A Derby-Nottingham metro area would boost growth

By Ben Lucas

This article originally appeared in the Local Government Chronicle

In the last couple of weeks both the president of the Confederation of British Industry and the Industrial Strategy Commission have noted that the East Midlands is one of the most significant areas of the country not to have its own clear voice on industrial strategy.

The success of the Midlands Engine and the imminence of the white paper on industrial strategy brings this into even starker focus.

It’s a large region that comprises several overlapping types of economy including urban/metro, former coalfields, market towns and rural areas. Each of these has distinctive as well as interconnected challenges and opportunities. They are represented by every tier of local government, from districts, through cities to counties.

Recently Metro Dynamics has had the opportunity to look at one aspect of this: the metro economy of Derby and Nottingham. Readers of the LGC will have read Jon Collins (Lab), leader of Nottingham City Council, talking about working with his counterparts in Derby City Council to build a “coalition of the willing” around metro strategy. The two councils have started by developing some reciprocal citizen services, where local people who live in one city but work in the other can use their library and leisure cards in both cities.

Building on this, we were asked to scope the economic opportunity that metro collaboration could present, the fruits of which can be read here. As someone who grew up in Beeston on the outskirts of Nottingham, and still an avid Forest fan, this has been a fascinating piece of work from a personal perspective.

Of course, I’m well aware of the rivalry between my home city and its near neighbour. But it’s also impossible to get away from their interdependence, which becomes more apparent the closer you look. An old friend of mine summed it up as we walked away from a Forest game once: “Everyone in Nottingham hates Derby. Mind you, half my mates work there!”

Derby’s strengths in advanced manufacturing are complemented by Nottingham’s specialisms in finance, business services and emerging digital and bioscience sectors. So much so that 40,000 people commute between the two cities daily, while over 80% of the residents of the wider metro area, covering neighbouring districts of Nottinghamshire and Derbyshire such as Broxtowe and Erewash, with a population of 1.4 million, also work there. The data confirms that these areas already function as a metro area economically.

Our conclusion is that if the area started to collaborate more like a metro then the scale of the economic prize would be significant. For instance, we believe it’s realistic for the metro area to raise its productivity to match the English average by 2030, providing an additional £11bn of gross value-added.

But to get there, some serious challenges need to be confronted. Local leaders are only too aware that there are pockets of severe deprivation in both cities, low school attainment and skills levels and a high proportion of low-wage jobs. In short, there’s a need for truly inclusive growth that spreads opportunity and prosperity. That’s hampered, in part, by the fact that currently the areas covered by the metro receive £800 less in public funding per head than Greater Manchester, a problem of underfunding that characterises the East Midlands as a whole.

Moreover, the big opportunities we identify lie in sectoral and locational intersections between Derby and Nottingham, for example bringing together advanced manufacturing specialisms with digital skills and capability, and realising the full potential of HS2 at Toton, midway between the two cities. Seizing these will require collaboration between all of the partners that have a stake in these developments.

The challenge in the complicated local government geography of the area is to create new shared economic priorities and the structures that can drive these. This cannot be about the creation of a super-council, or the domination of one place by another, and its focus should be economic, not on local services. It will have to be a voluntary process and all tiers of local government will need to be in the mix.

That’s why we have suggested a partnership approach to driving the metro industrial strategy in the shape of a metro growth board. Bringing together local politicians, businesses and anchor institutions such as universities, with an independent chair, this would be a modern equivalent of the 19th century municipal corporations that drove the growth of our great Victorian towns and cities. It could provide an effective voice for the area, as well as being tasked with developing joint approaches to inclusive growth, skills, and infrastructure investment.

Our local government structure is one of the oldest and most varied in the world. Getting industrial strategy and governance right for each place requires creativity, compromise and collaboration. We believe that operating as an economic metro area is the right way forward for the Derby-Nottingham area. To paraphrase the late local hero Brian Clough, we are not saying it’s the best idea for driving growth across the area, but it’s in the top one.

Press Release for Derby-Nottingham Metro Economic Case Report

Derby and Nottingham urged to accelerate collaboration to secure £11bn prize

·         Derby and Nottingham should operate as a ‘metro’ region economically to spur growth, report says

·         Historic rivals have complementary economies and should focus on shared priorities and combat government underfunding

·         Successful collaboration on industrial strategy could generate additional £11bn GVA by 2030

Full report by Metro Dynamics can be downloaded here.

 

Their football teams may both have been managed by the legendary Brian Clough, but until recently the idea that Derby and Nottingham had much in common would have been anathema to many of their citizens.

But a detailed study prepared for Derby and Nottingham’s City Councils hails progress by the two cities to develop joint services and recommends extending this into a combined industrial strategy that will enable them to operate as a ‘metro’ unit economically.

By developing a shared industrial strategy that draws on each other’s unique strengths, the cities could boost their output to match average English productivity, reaping an £11bn gross value-added (GVA) dividend by 2030, according to a report from city growth consultancy Metro Dynamics. New joint institutions and a focus on skills and education could encourage more inclusive growth that spreads prosperity, the report adds.

The findings are being considered ahead of the much-anticipated publication of the Government’s Industrial Strategy White Paper. Earlier this year, the green paper consultation stressed the importance of locally-led industrial strategy ‘deals’ based around economic and sectoral clusters as a way of spurring regional growth.

The report by Metro Dynamics, entitled The Economic Case for the Derby-Nottingham Metro, points out that the two cities and surrounding districts already have many of the characteristics of a metro economy, with a population of 1.4 m. Closer together than London’s Olympic and Wembley stadiums, over 80% of residents live and work locally, with 40,000 people commuting daily between the two. Average output-per-head is almost identical [Nottingham’s GVA per head is £27,645, compared to Derby’s £27,259], despite their very different economic structures.

Derby is by far and away England’s most industrial city, with over 30% of its economic output from advanced manufacturing, including big-name firms like Rolls Royce, Toyota and Bombardier. Nottingham has strengths in finance, business and data services and bioscience, with major employers including Boots, Experian and Capital One. These economies, supported by three major universities, are seen as complementary to each other by the report authors.

But both cities face challenges to their economic potential, including low skill levels, below-average school attainment, high proportions of low-wage jobs and pockets of severe deprivation.

Furthermore, the two cities, along with the wider East Midlands, have historically suffered relative underfunding from central government which the report suggests could be due to the lack of a united voice compared to competitor cities and areas in other regions. The report notes that if the area received the same level of government spending per head as Greater Manchester, per person spend would rise by £800, generating an additional £1.1bn for the metro

The report sets out a 10-point plan to turbo-charge the economy of the metro region, including:

·         Establish a new Metro Growth Board to bring local government and businesses together, in a modern version of the 19th century ‘municipal corporations’ that led the cities’ growth in their industrial heydays.

·         Prioritise delivery of the Toton HS2 station development and surrounding infrastructure as a key transport connectivity and economic driver for the metro region, generating 75,000 new jobs and much needed new housing.

·         Work together for a proportionate share of the proposed UK Shared Prosperity Fund - a post-Brexit replacement for European Structural and Investment Funds proposed by the UK Government. 

·         Establish a strategic approach to inclusive growth, bringing in national agencies such as the Education and Skills Funding Agency (ESFA) and Jobcentre Plus (JCP) to work on local priorities.

·         Create a globally significant metro presence by aligning the work of Marketing Derby and Marketing Nottingham to attract foreign direct investment (FDI) and tourism.

 

Ben Lucas, Managing Director of Metro Dynamics, said:

“The more you look at Derby and Nottingham, the more apparent their underlying economic interdependence becomes. But whilst the area already has many of the characteristics of an urban metro, it doesn’t operate like one, and it loses out as a result.

“We have identified some huge opportunities from a more joined-up approach. The most significant of these is HS2 at Toton. The potential here is enormous: It could be an innovation campus that links Derby’s advanced manufacturing and engineering strengths with Nottingham’s burgeoning digital sector, building on the Midlands Engine Innovation Accelerator plans.

“The big growth opportunities of the future lie in sectoral and locational crossovers between the two cities, such as combining advanced manufacturing with digital skills.  No one organisation or place can make this happen on their own.

“If all of the key organisations, City and County councils, Districts, LEPs, businesses, education institutions and local communities can work together in a real spirit of collaboration, then there is a big economic prize to be grasped.”

 

David Williams, Chair of the Metro Strategic Advisory Group, which has members of the business community from Derby and Nottingham, and Chair of Geldards LLP, said:

“What really stood out for me in this report is the economic parity of Derby and Nottingham.  The two cities have businesses and services which complement one another, with a high level of local residents who work in local companies. It is clear we have much more to gain in common than in competition. 

“Metro Dynamics tell us maximum economic benefit will come through formal collaboration between organisations covering an area beyond the two cities. They suggest a potential additional economic growth in GVA of £11bn is achievable long term. 

“I found myself asking two fundamental questions – firstly, why the perceived rivalry between Derby and Nottingham has been so dominant in the past and, secondly, what has our whole region missed out on as a result?

“This study feels fresh to me. Looking at a ‘metro’ economy is still new, our relationships are still forming; Metro Dynamics’ independent evidence shows that we are already on the right track. 

“To progress together and realise our potential we need an approach that is inclusive and pragmatic. We must form a partnership of equals, focus on areas of mutual economic interest, leaving our organisational interests behind. This will be a challenge, I don’t doubt, though what we achieve will be both exciting and rewarding.

“I am genuinely enthused by the idea of a Metro Growth Board and I will talk to business colleagues over the next few weeks about their response to the report and what we can do next, together.”

 

ENDS

 

Notes to editors

 

1.    About Metro Dynamics

Metro Dynamics provides strategic advice to those who lead, grow or invest in cities. Our mission is to help cities be places where all people can prosper, innovation can thrive and businesses can grow. We work with city governments, national governments, local authorities, real estate and investment funds, technology firms, engineering companies and retailers to understand city-based opportunities for growth. 

 

Contact

For further information and interview opportunities, please contact James Tout at Journalista on 07989 610 276 or email james@journalista.co.uk

Love London by all means - but dont forget about the rest

 

By Mike Emmerich

What’s good for London is good for the UK, right? Well yes, but that’s not the whole story.

Advocates for further devolution and public investment for London can point to myriad statistics which show how reliant the rest of the country has become on the capital. The latest ONS figures show that London produced a £26.6bn fiscal surplus (just over £3,000 per head) which is redistributed to fund public services in struggling regions. And if by ‘struggling’ we mean anywhere receiving more in public spending than it raises in tax, we can include every single region outside London and the wider South East.

And with London’s GVA running at about 170% of the UK average, it’s easy to make the argument that investment in London delivers a bigger bang for the buck.

But is that healthy? Quite apart from having all our eggs in one basket (even if laid by a seemingly indefatigable golden goose), do we really want to create a ‘city state’ economy supporting an increasingly barren hinterland?

Transport infrastructure is perhaps the most egregious example of the gulf in largesse. Including Crossrail, London will receive nearly £1,900 per capita for transport projects between 2016/17 and 2020/21, compared to £289 in the North West and £247 in Yorkshire.

So it’s hardly surprising that Transport Secretary Chris Grayling’s near-simultaneous cancellation of electrification of the TransPennine route between Manchester and Leeds, while giving an apparent green light to the £31bn Crossrail 2, stuck in the craw of many north of the Watford Gap.

But it wasn’t just a PR gaffe. Quite simply, it appears ignorant of the clear benefits that can accrue from investment in regional economies backed with sustained political commitment.

The latest Cebr report on city economies shows that Manchester’s economy has grown an impressive 9.1% since 2014, with Leeds growing at 8% - both ahead of London’s 6.9%. It can’t simply be coincidence that these cities’ strong growth in sectors including life sciences, financial services and digital technologies has quickened since the advent of George Osborne’s Northern Powerhouse drive.

It remains to be seen what effect city-region devolution and metro mayors will have, but the examples of London and Scotland show that growth strategies tailored to local strengths can reap dividends.

But to continue harnessing the benefits of agglomeration to fuel broad-based growth, we need to focus on the fundamental enablers. In the context of a national industrial strategy, this might lead us to consider that connectivity between cities in the North and Midlands, combined with greater control over skills and planning, should take a higher priority than further turbo-charging of London’s growth engine.

 

Mike Emmerich is co-founder of Metro Dynamics, a consultancy specialising in city growth, and author of the book Britain’s Cities, Britain’s Future.

Devo is not a fig leaf for austerity. rejecting it will scupper social progress

By Mike Emmerich, Director

To paraphrase a certain politician, is no deal better than a bad deal?

That’s the question many in South Yorkshire will be scratching their heads over following the apparent demise of the Sheffield City Region’s push for devolution. For many, the decision by Barnsley and Doncaster to walk away represents a huge lost opportunity. But some may be feeling a certain sense of relief, coupled with a ‘told-you-so’ satisfaction.

I’m writing this having been drawn into a debate with academics Martin Jones and David Etherington concerning a recent blog post based on their report, Devolution and Disadvantage in the Sheffield City Region. The original paper is good and makes many valid points. But my concern was, and is, that in some circumstances analysis of a kind found in the subsequent blog can overcomplicate matters and play into the politics of the issue in a way I fear we might live to regret if followed to its logical conclusion.

Their original research lists, in impressive detail, the various problems facing councils within the Sheffield City Region. Direct budget cuts and reduced welfare to residents totalling £1.3bn since 2010 have hampered the chances of locals to access skills and apprenticeships and symied growth prospects. Few would dispute this.

But in their blog, they go further, concluding that the cuts “undermine any attempts to regenerate the city economy and actually reinforce the ‘race to the bottom’ of low pay and skills, and economic exclusion". This is where the point gets stretched too far: do cuts really undermine any effort?

Overall, this later analysis presents devolution as little more than a fig leaf for austerity. The South Yorkshire authorities, following their argument, were entering into a Faustian pact with the Government, shackling themselves to its broader spending agenda in exchange for a woefully inadequate £900m sop over 30 years.

That austerity and devolution happened at the same time is a matter of fact. But the links between them are virtually non-existent: government ruled nearly all the key revenue budgets out of scope before the process started. Cuts happened everywhere, regardless.  Attempting to make the connection risks de-legitimising the whole devolution process and maybe even local government itself - scuppering chances for city-regions to pursue inclusive growth strategies even in a less-than-perfect economic climate.

And we need to ask: What, exactly, is the alternative? Should we wait for the fiscal position to dramatically improve and abandon devolution in the interim (likely a very long time)? Or are sceptics advocating a return to 1980s-style illegal budgets as a symbolic, but ultimately futile attempt to force the Government's hand? Hard-left politics may be back in vogue right now, but older readers will remember that such tactics actually hindered progress.

Politics really is the art of the possible. That is what the devo deals are delivering. We can argue about whether they were imperfect and watch as some of them fall apart, or we can build the way social progress generally is achieved: step by painful step.

Devolution in Yorkshire is back in limbo. Local Government secretary Sajid Javid is so far sticking to the line that a pan-Yorkshire devo deal is not on the table. But whatever path is ultimately chosen, we must not abandon pragmatism in exchange for the perfect "right time" for devolution that may never materialise.

Teething troubles for Combined Authorities must not be mistaken for failure

By Mike Emmerich, Director

Britain loves nothing more than to build up people and institutions in public life and then to participate in the spectacle of their destruction.

Not even three months since the election of a crop of new metro mayors for Combined Authorities across England, we’re already seeing the process start. The National Audit Office (NAO) report in early July said little more than that it is early days for Combined Authorities and much remains to be done to make a success of them. Yet some of the reporting of their findings seemed gleefully to anticipate their failure.

Meanwhile in the real world, new Combined Authorities and their metro mayors have been creating new ways of running cities amidst the toughest fiscal conditions and policy stress in living memory. Among the many challenges to which this has given rise is the adjustment by powerful city and other councils - which have for centuries been the focal point for civic, political and business leadership - to the reality of new and potentially powerful metro mayors.

That this should lead to tensions should come as a surprise to no-one in public life. You might have expected this in areas where Labour-dominated city authorities have been spliced together with suburban areas that propelled Tory candidates to victory, as in the West Midlands and Teesside. But it is in the power relationships between city halls that the new modus vivendi is being forged and tested. It is generating heat: in private in Manchester and Birmingham and rather more publicly in Liverpool.

Steve Rotheram’s mayoralty sits uneasily alongside that of Liverpool’s city mayor Joe Anderson, an institution that has dragged Liverpool from near-ruin to real success through exemplary regeneration. As this journal has reported, serial leakers have enabled the press to dine out on some of the steps in the painful process of making the new reality work.

At this point, cue extensive tutting and eye-rolling from some that this proves what they knew all along: ‘provincial’ politicians just aren’t up to the task of running their own cities. Why can’t they just replicate the successful model of the Greater London Authority (GLA), they ask?

Of course, you could write a whole book about the patronising attitudes and suffocating centralising tendencies that have led us to the point where even modest loosening of Whitehall’s grip is seen as a dangerously radical experiment in localism (and in fact, I did).

But parking that for a second, there are good reasons why we shouldn’t expect the new Combined Authorities to function like the capital.

For a start, the structure is completely different. In London, Sadiq Khan and the GLA sit as a quasi-federal government, with its own bureaucracy and a £16bn-a-year budget.

The Combined Authorities, in contrast, are sleeker beasts. In part this was to neuter accusations that they represented an extra layer of red tape, so the new mayors have minimal staff, modest budgets and, without a GLA-style assembly, they must lead cabinets of council leaders with city-region responsibilities but only local accountability.

But in part the model was to overcome a design flaw in London: that there is no functioning mechanism by which the GLA and borough councils can work together on policy. The London model has been successful but is far from perfect. Housing is a case in point: while Sadiq Khan wants 90,000 affordable homes built by 2021, in 2015 there were just 5,790 such homes completed and planning consent remains reserved to the boroughs. Hopefully the new Mayoral Combined authorities can do better: bringing strategic and local together creating both the growth and social inclusion that has eluded the capital.

Those who would criticise that this has not been an elegant process so far should remember: it's very, very early days. The new mayoralties need time and support to bed in. I hope in its future report on them the NAO will compare the Government largesse in preparing for the creation of  the GLA, or the millions spent on rolling out many central Government programmes with the Pickles-era penny-pinching that has deprived the new metros of any financial support for managing the transition.

Now, the Bloomberg Foundation has stepped in. The metro Mayors are currently at Harvard University learning from mayors around the world. Will we mock that or see it as a much-needed downpayment on the institution-building our city governance needs if it is to succeed? Readers of this magazine know better than most: building strong institutions is a great deal harder than knocking them.

First published in Local Government Chronicle

https://www.lgcplus.com/politics-and-policy/governance-and-structure/mike-emmerich-dont-mistake-ca-teething-troubles-for-failure/7020716.article

 

 

A weak and wobbly centre creates opportunity for enterprising cities

 

By Patrick White, Director

 

This week’s Queen’s Speech was notable for its absences. Many of the least popular election pledges – widely blamed for the Conservatives’ disaster at the polls – were summarily junked.

Denounced by Labour as “threadbare”, Theresa May’s programme for the next two years certainly seemed to come from a government with few new policy clothes. Coming the same week as the start of the fractious Brexit negotiations, it’s becoming clear that serious structural reform for local government will now be put firmly on the backburner. Any legislation that might attract even a murmur from backbench dissenters is unlikely to be contemplated.

Even formerly big-ticket items have been left in limbo. Not a peep, for example, on the proposed Local Government Finance Bill, which would have seen councils keep 100% of their business rates. It is true that the proposal had rightly become less than universally popular among local authorities. But while some commentators have judged recent comments by Chancellor Philip Hammond to spell 'the end of austerity', in reality revenue funding is still going to be in short supply for the foreseeable future.  And whatever money Government does magic up for councils will presumably all go towards the now certain to be continued finger-in-the-dyke approach to social care funding.  It is hard to see how any of this is a cause for celebration.

But central inertia, combined with growing concern about the economy and vocal pressure from business, presents real opportunities for city leaders to show their fundamental importance. With a centre that knows it lacks levers, place-based growth gets even more important.

In the context of a loosely-defined Industrial Strategy, places that can demonstrate a joined-up vision based around specific projects and impact have a chance to shine.  If you can get the support of your businesses, and are prepared to invest the time and effort in projects that will actually benefit all parts of your population, then now is a good time to get things done.

Maximising success means doing two things. Firstly, quantifying the payoff in terms of inclusive local growth in new, more sophisticated ways. So rather than just measuring expected GVA or numbers of jobs created and assuming that everyone will benefit, places need to look at more precise, socially-focused indicators such as increasing median wage levels, improving rates of skills progression in firms, or lowering the cost of transport from deprived areas to employment centres. Recent work by the RSA and others can help places be more confident about showing how necessary infrastructure investment, for example, could make more of an impact on groups most at risk from stagnant wages, rising inflation and poor productivity.

Secondly, working with businesses – from SMEs to top tier firms - to make the case for action and investment will be important. This Government will need to feel that it is doing the things that win back the confidence of businesses, currently in despair at the instability and lack of grip.  And where national regulation is going to be hard to tackle, local investment and action is much more likely. 

But leaders should expect business to play its part too. Taking a long-term view, investing more in skills and engaging with schools and communities ought to be compulsory for business leaders seeking to reflect the national mood. Mounting fears about the availability of skilled workers post-Brexit will provide the stick for this, if carrots don’t suffice. And local leaders will be emboldened by confirmation in the Queen’s Speech that new T-Levels for technical education survived the policy cull – providing a framework for private sector collaborations.

This context is particularly acute for new metro mayors starting their terms. Given all the uncertainties, the temptation will be to wait and see how things pan out - but for our biggest cities that can't be true. They must be proactive and show government what they need and why, articulating themselves in ways that carve out a new, less siloed approach to city economics. This will need to reflect more accurately the importance of the human end of capital and accept the political and ‘social logic’ of a place as being of equal importance to the outcome of some quasi-scientific, economic modelling based appraisal.  One that explicitly moves away from the approach that has left so many of our urban population feeling disconnected from the growth and investment around them.

https://www.themj.co.uk/Central-government-inertia-spells-opportunities-for-cities/208040

 

Good Morning Minister. No change, all change

Civil Servants, just like nearly everyone else in the country, was expecting a Conservative government to be returned to power following last week’s General Election.  Few, if any, were expecting a change in Prime Minister.  Some may have been pondering the pros and cons of a reshuffle, but staff in most Departments were working on the basis that most, if not all, their Ministerial team would remain unchanged.

The machine would have done its job and generated briefing on the Labour Party manifesto.  Whitehall is nothing if not scrupulous about such things. But on Monday morning the civil service found itself with the Prime Minister it expected, leading the party it expected to be in Government, and with a Cabinet that it had got to know and was getting used to working with.  So much the same, and yet so very different at the same time.   The civil service is very good at dealing with changes of political direction.  Reshuffles and changes of administration are much more keenly felt in Whitehall than in local government.  This is partly because a Permanent Secretary has much less executive power than a council Chief Executive and because their Secretary of State is often under the close eye of No.10.  This means that the best of them can turn on a sixpence.  But my hunch is that this even-crazier-than-normal moment of all change, no change is going to take just a bit of figuring out.   If you are working with Government in the weeks ahead, here are a few things that might be worth bearing in mind.

 

Firstly, don’t underestimate the extent to which the machine, including Ministers, will want to get on with business in an apparently normal way.  The election was last week and this week there is the business of Government to attend to.  But the recently departed Chiefs of Staff in No.10 set the pace and process of decision making.  Yes, they reflected the boss’ instincts to consider carefully and avoid news where possible.   I’m not suggesting that Secretaries of State, let alone junior ministers, will now be able to announce new things at whim.  But the new team will have a new approach.  And everyone will be trying to second guess that approach and learn how to work with it.  

 

Secondly, with no majority, taking any legislation through Parliament just got even more difficult.  There is a fine line here which may prove one of the most challenging for this Government.  Don’t legislate at all and you run the risk of looking like you aren’t doing anything, whilst the calls for action from various interest groups build up.  Lose more than a handful of votes and the already limited stores of credibility and political capital will be all used up, making a no confidence vote more likely.  So, expect little action on anything remotely legislatively risky.  Security and preventing domestic extremism will be important both in the light of recent atrocities and because it will unify the DUP and Conservative parties.  But generally, existing policy which has already been agreed and for which legislation is already in place, will be the safest space in which to operate. 

But, thirdly, the civil service is also working for a Government that has decided itself that it wasn’t elected to deliver its own manifesto.  This will be something of a conundrum for Ministers and their officials.  If you can’t legislate, and all that everyone can agree about the manifesto was that it was awful, then what, exactly, is on the to-do list?  Whitehall’s challenge here is an opportunity for local business and political leaders.  Finding things that can be done, which will be welcomed locally and support confidence in the economy, is likely to be met even more positively than previously.

Fourthly, good ideas are going to be doubly welcomed if they come from and with the support of businesses.  It is not hard to accurately imagine the tone of some of the calls to No.10 over the weekend from the leaders of our biggest businesses and the City of London.  This is a Conservative government about which the only positive thing that businesses will say is that it isn’t led by Jeremy Corbyn.  This is uncomfortable ground for any Tory PM, particularly one that has so annoyed her backbenchers.  So, expect Secretaries of State and No.10 to be particularly interested in what businesses have to say.   Greg Clark has a big opportunity and challenge in creating an approach to industrial policy that works for business and local growth.  He will be committed to getting it right.

Fifth, look at the economy.  Employment is high, but growth is sluggish at best, wages and living standards are perceived by the electorate to be falling and, where wages are high, no-one can afford a house.  We know that linking up spending on infrastructure, housing and skills needs to be done better.  And we know that building more housing (with associated social infrastructure) matters.  But now, maybe, there will be some effort in Whitehall to achieve it, particularly as this really doesn’t need legislation.  It’s certainly worth cities pressing their ideas.  And with Gavin Barwell in No.10 and Sajid Javid staying at DCLG, recent progress on housing might continue.

Six, I didn’t mention HM Treasury.  All thoughts, however speculative, of breaking up the Department will have been consigned to the dustbin (where they always end up).  But equally, don’t expect a sudden reversal in the move of power from No.11 to No.10.   Secretaries of State and their Permanent Secretaries may secretly welcome the changes at No.10, but none of them will be arguing for a return to the days of an overmighty HMT.

And, finally, unavoidably, there is Brexit.  The main impact on Whitehall is that lots of people are being moved into Brexit related roles.  The impact of this is only going to increase in the weeks and months ahead.

So what to do.  My advice is to work with your business leaders on the ideas that drive growth and benefit communities and individuals, be clear where investment needs to be joined up and what needs to happen to make it so.  Understand your local exposure to different Brexit challenges and opportunities.   Don’t wait for officials to tell you what can and can’t be done, but don’t count on anything that needs legislation.  And perhaps, more provocatively, cities could ask for a little less permission whilst assuming a greater chance of forgiveness.   Local leadership just got even more important.

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.