Is devolution the answer to the North-South divide?

The relative performance of UK cities will be firmly on the platforms of all the major parties at the forthcoming General Election. Centre for Cities Senior Economist, Paul Swinney discusses the recent Cities Outlook report, which examines the growing economic disparities between those in the North and those in the South and calls for more tailored and targeted policies to put an end to the North-South divide. 

Salford Quays Photo credit: Andy Davidson

New Government terms are a time to start afresh: to be bold and drive a vision through, with a view to leaving the nation in a better place than before the reins were taken. However, the kind of transformative change needed to make significant progress against Britain’s underperforming city economies will not be achieved if the mistakes of the past are made again.

To this end, and with a hope of consigning the hyper-centralised status quo to the confines of history, our annual Cities Outlook report this year took a long-term look back at the performance of UK city economies; demonstrating just how little positive impact the raft of well-intentioned policies we have seen under successive governments have made.

Cities Outlook 2015 found that despite the great deal of economic and political change over the past decade, one thing has remained constant: cities in the South have thoroughly outstripped their counterparts in the rest of the country across a range of important economic measures:

  • on population, cities in the South have expanded at twice the rate of cities elsewhere in the UK
  • the number of businesses increased by almost 27 percent in southern cities, compared to 14 percent in other UK cities
  • the most marked figure is for jobs; for every one extra job in cities elsewhere in Britain between 2004 and 2013, there were 12 extra jobs in cities in the South

These trends have persisted at a time when both the former Labour government and the current coalition have pledged to ‘bridge the North-South divide’ or ‘rebalance the economy’ along regional lines. Their lack of success in fulfilling these pledges isn’t for the want of trying.

There have been a range of initiatives over many years; most in good faith, some effective, some best left to the confines of history, that have attempted to improve the economic performance of places outside of London and the South East.

Different approaches

The two administrations have tried very different approaches. Labour went for an emphasis on regional planning, urban regeneration and physical-led development, underpinned by centrally-driven targets and administered by the Regional Development Agencies and other arms-length public bodies.

For its part, the Coalition government has instead favoured a local, place-based approach: ‘deal-making’ between individual localities and central government, and a wave of new, discrete funding pots allocated either by competitive bidding or by Local Enterprise Partnerships.

Despite these differences there have been three common themes to the policy-making of both administrations: it has tended to be small in scale, limited in its time frame, and most crucially, it has kept decision-making power within Whitehall rather than transferring it to cities themselves.

The last decade of economic performance captured in Cities Outlook tells us that cities are facing different challenges, which are playing out in different ways. Yet, the fundamental problem is that most policies over the past decade have so frequently fallen back to a one-size-fits-all approach that does not take the unique nature of cities’ strengths and weaknesses into account.

Greater London, the UK’s strongest city-region, has been the one exception. It has had some degree of devolution since 1999, with its mayor holding powers over the key economic drivers of planning and transport, amongst other things. While the level of power wielded by the capital is limited by international standards, it has proved important in allowing London policy-makers to respond to the pressures of growth, and to plan strategically for the future.

Freedom and flexibility

That is why the recent announcements by the chancellor regarding devolution to Greater Manchester are so welcome. By providing the city with the kinds of strategic powers and responsibilities that Greater London has enjoyed for over a decade, Greater Manchester will have more freedom and flexibility to tailor policy to tackle the challenges it faces and take advantage of opportunities within the national and global economy.

But if we are truly to see cities outside of the Greater South East punch their weight, then the Greater Manchester devolution deal must be followed by decisive action to extend these kinds of arrangements to other cities. All are equally constrained in the policy levers they can pull. And all would benefit from having more say in the policies that affect their economies and their communities.

So too should these deals go deeper. For both London and Greater Manchester, that means making more progress on fiscal devolution, granting them tax and borrowing powers, and more control over their own budgets. Only when this happens will UK cities be armed with the kinds of tools that have seen cities across Europe and the United States steam ahead.

It is our hope at the Centre for Cities that ten years from now, the urban policy landscape in Britain will look very different. We recognise that more tailored and targeted policies, which reflect the particular needs and opportunities of each of our cities, would fundamentally help to improve the performance of both local and national economies.

All parties have engaged in a ‘race to the top’ in recent months around devolution, with each promising to pass down power from Whitehall to the town hall. But if we want to bring to an end discussion on the North-South divide, then it’s imperative that these pledges are put into action.