This year, George Osborne delivered his Budget against a backdrop of better than expected growth, higher than expected employment, and a deficit reduction plan that exceeded previous OBR forecasts.
His speech, unsurprisingly, made much of the success of the “long-term economic plan delivered by a coalition Government and a Conservative Chancellor”. Yet the fact that our cities still lack the powers they need to fulfil their economic potential, and drive growth locally, will constrain future growth for large parts of the UK economy.
Without thriving city economies, there can be no sustained national recovery. Between 2010 and 2012, urban areas accounted for 97% of all net new private sector jobs created in the UK. London has been home to overwhelmingly the largest proportion of these new jobs, but cities like Edinburgh, Manchester and Liverpool all saw significant jobs growth too.
However,the biggest cities outside of London continue to perform below the national average across a range of key economic indicators, including skills, employment and new business starts. Many others, such as Bradford and Sheffield, have continued to lose jobs, despite the national economic recovery.
Of course there were individual announcements of extra funding or project support for urban areas – for example the £270m guarantee for the Mersey Gateway Bridge, or the extension for the Regional Air Connectivity Fund to include start-up aid for new routes from regional airports, and these are broadly welcome.
But only the announcement of the Cambridge City Deal, where the government is committing £100m to Greater Cambridge until 2019-20 to support their housing, transport and infrastructure proposals through a Gain Share mechanism, represented the kind of empowerment urban areas need to shape and drive growth in their areas.
Despite progress made by initiatives such as City-, and now Growth-Deals, the UK remains one of the most centralised countries in Europe. Indeed, the fact a national Budget included a challenge fund for pothole repairs for local authorities to bid into illustrates that, if an issue is politically important, then national government wishes to be given credit for progress. There is a persistent imbalance in the relationship between central and local government.
The biggest winner of new devolved powers in the Budget was not Manchester, Leeds or Newcastle, but the Welsh Assembly, who were given permission to borrow to fund infrastructure investments, ahead of a Wales Bill to devolve greater tax raising and borrowing powers.
Recognising the issues of national politics and cultural identity that underpin these reforms, it nevertheless suggests the UK is missing opportunities when UK city regions such as Greater Manchester and Greater Leeds, each of which boast larger economies than Wales, have so few powers to drive their economies.
A more radical transfer of powers and responsibilities from central government to cities would give urban areas greater control over their economies, while the prospect of retaining a greater share of the proceeds of growth would provide real incentives to attract and support business investment in their area. But it would also provide flexibility to adapt policy to local needs, driving much needed innovation and efficiencies in public services.
All around the world cities are driving growth. They are home to the most productive parts of the global economy – where new ideas are generated, businesses are started and expanded, wages are higher and people’s ambitions can be fulfilled.
In the Chancellor’s own words, this was intended to be a Budget for the “makers, doers and savers”. But while there were significant announcements on tax, pensions and housing, there was no discussion about the fact that things are made, economic activity is undertaken and money is saved, in places – primarily in urban areas and their hinterlands.
If we want UK cities to play a larger role in the national economy in the years ahead, then they have to be given the tools to grow their economies and respond to the distinctive local circumstances that they face. That’s how the makers, doers and savers will sustain economic growth in the years ahead.
* Alexandra Jones has been Chief Executive of the Centre for Cities since summer 2010.
