their collective voice is heard loud and clear.

At the same time each city will need to work on its own immediate strategy.  Many cities have already held meetings with local businesses, universities and public sector agencies to assess their risk exposure on Brexit.  What’s now needed is confident and imaginative leadership to quickly develop the big ideas that can be at the heart of discussions with Government and investors about growth projects and the next phase of devolution.

These will need to include:

  • Shovel ready projects and schemes that can start now and will rapidly generate investment opportunities for private sector, along with jobs for local people.  These should include housing schemes that can be quickly delivered.
  • More imaginative propositions for local bond financing for major projects, that are currently stuck on the grid because they can’t be financed.
  • Practical ideas about how capital and infrastructure projects can be linked with local employment and training opportunities.  For example, for cities that will benefit from HS2 and other big projects, they should be developing plans for establishing construction skills colleges and looking at how procurement can be used as a lever to ensure that contractors provide employment for local apprentices.
  • Scalable ideas for investment in social infrastructure, with big initiatives on early years education, family support, and wider early intervention and preventative measures designed to reduce the health and economic inequalities highlighted by Theresa May.

The approach that cities now need can be summed up in two words – Carpe diem.