Cities

Lord Shipley Excerpts

Thursday 19th January 2012 Lords Chamber

[Lord Shipley]

My Lords, I join in thanking my noble friend Lord Storey for initiating this debate. I thank him too for his comments on my role as adviser to the Government on cities policy. I have taken a very close and detailed interest in this over the years. I am pleased that great progress has been made because we need to make progress urgently.

In contributing to this important debate, I want first to make one very simple point: cities drive growth and jobs and they do it best when freed from central constraint. The Core Cities Group in England, of which I was a member when leader of Newcastle City Council, has laboured over this one critical message for more than a decade, building evidence, demonstrating practical examples, and developing new instruments and financial models. Yet the productivity of our greatest cities still lags behind that of their counterparts in Europe and elsewhere.

Let me give two examples. My noble friend Lord Storey referred to GDP figures. The eight English core cities account for some 27 per cent of GDP, while Greater London accounts for 28 per cent. If you compare them with other major European countries, for example, you see the gap. If we compare the GDP figures for the eight largest non-capital cities in England with the eight highest performing non-capital cities in Germany, France, Spain and Italy, the examples of Germany and France, which are closest to us, are particularly revealing. We are simply much lower in any GDP test that we seek to apply.

A simple and practical example is the annual patent applications per million of population. Germany’s top non-capital eight cities have an average of around 400 patent applicants a year, France has around 200 patent applicants a year, and the top eight non-capital English cities have an average of 70 patent applications a year. To me, that sums up the problem. England has been—the United Kingdom less so—hugely overcentralised. One of the things that the Government are trying to do which I am particularly pleased about is to reverse that trend. The economic contribution of our cities has never been more vital to the growth of the United Kingdom.

The government publication Unlocking Growth in Cities, launched in December, comes at a decisive moment for the economy. The document builds on an amendment to the Localism Act, originating from the core cities, which I and other noble Lords present have spoken to and supported in this House. It sets out the goals, opportunities and process for bespoke city deals, giving each place the means to improve their specific circumstances—not to a one-size-fits-all formula. These are called city deals and initially those deals will be with each of the eight core cities—Birmingham, Bristol, Leeds, Liverpool, Manchester, Newcastle, Nottingham and Sheffield—but with a clear and stated ambition to go much further.

Each of these cities, working with their local enterprise partnerships, is engaged in discussion and negotiation across Whitehall for further decentralisation of the tools and resources to drive up growth and jobs and drive down dependency on public services. As I said, these eight cities already produce 27 per cent of the country’s total economy. However, recent independence forecasts by Oxford Economics demonstrate that the eight core cities local enterprise partnership areas are capable of delivering an additional £61 billion in GVA and 1.3 million jobs beyond those currently predicted up to 2030.

Some contributing growth factors are beyond the control of local or national governments, and we need to recognise that. But others, including a more locally sensitive application of the levers of growth, can and should be devolved.

The eight core cities I mentioned have a particular role, but their work has always been applicable to a much wider constituency of towns, cities and local authorities. What works for them can work in other places, particularly using the bespoke method that the Government have put in place. Unlocking Growth in Cities and the Localism Act set in motion a long-term process of decentralisation for growth, and it is not a one-off initiative. It is my hope that many other places will in due course come forward, jointly with business leaders, to benefit this process—perhaps several times as needs change—and that we will in turn all benefit from the increased growth that they produce.

I listened with interest to what my noble friend Lady Eaton said about Bradford. It has been a common comment, because there has been a misunderstanding that somehow this is only about eight cities. It is about those eight core cities that have for the past decade been planning for how they could use the levers of government to drive growth. It was made absolutely clear by the Deputy Prime Minister in his speech in Leeds in early December to launch the new cities policy that this was the forerunner for other cities. There will be a second round starting later this year, and this should be perceived as a continuum.

Cities will need to be bold, and all those who would like to be in a further round will equally need to be as well. Government departments will also need to be bold following the localist lead set by my right honourable friend the Minister for Cities. This requires nothing short of a complete culture change in the way we all work, moving from a central to a more local model, driven by good city governance, with political and business leaders working more closely together.

This is about rebalancing the economy away from an overreliance on London and on financial services; it is about our need to invest and build in our cities so that they can create more of their own wealth and a rising tax base, without simply being dependent on financial support from London and the south-east.

So what needs to be different? We need to manage cities in a different way. Rather than waiting for the centre—Whitehall—to give out money tied to specific programmes and outputs, we need to use money, which may be limited, wisely, defining the local priorities that are felt to be important, and let them shape the funding to fit that set of local priorities. Local authorities will in future be less development managers and more development facilitators. They will act less on the basis of national targets and work more in collaboration with neighbours to establish growth ambitions and delivery. Crucially, risk and funding, which are currently undertaken at the centre, will be managed by the local authority, the council, the first eight core cities and their city regions. This is quite a significant culture change that the Government are proposing.

However, the context is very important and it relates to governance of the United Kingdom. There has been devolution to Scotland, Wales, Northern Ireland and London, and there will probably be increasing devolution to all those places. Perhaps we do not talk enough about the implication of that for England, which cannot be left out of that process. The Localism Act, which is now in place, focuses mostly on local government and its relationship to Whitehall within a context in which government offices in England have been abolished.

There is a strong centre of government in London and there are strong centres of government in Wales, Northern Ireland and Scotland, but there is no longer a government office in Newcastle upon Tyne, my city, or in any other regional capital in England that hitherto existed. There are some outposts of Whitehall departments, which are very welcome, although I sometimes feel that they could be better co-ordinated. Perhaps at some point they might all be collocated. We will see. As I said a moment ago, we have to address the issue of devolution from Whitehall.

Noble Lords may care to look at the document, Unlocking Growth in Cities, which was published in December. It gives a list of 21 policy areas in which the Government are prepared to enter into negotiation with cities to establish greater freedoms to invest in growth. I cannot go through all of them but some are very important. It refers to one consolidated capital pot for local decision-making and powers for cities to offer business rate discounts to local businesses. There will be a particular role, from 2014, for structural fund—the European RDF and European Social Fund—programmes under which there is a plan across Europe to adopt a special focus on cities and which will be able to play more of a leading role in shaping bespoke and integrated programmes.

There will be the ability to create industry-specific business improvement partnerships and tax increment financing, which is part of the Localism Act and in essence enables a local authority to borrow against future business rate income. At the moment, in England, councils are required to borrow prudentially against guaranteed sources of income. Therefore, there is a greater risk management in tax increment financing but also enormous potential rewards in the form of growth. There could be benefits in local authorities opting to pool business rates across their local enterprise partnership. There is the possibility of devolving local transport major funding and the responsibility for commissioning local or regional rail services, and for developing greater accountability to local communities for local bus services in the context of wider bus service operator grant reform. Public sector assets could be vested locally in a single local property company. As I say, no longer are there government offices to manage some of these things. There is a gap which someone else might have to step into to do these things.

Some of the spending functions of the Homes and Communities Agency—including a whole range of things such as planning, broadband and skills—could be devolved to councils and cities. It is a major concern to me that, despite all the multi-millions of pounds that have been spent in my region and in many others on skills development in the north-east of England, 25 per cent of manufacturing and processing companies are finding it difficult to recruit people to work in them. There is a mismatch between what the private sector needs to create wealth and therefore tax income for this Government, and the investment that is being put in. It seems to be leading people to develop skills, which in one sense is very good but in another sense does not help us drive the growth of the economy that we need.

Areas that should be looked at are city apprenticeship hubs, the creation of a city skills fund, and much closer working with and perhaps leadership of Jobcentre Plus. There certainly should be greater integration in the service of Jobcentre Plus at a local level. I would welcome it working much more closely with the Department for Work and Pensions. The Government can do a whole range of things. Each city will be different. One size will not fit all. I hope, first, that by Easter some cities will have reached agreement with the Government and that others can follow quickly. After that, round 2 can start and it is to be hoped that similar agreements can be reached.

As I said at the start of my speech, I am immensely encouraged by what the Government are doing. There is enormous potential in the policy work that is now being done and I hope very much that this will be grasped by all the cities and urban areas in England in order that we can produce the growth that the country needs.