Cities

Baroness Sharp of Guildford Excerpts

Thursday 19th January 2012 Lords Chamber

[Baroness Sharp of Guildford]

My Lords, I thank my noble friend Lord Storey for initiating this important debate. The White Paper, Unlocking Growth in Cities, which was published in December, received remarkably little publicity for what it had to say, so it is good that we now have a chance to debate it at somewhat greater length.

As has already been mentioned by other speakers, the White Paper had two key themes: first, that,

“Cities are the engines of economic growth and they will be critical to our economic recovery”;

and, secondly, that,

“for too long decisions about the future of these proud cities have been taken in Westminster, constraining local leadership and stopping cities reaching their full potential”.

As the White Paper says,

“We want to help cities exercise their independence and take their economic destiny into their own hands”.

When I announced that I was going to participate in this debate, somebody jokingly asked me, “Are you going to talk about Guildford?”. I said, “Certainly not, the last thing that Guildford wants is talk about the case for any sort of growth”, although it does have aspirations to be a city. No, my reason for wishing to participate in this debate stems from research that I undertook during the 1990s, when I was a research fellow at the science policy research unit down at the University of Sussex—I should perhaps declare an interest as I remain a visiting fellow of that unit—and was looking into innovation in Europe.

In particular, one issue that emerged from that research was the role played by a number of the core cities in Europe. In Germany, a large number of the cities play a vital role within their Land—one thinks of Munich, Stuttgart, Frankfurt and Dortmund. With the increasing prosperity of eastern Germany, cities such as Dresden are now emerging as core cities that lead their local areas. However, we looked not just at what was happening in Germany, which is the most decentralised of the European countries, but at what had happened in Spain, where devolution had encouraged Barcelona. Over the past 20 years since the Olympics, Barcelona has built itself to be a hub of growth within its local region of Catalonia. Again, Helsinki in Finland, which 20 years before had been a dull city, had also taken itself forward—partly on the back of Nokia and the electronics revolution—to become much more important and another hub of growth. I was interested in the role of cities within their sub-regions and regions, and I was interested in the degree to which they became a core for growth.

The other reason I wish to participate in this debate is because, in the course of the past year, I have been chairing a commission for the National Institute of Adult Continuing Education and the AOC that is looking at the role of colleges in their communities. I wanted to flag up the importance of colleges as well as universities within this agenda.

Let me start by taking up the whole issue of European cities, which has already mentioned by my noble friend Lord Shipley. As I said, my interest stems from the work that I did in the 1990s, but that work was carried forward to a considerable degree in the early part of this century with a report published by the then Deputy Prime Minister's Office—in the time of the noble Lord, Lord Prescott—called Competitive European Cities: Where do the Core Cities Stand? That was led by research from Professor Michael Parkinson at Liverpool John Moores University. Among his co-authors was Greg Clark—I rather excitedly thought that this might be the Minister in the Department for Communities and Local Government, but on chasing him up further, I discovered that it was not the same person, although the name is the same.

The Competitive European Cities report picks up some of the points made by my noble friend Lord Storey. It is a rather depressing story. The report was written in 2004 so it does not reflect the continuing growth in our core cities that took place from 2004 to 2008 and their continuing renaissance, which my noble friend Lord Storey talked about. It showed that Britain's core cities in the late 1990s and the early years of this century, while going through something of a renaissance, nevertheless in general lagged behind their European competitors in terms of productivity, GDP per capita, innovation, education levels, connectivity—the transport and communication routes, both electronic and physical —social cohesion, quality of life, political capacity and connections with their broader sub-regions. The only exception to that was Bristol, which in GDP terms was actually above the national average rather than below. With the exception of Bristol, all the major cities in GDP per capita terms fell below the national average.

Equally, the very positive message from the study was that the situation can be turned around, albeit over time. It instanced the very positive stories of cities such as Barcelona and Helsinki, which I have already mentioned, which over the previous 20 to 25 years have transformed themselves and their regions from being backwaters into being leading global players.

The factors that were listed as contributing to success were interesting. One was economic diversity—not being too dependent on a single sector of the economy but having a range of sectors, all of which contributed to their success. Connectivity, the physical and electronic capacity to move goods and services and people quickly and efficiently, was important. In that sense, airports played an important part. Barcelona, for example, has a splendid new airport that was built for the Olympics and it has made a great deal of difference to the city. Again, in Spain, the linking up of all the Spanish cities by the TGV-type fast train has made an enormous difference.

Other important factors included strategic decision-making capacities, the significance of networks and the relationship between key players in public and private sectors to get things done and get them decided. Networks are extraordinarily important—I want to come back to that point because that links up with the work that I was doing on colleges in their communities.

Innovation and investment in knowledge-based industries, combined with research education capacity, are also vital. That is something that one sees so strongly in countries such as the United States. I remember back in the 1970s being very impressed with the degree to which a group of universities in North Carolina had created a hub of growth within what had been a very backward state. One sees this very much in the United States, where the links between university and research have carried many states and regions within states forward.

Decentralisation and access to a skilled workforce are also very important. I want to pick up both of those issues and talk a little bit more about them. Decentralisation is very interesting and was an issue that hit me in my own research. The Competitive European Cities report said:

“Although it is not a straightforward relationship the evidence does suggest that where cities are given more freedom and autonomy they have responded by being more proactive, entrepreneurial and successful. Decentralisation in France has invigorated provincial cities during the past 20 years. The most successful cities in Europe have been German, which is the most decentralised country in Europe. The renaissance of Barcelona in part stems from the move towards regionalisation and the lessening of the grip of … Madrid”.

The question arises as to whether the new powers we are proposing to give to our core cities are sufficient in this respect. My noble friend Lord Storey has been quite optimistic, but others have been much more critical about how much real economic decentralisation is proposed. In looking at the list of new freedoms that were being given, it seemed to me that it was again—one has seen this before—a list of pots for funding for this initiative and that initiative. Such funds are of vital importance, but the only new money seems to be the degree to which these cities are able to control business rates. Indeed, all they seem to be getting is the right to access any money from the growth in business rates—yet I think it was perhaps the noble Baroness, Lady Eaton, who said that this is now being constrained as the Treasury is holding it back.

England remains the most fiscally centralised country in Europe and, probably, in the world. In the week in December in which this announcement was made, the Secretary of State for the Department for Communities and Local Government announced that, after a two-year freeze on council tax, he will intervene if any council raises its council tax by more than 3.5 per cent this coming year. Such intervention would, in most countries, be regarded as quite untenable. Most of these successful cities in Europe have the discretion not only to set their own tax rates but often to develop new forms of tax, such as local sales taxes, local property taxes and so forth. They also have—and this is very important—freedom to go to the market to raise capital. One looks at German cities and the importance of the links they have with the local Landesbanks, with which they are often in partnership in new projects and developments. That seems so important.

However, in this country, if you want to raise money, you go cap in hand to the Treasury and say, “Please sir, can we raise the money for this? Can we have the money for that?”. The Treasury controls absolutely everything. You can devolve political leadership—we have seen that and we have some very fine local leaders—but as long as the Treasury is not prepared to devolve in economic terms, and unless those leaders have the tools to do the things they want to do, I am not confident that we will see this turning around that one has seen in some of these European cities.

I will just spend a little time talking about colleges in their communities. My remit was to look at the role that colleges can and do play within their communities and the value that they might add as potential leaders. That led me to visit a great many colleges. If you are talking about the role and levels of education and so forth, a lot of emphasis is put on universities and the development of graduate education and research, which is absolutely important, but the majority of those at the local level—if one is talking about skill levels—are trained by the colleges rather than by the universities. Where Britain really lacks capabilities is in the intermediate and technician-level skills, where colleges can potentially play a very important part. The skill profile in many of these cities is below the average; they have a disproportionate number of those completely lacking higher-level skills such as Level 2 or 3 and a disproportionate number with very low-level skills.

I was very encouraged by what some colleges are doing in reaching out, for example, to work with local employers. I am thinking of a college such as Birmingham Metropolitan College, which has worked with the BBC to train technicians for the digital switchover and with Samsung to train electronics technicians. The college has also developed a new link with Caterpillar and its supply chain and developed lots of apprenticeships. However, I also think of a college such as Barnsley College, which is facing very different conditions. Most of the local employers are small and medium-sized enterprises, which are loath to take on apprenticeships. Barnsley College has set up a separate company to employ apprentices off their own bat, whom they then hire out to small and medium-sized businesses. Some 99 per cent of these young people fulfil their apprenticeships and there are no problems, but the college acts as a guarantor and will always take them back if it does not work out.

It is so important that colleges link up in partnership, not only with employers but also, for example, with the police and local youth offending teams to bring the NEETs into college and give them experience and that they link up with community groups and ethnic minorities. All of this is happening as best practice in the best of our colleges, but one just needs to see it happen far more widely. This whole issue of upgrading the skill levels of people generally is an absolutely vital one if our cities are to succeed.