Chancellor of the Exchequer on what we can do to make the cities of the north a powerhouse for our economy again.
Welcome to the Power Hall in the great Museum of Science and Industry here in Manchester.
We are surrounded by the beam engines and hydraulic accumulators and turbines that made this part of Britain the economic powerhouse of the world a century ago.
And I’m here to talk to you today about what we can do to make the cities of the north a powerhouse for our economy again – with new transport and science and powerful city governance.
I’ve been a Member of Parliament here in the North West of England for 13 years.
Indeed, I’m the first Chancellor to represent a seat in the north of England for over 35 years.
But as you can tell from my accent, I wasn’t brought up here. I was born and raised in London.
Being a Londoner proud to represent a Northern constituency gives me a very personal perspective on the time-worn debate about north and south, London and the rest.
I grew up with the cliché that if it wasn’t happening in London, it wasn’t happening at all.
And my time in Parliament has been shaped by another cliché: that the dice are unfairly loaded against the north; that our capital city to the south has sucked economic life and talent away from here.
It’s the context of almost every media interview I’ve done here, from when I was first a parliamentary candidate to my time now as Chancellor.
I’d like to try to escape both clichés today, and get closer to the truth.
Something remarkable has happened to London over these recent decades.
It has become a global capital, the home of international finance, attracting the young, the ambitious, the wealthy and the entrepreneurial from around the world in their tens of thousands.
During the week I live in the centre of the capital, and I see this London effect with my own eyes.
And it’s a great strength for our country that it contains such a global city.
But something remarkable has happened here in Manchester, and in Liverpool and Leeds and Newcastle and other northern cities over these last thirty years too.
The once hollowed-out city centres are thriving again, with growing universities, iconic museums and cultural events, and huge improvements to the quality of life.
I feel the buzz and the energy every time I’m here.
And I see it too in the Treasury data.
Which part of England has the fastest-growing economic activity right now? The North-East.
Where are people joining the labour market at the fastest rate? The North-West and North-East.
Where is construction strongest? Yorkshire and Humberside.
We’ve seen massive investments all over the north. Hitachi, Nissan and Rolls Royce in the North East. The Airport City in Manchester. The new deep water port in Liverpool. Siemens in Hull and East Yorkshire
Our long-term economic plan is delivering a recovery everywhere.
And I’ll speak on other occasions of the huge opportunities for Birmingham and the Midlands.
But today I want to focus on the north of England.
So let me be very clear.
There is a hard truth we need to address.
The cities of the north are individually strong, but collectively not strong enough. The whole is less than the sum of its parts.
So the powerhouse of London dominates more and more.
And that’s not healthy for our economy. It’s not good for our country.
We need a Northern Powerhouse too.
Not one city, but a collection of northern cities - sufficiently close to each other that combined they can take on the world.
Able to provide jobs and opportunities and security to the many, many people who live here, and for whom this is all about.
You know, if you brought together the best players from each of the Premiership teams in the north, you’d have a team that would wipe the floor with any competition.
We need to bring the cities of the north together as a team – that’s how Britain will beat the rest.
Here’s why. Here are the hard economic facts.
In a modern, knowledge-based, economy city size matters like never before.
In the nineteenth and twentieth centuries, a factory would be located where you could find raw materials, power, and cheap labour.
Today, in a services based economy, what investors are looking for is not a river to dam, but access to a deep pool of human capital.
There is a powerful correlation between the size of a city and the productivity of its inhabitants. The top 600 cities in the world contain just 20% of global population but create 60% of global GDP.
Over recent decades economists have explored all the different reasons why cities raise their residents’ productivity: specialisation is greater, competition and economies of scale increase, ideas and innovation spread faster.
Crucially, cities are also where clusters of successful industry are created - like the financial services cluster in London, or the digital economy of California’s Silicon Valley.
Not so long ago, people thought that the internet might make physical location less important.
But it seems in the modern knowledge economy businesses and entrepreneurial types want to flock together more than ever. To form clusters where they can learn from and spark off each other.
And of course, as Europe’s largest city, London benefits from those important agglomeration effects, helping the capital to suck in money and talented people from all over world.
As Manchester’s Independent Economic Review argued, there are “powerful market forces” pulling activity into big cities, world cities.
I know this is something that Jim O’Neill and the Cities Commission have been thinking hard about – and I want to make sure we learn from their important work.
How can we have more of such cities? How can we create the Northern Powerhouse?
For decades different governments tried shifting lower end public sector posts around the country. It created jobs in call centres and back offices, but it didn’t improve the fundamental growth potential of these places.
Leaving it all to the market doesn’t work either. The Albert Dock in Liverpool or Manchester City Centre didn’t regenerate themselves. It took national leaders like Michael Heseltine and civic leaders like Richard Leese and that brilliant star of city government, Howard Bernstein.
A great global city has many things. Great jobs and businesses. Fast and effective transport connections. Strong universities and hospitals, colleges and schools for aspirational families. It will have the entertainment, the green spaces, the housing, culture and sport that makes for a good lifestyle.
All this requires scale. You need a big place, with lots of people. Like London.
Here in the north we have some of the best universities and teaching hospitals in the world. Fantastic museums and theatres too, all surrounded by the most beautiful countryside.
These cities, in a belt that runs from Liverpool to Hull all have strengths individually – but on a global scale they are also quite small. Manchester’s population is 2.6 million. Leeds’ and West Yorkshire’s is 1.8 million.
But together our northern cities can be more than the sum of their parts.
The last census found that the average commute of someone who travels into London from outside is 40 miles. If you make a circle of the same distance, and centre it here on Manchester, you’d have a catchment area that takes in Leeds, Sheffield and Liverpool, Lancashire, Cheshire and Yorkshire, and contains ten million people – more than Tokyo, New York or London. An area containing nearly two million graduates. A huge pool of talent.
How do we build the Northern Powerhouse?
By joining our northern cities together – not physically, or into some artificial political construct – but by providing the modern transport connections they need; by backing their science and universities; by backing their creative clusters; and giving them the local power and control that a powerhouse economy needs.
And those are the four ingredients that I want to address.
The oldest railway station in the world is here – right here, in this very museum.
This is the area that invented modern transport.
And yet today the transport network in the north is simply not fit for purpose – and certainly not good enough, if we want our cities to pool their strengths.
- Manchester and Sheffield are just 38 miles apart - yet it takes over 1 hour 20 minutes to travel by car. In that time you can get from Southampton to Oxford, which is twice the distance
- it’s quicker to travel the 283 miles from London to Paris by train than it is to travel less than half that distance between Liverpool and Hull
- bus trips in the capital are up a third over the last ten years, but down by 7% in the northern cities
Now I’m trying to fix this with a series of massive investments in the transport infrastructure in the north.
I’ve committed £600 million to the Northern Hub, which will cut journey times on trains between Manchester, Leeds, Bradford and Sheffield.
I want now to properly hook up Hull to our national network too.
The huge roads investment programme we’ve just started on will see upgrades to the M62, M1, A1 in Newcastle and Gateshead, and a new Mersey Gateway Bridge – with more schemes to be announced later this year.
We’ve backed the port of Liverpool, reversed the crazy decisions that blocked cruise ships there, and I want to see the Atlantic Gateway go from being a brilliant concept to a transforming reality.
I’ve found resources to extend the Metrolink here. Like any global city, the commuter routes to the surrounding towns and villages are vital.
And this winter we will tender for the whole new Northern rail franchise. We’ll want to see not just better services, and more seats at peak times, but also better journeys.
So bidders for the franchise will be asked to include options to get rid of outdated ‘railbus’ or ‘pacer’ style trains.
It’s time for modern rolling stock in the north.
Above all, we are building High Speed 2, which will connect 8 of the 10 largest cities in the UK, including Manchester, Leeds and Sheffield. Phase 2 alone is a £21bn investment, and will support at least 60,000 jobs. It’s the most important investment in the north for a century.
Of course, there are opponents of the project – just as there were opponents of the original railways. I’ve discovered that almost everything worth doing in politics is controversial.
We are making it happen. The reality is that HS2 is a vital investment. It’s essential capacity and it will change the economic geography of the country. It will mean that London and Manchester are just an hour apart.
We’ve done a lot – but we must do much more to connect our northern cities.
David Higgins is here with us. He’s chairman of HS2 and his recent report identified the need for better connections between the cities of the north, if we are going to make the most of better connections between north and south. I know the city leadership here in Manchester and in Leeds are working together to respond.
I am saying today: we need to think big.
We need an ambitious plan to make the cities and towns here in this northern belt radically more connected from east to west - to create the equivalent of travelling around a single global city. As well as fixing the roads, that means considering a new high speed rail link.
Today I want us to start thinking about whether to build a new high speed rail connection east-west from Manchester to Leeds. Based on the existing rail route, but speeded up with new tunnels and infrastructure.
A third high speed railway for Britain.
New high speed rail and motorway upgrades are huge projects that take time.
But there are many improvements we can start now.
In two weeks’ time we will announce the first allocation of £2 billion a year of funding from the Single Local Growth Fund. This was the brainchild of Michael Heseltine.
And I can tell you today I want to make sure we don’t just commit this money year-to-year, but commit money over many years, to long term projects that drive local growth. That’s the long term approach that we are bringing to investment spending.
So step one in building the Northern Powerhouse is a radical transport plan so that travelling between cities feels like travelling within one big city.
The second thing that’s going to fuel that powerhouse is science and innovation.
Durham, Lancaster, Leeds, Liverpool, Manchester, Newcastle, Sheffield and York and more – the north is blessed with world class universities. These universities have been at the forefront of the urban renaissance here over the last three decades.
Many of them were founded by enlightened industrialists – today they are still leading the way in cooperation between academics and industry.
We want to see science here turned into products here - and into jobs and growth here.
So I’ve ruthlessly prioritised science and innovation investment and made hard choices elsewhere to pay for it. Much of that investment is coming north.
The new Graphene centre is here in Manchester;
The new headquarters for the Square Kilometre Array – the global project to build the world’s largest telescope – is at Joddrell Bank just south of here;
We’re building one of the world’s largest and fastest supercomputers at Daresbury;
The National Biologics Industrial Innovation Centre in Teeside will make it one of the best locations for life sciences.
And the new Materials Innovation Factory at Liverpool University puts us at the cutting edge in manufacturing the materials of the future.
And we’re determined to cure the British disease of inventing things but letting others get the commercial benefit from them, with our new Catapult technology centres.
Like the High Value Manufacturing centres in Rotherham and Redcar. We’ve got two new centres coming in Energy Systems and Precision Medicine and I will be very disappointed if at least one of them doesn’t come to the north.
But that is just the start.
Because I have taken difficult decisions I’m able to increase science investment in every year this decade. That’s £7 billion for scientific investment in the next parliament alone.
How this funding is allocated is up to the scientific community, rightly, according solely to rigorous criteria of scientific excellence.
We’re consulting now – and I will announce the outcome later in the year.
We’ve got an incredible opportunity to change the landscape of British science.
I look at London and I see the largest research institute in Europe – the Crick Institute – being built.
What’s the Crick of the north going to be? Materials science? Nuclear technology? Something else? You tell me.
Today I call on the northern universities to rise to the challenge, and come up with radical, transformative long term ideas for doing even more outstanding science in the north – and we will back you.
So we have great transport and great science.
Global cities are also great places to go out.
The economist Richard Florida has talked about the way that great cities are competing for the “creative class” that powers economic growth. He’s shown how innovators and entrepreneurs are attracted to creative, cultural, beautiful places.
Here we already have world-class arts and culture, from Opera North in Leeds to the Tate in Liverpool, to Yorkshire Sculpture Park, and the new Hepworth over in Wakefield. And then there’s the music of the Halle and the Liverpool Philharmonic and of course the best pop music on the planet.
And we can build on all that. I am introducing a new theatre tax credit this September and it’s designed to particularly help theatres outside the capital.
I’ve seen proposals to upgrade the Lyric theatre in Manchester and make that the anchor of a creative enterprise zone – I think it’s a fascinating plan and I want to see what can be done to make it happen.
The new Culture secretary Sajid Javid, born here in Rochdale, has talked about how we give more people outside London access to world class arts and culture. Not at the expense of our capital city’s great institutions but as a complement to them, and in partnership with them.
The BBC’s got a big role to play too.
As a local MP I was a strong promoter of the move to Salford a decade. I thought it would be good for Manchester and good for the BBC too.
MediaCity is now the biggest digital hub in Europe outside London. We need it to be bigger still, drawing in creative and digital businesses. So the BBC need to make sure the move is really secure, that the important decisions don’t leech back to Broadcasting House in London. That requires an active effort.
The natural environment also matters hugely to quality of life. Our national parks are staggeringly beautiful here too. When the Tour de France comes to Yorkshire it will show them off to the world.
We have fantastic Victorian parks in the hearts of our northern cities.
We cleaned polluted rivers like the Mersey and the Humber. Now we should take the next steps in improving them and making them great places for leisure and tourism, and natural beauty.
The final thing you need in a Powerhouse is, of course – Power.
Global cities have powerful city governments.
I think it’s great to see how local authorities here are getting much better at working together.
Councils in this city and elsewhere have been coming together in combined authorities to solve issues that cut across their borders and jointly promote their cities.
I see it myself in the cooperation between Manchester City and my own Cheshire East Authority, over the science park at Alderley – cooperation I never saw before.
That’s vital. Otherwise we can’t make the most of our cities and the towns in between. The OECD, in a paper published this spring, showed that cities around the world with fragmented governance structures have lower levels of productivity than those that don’t. 6% lower.
We’ve been backing you all the way. We’ve been devolving power through City Deals. We’ve signed 25 deals. They encapsulate two things about our approach. We don’t offer an identikit model, instead, we offer each area the different specific things it needs to get growth going. And instead of laissez faire we recognise that there’s a crucial role for local leaders to clear away the obstacles to growth and enterprise, and get things moving.
A great example of that is the deal we’ve done with Joe Anderson in Liverpool.
Today I want to ask: is it now time to take the next steps?
London has the advantage of a strong, recognisable city leader.
The haircut that is recognised all over the world. Boris Johnson.
There are big advantages in having an elected Mayor to represent your city. To fight your corner in the world.
To have someone democratically accountable to the whole city who can deal with issues like transport or economic development or fighting crime.
There’s no question that public transport in London has improved immeasurably since I took the bus and tube to school as a child, because you have had there a strong mayor who can integrate the roads and the busses and the rail and the tube and the river and the cycle lanes and so on.
In London, the traditional boroughs all still there, and still have the same powers. But the powers that were held by quangos and by the national government are now held by an elected local leader.
At the moment you could argue there’s a mis-match between the economic importance of the great northern cities and their political clout.
Wales has its own parliament, and can pass its own laws. But as the Centre for Cities point out, the economies of Manchester and Leeds are each individually bigger than Wales. But they don’t have a single leader who can speak for the whole area.
I say it again
A true powerhouse requires true power
So today I am putting on the table and starting the conversation about serious devolution of powers and budgets for any city that wants to move to a new model of city government - and have an elected Mayor.
A Mayor for Greater Manchester. A Mayor for Leeds. With powers similar to the Mayor of London.
What I’ve set out today is a vision of the Northern Powerhouse – not to rival the South, but to be its brother in arms as we fight for Britain’s share of the global economy.
Let’s bring our Northern cities together, so they’re bigger and better than anyone can be alone.
The Northern Powerhouse can’t be built over-night. It’s a long-term plan for a country serious about its long-term economic future.
It means jobs and prosperity and security for people here over future decades.
And I promise you this – I will work tirelessly with anyone across political divides in any of these great cities to make the Northern Powerhouse a reality.
For this plan is bigger than any one of us – and it’s worth it for us all.