‘Devo met': an idea whose time has come

This article was originally published by Policy Network

With a series of significant new pledges since his ‘northern powerhouse’ speech in June, George Osborne seems determined to own the city growth agenda. How can Labour get back on the front foot?

Cities are at the heart of a new bidding war between the main political parties. The autumn statement and the Manchester devolution deal, underline the chancellor’s determination to own the city growth agenda. So far we have had major infrastructure, new public service powers, a ‘metro mayor’ and an advanced science institute for the north, all following George Osborne’s ‘northern powerhouse’ speech in June.

Meanwhile, Nick Clegg’s ‘northern futures’ project has been seeking to drive city innovation and Vince Cable has been claiming credit for delivering the new science funding for Manchester. For Labour it looks like an early lead lost, with the Adonis Growth Review and the party’s policy commission, led by Jon Cruddas, both staking out city devolution territory – in the form of a proposed £30bn of devolved funding to combined authorities – that was not subsequently built on.

Cities are a recent success story in Britain, with revitalised urban centres that are the cultural and creative hubs of their conurbations. The resultant population growth in most of our main cities has outstripped national demographic trends and a recent report showed record numbers of thirty-somethings are relocating from London to cities like Manchester, Birmingham, Nottingham and Bristol.  Public services have also benefitted from dramatic improvements, with cities now outperforming rural and coastal towns on education standards, as a result of initiatives like the London Challenge.

But it is not all good news. Despite 62% of global growth coming from cities, which routinely outperform their countries, in Britain, only London, Cardiff and Bristol have growth rates higher than the national average. The RSA City Growth Commission, which I set up just over a year ago, set out to examine what could be done to enable British cities to achieve their growth potential. Our Chair, Jim O’Neill, was clear from the outset that the question we should ask is what measures might increase the growth rate of cities, such that they also raise national growth? For that reason, we decided to concentrate on the 15 largest ‘metros’, consisting of functional economic areas that combine core cities and their adjacent towns and cities.

However, it was quickly apparent to us that in economic terms, even most of these metros were still not large enough to be able to generate the scale of agglomeration benefits that would be required to rebalance our economy. The metro area of London is six times bigger than Greater Manchester, which is Britain’s second largest metro. So one of the questions we looked at is: could nearby metros collaborate with each other to create greater economic mass? This was the genesis of the northern powerhouse idea. The combined metro population of these four great cities is 7m people, much bigger than Scotland and closer to the size of London. A similar logic would create a Midlands super city region of 4.5 million (spanning Birmingham to Nottingham); and super city regions in the north east and in the Severn area (with Bristol and Cardiff) of closer to 2 million.

We then set out to look at what policies could accelerate these agglomeration effects. Connectivity is critical. That is why we recommended massively improving the speed and frequency of east-west travel in the north and in the midlands, supporting HS3, Midlands Connect, a ‘NOyster’ for the north and devolved regulation of buses to city regions. In addition, we need a big improvement in our broadband infrastructure, which is lagging further behind our international competition.

Devolving responsibility for skills and employment support to metros is also crucial, so that decision making can be aligned with the skill needs and employment opportunities of local economies. The same principle applies to public service spending on health and social care, where place budgets can support whole system redesign and service integration. And universities could better support metro growth, through more effective graduate retention programmes and the promotion of innovation and enterprise hubs. However, if cities are to achieve their growth potential then they will also need fiscal devolution to enable them to borrow for investment and to benefit from the tax revenue generated by higher levels of gross value added. Taken together, we concluded that by 2030, these measures have the potential to boost economic output in the 15 largest metros by £79bn a year – worth approximately 5% of current gross domestic product.

When we set up our commission we did not seriously imagine that some metro devolution would be introduced almost before the ink was dry on our report. Of course, there is still a long way to go. There has not yet been any fiscal devolution. A lot more is still to be devolved, both to the north and to cities in the midlands, north east, south west and to London, and these metros will need to make some big decisions about governance and accountability. The default mode in Whitehall will seek to undo and undermine what has already been agreed. And while the government is giving control over more expenditure to cities, the next wave of cuts will be eye-wateringly painful for those same places. But it would be a mistake for Labour to not recognise the significance of what has happened. As Jon Cruddas said recently, ‘this was an audacious land grab’ by George Osborne. Moreover, his northern powerhouse speech indicated a surprising familiarity with the work of progressive urban economists like Ed Glaister, precisely the type of thinkers who you would normally expect to be part of Labour’s intellectual hinterland.

So the question for Labour is how can get it back on the front foot on cities? The answer is to relate city region devolution to some core Labour themes such as: an economy that works for all; public service reform that prioritises prevention and social investment; and a power shift away from the centre to local people and communities. Improving skills and employment support is a key priority for Labour, along with its job guarantee for young people. A negotiated package of skills and employment devolution to Britain’s cities could be the best way of achieving this. This could go substantially further than the city deals that were announced in the autumn statement and could contain clear commitments on jobs, apprenticeships and skills and training provision.

On public services, the Labour concern is that devolving budgetary responsibility is just a way of passing the buck on cuts. But there is an opportunity to do something more radical that links together Graham Allen’s early intervention work with place-based budgeting. What Labour needs to do here is to engage in some serious thinking about how to reprofile public spending between productive and social protection expenditure. This, rather than marketisation, is the new cutting edge of public service reform. But it will require making the case for treating preventive expenditure, for example on skills, school readiness, early years education, and family support as being a form of investment with longer outcome returns. Some ground breaking work is being undertaken by Greater Manchester on this, as well as by some ‘cooperative’ councils like Oldham, Sunderland and Newcastle. Labour should champion this as being central to its vision of social devolution and people-powered public services.

Hot on the heels of ‘devo max’, ‘devo met’ can help Labour respond to the English question. Replacing a UK parliament in Westminster with an English parliament in Westminster will do nothing to empower local people. Whereas supporting devolution to our major cities, goes with the grain of existing structures, while enabling effective regional economic collaboration to take shape.

The message from the cities is clear: let the competition between the parties continue. For Labour, it is time to find a game changer.

Ben Lucas is Chair of Public Services at the RSA and City Growth Commissioner. You can follow him at @BenLucas_