Check against delivery
The Coalition Government has talked a lot about rebalancing the UK’s lopsided economy. Ending our overreliance on one sector - financial services. In one city - London. To build a model of more diverse, even and sustainable economic growth.
Less spectacular than what we have seen in recent decades? Probably. But we are willing to sacrifice a big bang if it means avoiding a monumental crash. Clearly our cities have a major role to play in this new, rebalanced economy.
Everyone in this room will, at some point have heard one Westminster politician or another opine on the importance of our cities, on their role as great engines of growth. There’s nothing new about that ambition.
But what is new is that the Coalition is taking the leap needed to deliver it.
Today we are launching a series of deals to recast the relationship between central government and our cities, in what we hope will be an unprecedented transfer of power - to unleash city power, to boost entire regions, to get our national economy growing and to begin correcting the dangerous imbalance in that economy.
I will come to the nature of those deals shortly. Before I do, let’s recap on what has happened to our cities. Liberals have always understood that a great nation is built on great cities.
Almost 140 years ago Joseph Chamberlain was elected Mayor of Birmingham. Back then the city was deep in squalor and run by a group of independent councillors who had neither the will nor imagination to sort it out.
So Chamberlain booted out the old guard and he launched a movement from within local government - cleaning up the rivers and streets, guaranteeing gas and water supplies, giving people galleries and parks and ultimately creating a civilised city of which Brummies could be proud and others described as the ‘best governed city in the world’.
That ambition was not confined to Birmingham. Our cities, the giants of the 18th and 19th centuries, made this country what it is today. Birthplace to an industrial revolution that shot Britain to global pre-eminence. And that helped democratise the spread of wealth and opportunity, changing the face of our society for good.
Yet, despite that heritage, for much of the last century, those same powerhouses have been in relative decline relative to London, relative to their European competitors, relative to their own potential.
They are still home to much innovation; some of our best universities; many of our most dynamic businesses; millions of our citizens. And, of course, they experienced growth during boom years.
But, over time, the rest of the world caught up. In Europe, in North America, in the buoyant economies of the East. And we have not kept pace.
A number of historical forces have underpinned city decline: our industrial heartlands were too slow to adapt to the shift to services; London and the South East have benefited most from the reorientation of trade towards Europe and the rise of air over rail.
Decline is, of course, self-perpetuating. Fewer opportunities led to smaller populations. Smaller populations generate fewer opportunities. But it is not simply down to the forces of history. We also need to understand more recent mistakes.
The previous government had laudable intentions: they devoted a lot of time and cash to attempting to revive our cities, billions were spent on urban renewal. Not all of it was well-targeted, nor did every pound achieve value for money. But city districts once synonymous with urban decay - East Manchester, the centre of Sheffield where I am an MP - were, in some cases, dramatically revived.
The problem - and this is a theme that ran through under the previous government, is that they tried to reinvent our cities from Whitehall. They were like an overbearing parent, wishing great things for their children, throwing money at them, dressing them up in new clothes but refusing, ultimately, to let them stand on their own two feet.
Instead of allowing cities to forge their own path and play to their own strengths, the previous government entrenched their dependency on the centre.
First, on the political centre, where the big decisions were made and where handouts were negotiated. Around two thirds of local authority income comes from central government - more than many other OECD states - with just a third from local sources.
And how much taxation do our cities control? Just Council Tax - just 5%.
Second, the previous government effectively made our cities dependent on the financial centre too: The City of London. They pursued a growth policy driven by Square Mile tax receipts with those profits recycled and redistributed to other parts of the country through the long arm of the state.
Instead of helping our cities become more economically self-sufficient, instead of helping tap their potential as drivers of national growth, they presumed we could all live off financial services forever, to the extent that, between 1998-2008 some cities, including Birmingham and Nottingham, actually saw their private sectors shrink.
Put that dependency into historical context for a moment. In their hey day, these cities not only generated huge wealth, they controlled it too. For every pound spent by the public sector, around 95 pence would have been funded by local tax payers. And all of it directed by local leaders who had a clear incentive to make their cities a success.
Yet today our cities are patronised by an overcentralised politics, emasculated by an imbalanced economy and the entire economy is weaker as a result. That is a huge waste - and one we cannot afford.
We heard clearly from the OBR last week: the economy is in a worse state than we thought. The boom was even bigger, the bust even deeper, the effects will last even longer, and it is not yet clear when the global economy will return to health.
So we cannot simply hold our nerve, waiting for the good times to come round again. We must fundamentally rewire our economy to multiply and spread our sources of growth.
That will not happen overnight. It will take time to unwind our over-centralised, overleveraged, debt-dependent and consumption-fuelled economy. And to rebalance across regions and sectors. But the scale of this task must not deter us. Our challenge is to lay lasting foundations for growth.
A kind of growth from which everyone can benefit. I know that some of our public sector workers bristle when they hear Ministers talk about paring back the public sector and letting business lead the recovery.
These professionals - teachers, nurses, police men and women - make up a big chunk of our northern workforce. And some fear that ‘rebalancing’ is code for cutting them adrift. But that is not the case.
Many of our public sector workers are making sacrifices and I am hugely grateful for it. And I am grateful to the people making sacrifices in the private sector too. And what will hurt both groups is if we now allow this debate to become polarised - as if our dilemma is helping the public sector versus the private sector.
The North versus the South. Picking industry or picking banking. Because if we play into these bygone caricatures of the left and the right, if we allow our society to fracture into these camps, that is the surest way to drag the UK back to the 1980s.
Yes - different areas and different sectors have different needs. Addressing that reality is the purpose of the city deals I am announcing today.
But look at homes across the country - you will find shop owners around the same dinner tables as health workers, electricians married to teachers, parents who live in Manchester but whose children study in Brighton, and vice versa. And all families, no matter who they are, care about good quality public services.
So we must not allow our country to become divided. And we must always remember that the point of rebalancing our economy is not to pit one group against another but to close the gulfs between winners and losers. So that no matter where you work, no matter where you live, you can benefit from an economy that is strong, diverse and resilient. Where growth is spread and opportunities are open to all.
To that end, starting with the eight largest English cities outside London - Birmingham, Bristol, Leeds, Liverpool, Newcastle, Nottingham, Manchester and Sheffield - we are negotiating a series of deals to transfer powers traditionally held by central government to cities and their communities.
A bonfire of Whitehall controls to empower our cities to go for growth.
As the Work Foundation rightly pointed out in a report they published yesterday, innovation and freedom go hand in hand.
Crucially the deals will be tailored to the needs of each city. Previous attempts to decentralise power have tended to work on the principle that one size fits all. But that is absurd.
Edward Glaeser, in his widely acclaimed book ‘The Triumph of the City’ makes a very important observation: cities often fail for similar reasons but no two success stories are ever the same.
No one could ever confuse Bangalore with Boston, or Tokyo with Paris.
Different cities have different needs different strengths and different identities, and success is always unique. Because place matters.
For years people predicted that, because modern technologies would shrink distances, eventually we would run our economies from behind our laptops, and our identities would become so fluid that we would attach less and less importance to our immediate surroundings. Local life would become an anachronism.
But that will never happen. Human beings need interaction, community. We are our most dynamic when we share ideas face to face.
So we need our cities to be economic, social and cultural magnets. Places people aspire to live in.
That’s why the deals will give cities a full toolbox of powers to address a wide range of aspects of city life. And, of course, to best equip them to recover and develop at a time of severe spending restraints.
We have published a menu of powers we want to explore with cities, but nothing is off the table.
We want cities to come to us with ambitious proposals for powers they want to take back, and we will approach those proposals with a degree of openness never before seen in Whitehall.
For that I would like to pay credit to Greg Clark, who has embraced this agenda as the Cities Minister.
It hasn’t been easy getting Whitehall to let go. Government after government has programmed the centre to be suspicious towards local government, as if top down targets are all that stand between local communities and total mayhem. But we are turning a page on that approach.
Greg, Lord Shipley and their team are meeting cities from week to week. The aim is to have the first deals agreed by the Budget, before later launching a second round with a different group.
Clearly each deal will be different, but the new levers that will be available to cities are best understood in three broad categories based on what they have told us they need.
One - greater freedom to invest in growth. Because no one will take the offer of decentralisation seriously unless government weakens its grip on the purse strings. So not only are we providing additional money to what has already been announced through the £1bn boost to the Regional Growth Fund to create jobs, we are also giving cities more autonomy both over how money is raised and spent.
On spending - there will be no more going on bended knee to Whitehall Department after Whitehall Department to bid for different capital pots, for individual schemes, each judged according to their own criteria.
Instead cities will get one consolidated capital pot to direct as they see fit, whether that is on a new roundabout, or a new retail park, whatever their area needs to boost economic activity.
On raising money - you will know that the Coalition has committed to localising business rates and introducing Tax Increment Financing to allow local authorities to borrow against those revenues in order to invest in development.
We have already made big steps with Enterprise Zones.
The 24 that we have created, including in all of the core cities will be able to keep the business rates that are created there over the next 25 years. And with this guaranteed revenue stream, they can borrow to invest in new infrastructure. Tax increment financing in action now. But we are going further.
Our consultation on local government resources has now finished, and yesterday I held a discussion with Ministers to agree the next steps.
I can tell you today that we will be setting out details of the changes and beginning the necessary legislative process by Christmas with the benefits of business rate growth back in the hands of all local authorities by April 2013.
We will introduce a mechanism to strike the right balance between incentivising councils to attract the best businesses and ensuring we protect areas that cannot grow as quickly through no fault of their own, so that all councils can still continue to deliver vital services. And I can confirm that TIFS will be available to everyone.
And we are going to enable a number of larger TIF schemes across the country, which, like Enterprise Zones will have longer-term revenue streams, creating the certainty needed to deliver major investments. We will be publishing further details shortly.
And I hope we will see ambitious projects - like the one being developed in Newcastle - coming forward.
Within the city deals we are also giving cities the right to offer business rate discounts. So, for example, if a particular city would benefit from more creative industries to compete with its neighbours, or to make the most of its colleges and universities, it will be able to adjust its rates to attract companies working in design, fashion, music, the arts, and that will in turn help create internal markets, boosting competition and productivity with it.
Two - power over infrastructure: transport, housing, broadband.
The investments that will unlock growth, boosting demand in the short-term and creating a supply side legacy after that. The deals will remove barriers to delivering them and ensure cities can prioritise the development they need.
On transport - under the current rules, cities have to jump through numerous Whitehall hoops, with many major projects suffering long delays.
For example - two new railway stations here in Leeds, first proposed over a decade ago, but approved only last week.
So, in order to get the right projects moving, under the new arrangements all cities will have to show is that a specific scheme is feasible, achieves value for money, is transparent and accountable and contributes to growth.
And we want to look at ways cities can shape public transport, being ambitious about what they can deliver for their area.
When we talk about TFL instead of Transport for London, why can’t it be Transport for Leeds? Or Birmingham, or Bristol? Where, if there is a good economic case for trams or oyster cards or bicycle hire, those areas can have modern, innovative systems too?
On housing and regeneration - decisions that used to lie with RDAs and were then sucked up into the Homes and Community Agency will finally be handed down, so that cities can get developers building and businesses locating in the parts of town that need them most.
And on broadband - we are making £100m of seed funding available for cities to work with Virgin, BT and other suppliers in order to become truly digital.
High Speed broadband is part of that, but we want cities to be creative. To learn from the experiences of places like Philadelphia, where free Wi-Fi across the whole city means ordinary residents can log on anywhere and small hi-tech businesses have come in their droves.
Finally, three - the power to boost skills and jobs. Because it simply cannot be right that so many businesses tell us they can’t fill their vacancies while so many talented young men and women are out of work. So the City Deals create new ways for councils, local businesses and colleges and schools to bridge that gap, matching young people to jobs and using local knowledge to tackle skills gaps.
At the moment, for example, many small companies say they would like to take on an apprentice, but they can’t afford it or they find the national scheme too bureaucratic.
So the cities will be able to create new Apprenticeship Hubs, bringing together businesses looking for an apprentice with colleges who can refer their students, and making it easier to access national funding to support local needs. Other businesses say they have posts to fill, but local people don’t have the right skills. So we are also funding research that will allow councils and businesses to establish where the gaps are, whether in engineering, or IT, or management, before then working with the colleges to prioritise filling those gaps.
And where young people are really struggling to find work, cities will be able to bring local services together, so that instead of being passed from pillar to post between the job centre, the town hall, the careers adviser, all of that can be done under one roof where it makes sense to do so. A more human approach to welfare, which we know gets better results.
So, power over money.
Power over infrastructure.
Power to boost skills and jobs.
More economic freedom.
More political freedom.
A combination that made the UK’s cities great once before, and that I hope will help them thrive again.
Where these deals will end up. It is not up to me, or Greg, or any member of this government to dictate.
My ambition should be clear, and the Government will go further and faster if we can see that is right for our cities.
But this reconfiguring of our relationship will be driven by their ambition, their pace.
Of course, we will have a few demands of our own. This is a deal after all.
Our cities will need to shoulder some of the risks. Where big projects are involved, for example, we will not do all the underwriting. We will expect you to work together, and we will need to see results.
But, for as least as long as I have been in politics, our cities have been straining at Whitehall’s leash.
So my message to them today is this: seize this opportunity. Embrace the chance to be pioneers, and blaze a trail for others to follow.
The Coalition wants to give cities the key to your future. We know the UK’s prosperity depends on it and we stand ready to do our bit.
The rest is now up to you.