Future of cities: What our economic divide is costing us
The north-south divide has a long history in England, culturally and economically. But as recently as 2004, figures have shown the gap between the average economic output of England and its three northern regions had grown to £30bn. This has given great cause for concern and has led to the launch of an initiative called the Northern Way, a partnership between three regional development agencies aimed at boosting the economic development of eight city regions in the north.
But while this gap exists, people are recognising another economic dividing line that runs diagonally across the country, from below the Humber in the east to the south-west coast. It forms what Danny Dorling, professor of human geography at the University of Sheffield, calls "a £100,000 cliff in house price rises". With a few exceptions, the gap is effectively between London and the greater southeast, and the rest of the country.
Why does this matter? Shouldn't we be content with our strong economy radiating out of the south-east and leave well alone? Yes, it has an impact on equality of economic opportunity, but can't we just leave the market to sort it out?
In fact, the overheating of the southeast economy has become a worry — and it has serious environmental implications too — but the words "eggs" and "one basket" also come to mind given the current economic climate.
Quite rightly, we hear a lot about the importance of London's economy, but what is less well known is that the combined economies of England's eight regional "core cities" and their surrounding conurbations — city regions — are actually greater than that of London, contributing 25.5% of national output. Their total population is 16 million, one third of England's total; they account for 18% of the workforce and 25% of those people qualified to degree level or above.
This isn't an either-or argument; our cities need London. But it does give a sense of relative scale, and the message is clear: there is another economy out there that can do as much, if not more, for England — and we ignore it at our cost. At a moment of downturn, the entire UK needs to be firing on all cylinders.
The urban policy narrative in England has shifted dramatically over the past 10 to 15 years, from seeing cities as problems (the seat of social terror and economic nightmare) to viewing them as solutions to the economy, society and the environment. Cities are being recognised as the most sustainable places to live, and offering the best chance of dealing with disadvantage. They clearly drive the economy, with some of the core cities accounting for more than 50% of their region's entire output.
But some cities in England are struggling to close the productivity gap, creating a further dividing line between places that might be neighbours. Internationally, things look bleaker still. A 2006 report, State of the English Cities, by a group of city experts led by Professor Michael Parkinson, showed that out of the top performing cities in Europe, England had only three in the top 50. France had five, Italy six, while Germany had a staggering 15 in the top 20.
Across the great divide then, but the report had two important lessons for thriving cities. First, the most successful European cities enjoy more devolved arrangements than those in England, particularly financially. Here we are heavily centralised and cities directly control only about 5% of the total taxation raised in them — council tax. Among our competitors, this can be 40-60% and more. They have freedom to decide on local priorities, act quickly to take opportunities and resist economic shocks.
Second, they have a tradition of operating across functional economic areas — city regions. Increasingly, we live and work in a way that takes no account of administrative boundaries; economic and business flows also follow these patterns. The most successful places integrate their strategies for housing, economy, transport and spatial planning at this level.
We have seen much progress in recent discussion about empowering cities by devolving finances and control. The forthcoming sub national review of economic development and regeneration is about to conclude, hopefully, in this direction; the empowerment white paper makes proposals for more local democratic engagement; and the Lyons inquiry has made suggestions for empowering local government as "placeshapers".
As a group, the Core Cities Group — Birmingham, Bristol, Leeds, Liverpool, Manchester, Newcastle, Nottingham and Sheffield — have been working positively on these issues with the government, RDAs and the Homes and Communities Agency — an important new player in housing and regeneration. However, change has yet to be felt at local level.
Public spending
One of the biggest issues cities face is paying for their needs and ambitions at a moment of downturn and decreasing public spending, particularly to finance major infrastructure.
With PricewaterhouseCoopers, the Core Cities Group has produced a report that demonstrates how cities might use innovative approaches, allowing borrowing against future income to pay for schemes that generate the proceeds in the first place.
Interim findings suggest that such an approach could greatly increase economic outputs, housing units delivered and jobs created in some schemes. It could be used to fund transport projects and climate change measures. At the end of the borrowing period, it would also create a greater return to the Treasury from receipts that would not otherwise exist.
But perhaps the starkest and most persistent economic split in England is neither north-south nor east-west. It is between individual cities — those that have benefited from prosperity and those that have not. The personal difficulties caused by worklessness and a "cycle of disadvantage", often concentrated in small areas, cannot be underestimated. It also has an effect on local economies, reducing the workforce, constraining output and productivity and straining public spending. Ultimately, it has an impact on quality of life and quality of place, two factors that, in a knowledge economy with highly mobile businesses, give big competitive advantage.
There is some exceptional work taking place but, if we want to reduce economic disparity in England, as well as looking at important regional divides, we need to do more within individual places. In some of our cities, up to 22% of the population have no qualifications. Increasing skill levels can bridge the gap between disadvantage and economic opportunity, but programmes are more likely to succeed working alongside plans for housing, economic development and transport.
Which brings us back to devolved control and integration across the real economic geography. It might sound like "economyspeak", but allowing cities to play their full economic role will help their citizens and communities have more fulfilling lives.
Chris Murray is director of the Core Cities Group
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